The directors present the strategic report for the year ended 30 April 2023.
The company is the parent company of the group containing its wholly owned subsidiaries, Hope Technology Holdings Limited and Hope Technology (IPCO) Limited.
The group is a global leader in bicycle engineering, with over 30 years’ experience in designing, testing and manufacturing cutting edge components in house at our factory in Barnoldswick.
The group has a simple ethos of making high quality products which will sell themselves; the products do the talking. The group’s products have an excellent international reputation for quality and reliability, with the end user generally being cycling enthusiasts looking to upgrade their bikes to the highest level.
The group has reported a decreased turnover of £19,491,791 (2022: £22,386,296) during the year. Part of this decrease was due to the group experiencing a rush of sales deferred by the Covid-19 pandemic towards the start of the prior financial period. Turnover is also impacted by the mix of sales in the year.
Gross profit margins are broadly unchanged at 57.0% (2022: 57.1%). Whilst the mix of sales does impact the gross margin, this result also demonstrates the group is able to manage input cost increases successfully without eroding unit profitability. Significant input inflation lessened as the financial year progressed, but significant management focus was employed on this, with the group keenly aware of what inflationary burden its customers could reasonably share. The group continued to mitigate these strains through its buying practices which can be seen in the increased year end stock balance £6,983,527 (2022: £4,037,182). This also safeguards continuity of production, which has been an issue elsewhere in the industry. Whilst overheads increased by 7% to £9,578,021, the directors have keenly monitored this area and those increases are predominantly due to areas beyond their reasonable control, such as well reported rises in energy costs and movements in foreign currency exchange rates. Therefore, the combination of a reduced turnover and the increased overheads caused the decrease in pre-tax profits to £1,515,020 (2022: £3,854,409).
The group's operations expose it to a variety of financial risks that include the effects of changes in foreign exchange risk, price risk, liquidity risk and cash flow risk associated with manufacturing and through offering sales credit terms. The latter risk is actively managed through robust credit control procedures. In addition, the group does not use derivative financial instruments to manage interest rate costs and as such, no hedge accounting is applied. The group is not reliant on any one customer for a large proportion of turnover, therefore spreading and reducing the risk of customers not returning or failing.
Since mid-2019 the group proactively increased raw material and component stocks in readiness for any supply chain shocks which may have been caused by the subsequent Brexit deal. Thanks to this, it did not suffer from any stock deficiencies due to the various global induced logistic issues experienced since, the fallout from which is still being felt by the industry and by manufacturing businesses generally.
Ensuring sufficient stock levels, where sourced from international suppliers is a potential risk, but one which is actively and successfully managed by the group. At the time of approving the financial statements, the group has ample levels of raw material stocks and production is not compromised in any manner.
Given the size of the group, the directors have not delegated the responsibility of monitoring financial risk management to a sub-committee of the board. The policies set by the directors are implemented by the group's finance department.
The directors will revisit the appropriateness of this policy should the group's operations change in size or nature.
The group recognises that the market can be a difficult one in which to operate and so it is imperative to develop and launch a steady number of quality new products. The group’s culture engenders an environment within which innovation is natural. Many of our colleagues develop or enhance our products through their own experiences and have an instinct for what our customers will demand. As in recent years we continue to innovate through refinements to existing products and new to market items. As examples we launched our 155mm Evo Cranks and Gravity Stems during the year under report. Since the year end, amongst others, we have launched our Hope Dropper Lever and Pro 5 DH Hub.
The country's world class track riders continue to use the HB.T. Throughout the year under report and since the balance sheet date, we have continued to develop our bike frame, components and wheels to provide them with the best equipment in pursuit of success at the Paris 2024 Olympic Games. In October 2023, Vittoria Bussi broke the UCI Women’s hour record on the HB.T, taking the record beyond the 50KM mark. These are tangible results from the group’s flagship project in carbon composite design and manufacturing techniques and forms a discrete area of ongoing development.
More generally the board regards the stimulation of Research and Development activities including those described above as being of equal importance to financial results. The group has maintained this investment and the number of colleagues involved in development, together with further spend on capital expenditure of £989,263 (2022: £1,576,126). Each investment helps position the group for the long term and has been carried out whilst maintaining positive cash balances at appropriate levels for operating purposes of £4,097,131 (2022: £6,154,251).
The group contributes financially to local and national level bike events, the aim being to provide clubs with infrastructure to consistently run events. The group sees this as an effective way to demonstrate its commitment towards providing opportunities for all to ride bikes in an appropriate environment and to play a role in safeguarding society’s appetite for fun, competition and the wider health benefits that riding a bike across any terrain brings.
The directors believe the reported financial results and balance sheet position are strong, placing the group in position to remain at the forefront of the cycling and leisure markets in the years ahead.
The group has made a pleasing start to the new financial year with strong sales and profitable trading seen at the time of approving the financial statements. The group continues to experience strong domestic and international demand, where it has further diversified its exports into new markets. We have not noted any waning in individuals' yearning for the great outdoors and the associated health benefits, hopefully sustaining repeat and new customer interest all Hope products, regardless of the apparent never ending economic headwinds.
Finally, the directors would like to place on record sincere thanks to the dedicated and talented staff employed throughout the group without whose efforts the group would not continue to thrive.
On behalf of the board
The directors present their annual report and financial statements for the year ended 30 April 2023.
The results for the year are set out on page 8.
No ordinary dividends were paid. 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:
The auditor, MHA Moore and Smalley, is deemed to be reappointed under section 487(2) of the Companies Act 2006.
The group has chosen in accordance with UK Companies Act 2006, s. 414C(11) to set out in the group's strategic report information required by Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008, Sch. 7 to be contained in the directors' report. It has done so in respect of future developments, research and development and financial instruments.
We have audited the financial statements of Hope Too Holdings Limited (the 'parent company') and its subsidiaries (the 'group') for the year ended 30 April 2023 which comprise the group statement of comprehensive income, the group balance sheet, the company balance sheet, the group statement of changes in equity, the company statement of changes in equity, the group statement of cash flows and notes to the financial statements, including significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (United Kingdom Generally Accepted Accounting Practice).
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of our report. We are independent of the group and parent company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the directors' use of the going concern basis of accounting in the preparation of the financial statements is appropriate.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the group's and parent company’s ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.
Other information
The other information comprises the information included in the annual report other than the financial statements and our auditor's report thereon. The directors are responsible for the other information contained within the annual report. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of our audit:
the information given in the strategic report and the directors' report for the financial year for which the financial statements are prepared is consistent with the financial statements; and
the strategic report and the directors' report have been prepared in accordance with applicable legal requirements.
In the light of the knowledge and understanding of the group and the parent company and their environment obtained in the course of the audit, we have not identified material misstatements in the strategic report or the directors' report.
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion:
adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or
the parent company financial statements are not in agreement with the accounting records and returns; or
certain disclosures of directors' remuneration specified by law are not made; or
we have not received all the information and explanations we require for our audit.
As explained more fully in the directors' responsibilities statement, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the directors are responsible for assessing the parent company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the parent company or to cease operations, or have no realistic alternative but to do so.
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
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 specific procedures for this engagement and the extent to which these are capable of detecting irregularities, including fraud, are detailed below:
Enquiries with management about any known or suspected instances of non-compliance with laws and regulations;
Enquires with management about any known or suspected instances of fraud;
Examination of journal entries and other adjustments to test for appropriateness and identify any instances of management override of controls;
Auditing the risk of fraud in revenue, including through the testing of income cut off at the period end and through sales transaction testing to provide comfort that revenue is completely stated in the financial statements; and
Review of legal and professional expenditure to identify any evidence of ongoing litigation or enquiries.
Because of the field in which the group operates we identified that employment law, health and safety legislation and compliance with the UK Companies are the areas most likely to have a material impact on the financial statements.
Owing to the inherent limitations of an audit, there is an unavoidable risk that some material misstatements in the financial statements may not be detected, even though the audit is properly planned and performed in accordance with the ISAs (UK). For instance, the further removed non-compliance is from the events and transactions reflected in the financial statements, the less likely the auditor is to become aware of it or to recognize the non-compliance.
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.
As permitted by s408 Companies Act 2006, the company has not presented its own profit and loss account and related notes. The company’s profit for the year was £0 (2022 - £4,600,000 profit).
Hope Too Holdings Limited (“the company”) is a private limited company domiciled and incorporated in England and Wales. The registered office is Hope Mill, Calf Hall Road, Barnoldswick, BB18 5PX.
The group consists of Hope Too Holdings Limited and all of its subsidiaries.
These financial statements have been prepared in accordance with FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland” (“FRS 102”) and the requirements of the Companies Act 2006.
The financial statements are prepared in sterling, which is the functional currency of the company. Monetary amounts in these financial statements are rounded to the nearest £.
The financial statements have been prepared under the historical cost convention. The principal accounting policies adopted are set out below.
This company is a qualifying entity for the purposes of FRS 102, being the parent member of a group which prepares these consolidated financial statements, which are intended to give a true and fair view of the assets, liabilities, financial position and profit or loss of the group. This company has therefore taken advantage of exemptions from the following disclosure requirements for parent company information presented within these consolidated financial statements:
Section 7 ‘Statement of Cash Flows’ – Presentation of a statement of cash flow and related notes and disclosures;
Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instrument Issues’ – Carrying amounts of financial instruments;
Section 33 ‘Related Party Disclosures’ – Compensation for key management personnel.
The consolidated financial statements incorporate those of Hope Too Holdings Limited and all of its subsidiaries (ie 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 30 April 2023. 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.
At the time of approving the financial statements the group is both profitable and cash generative, whilst there exists sustained demand for its products. Cash levels far beyond the levels required for operating purposes have been maintained within the group, both throughout the financial year under report and up to the present date.
The directors have concluded that it is appropriate to prepare the financial statements on a going concern basis as the group has adequate cash resources and available banking facilities to indicate that it will continue to meet all liabilities as they fall due for payment in the twelve months beyond the approval of the financial statements.
Group turnover shown in the profit and loss account represents amounts invoiced during the year, exclusive of Value Added Tax. Goods are invoiced upon the date of despatch to the customer and the relevant income is also recognised at the same point.
The gain or loss arising on the disposal of an asset is determined as the difference between the sale proceeds and the carrying value of the asset, and is recognised in the profit and loss account.
In the parent company financial statements, investments in subsidiaries, associates and jointly controlled entities are initially measured at cost and subsequently measured at cost less any accumulated impairment losses.
A subsidiary is an entity controlled by the group. Control is the power to govern the financial and operating policies of the entity so as to obtain benefits from its activities.
At each reporting period end date, the group reviews the carrying amounts of its tangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the company estimates the recoverable amount of the cash-generating unit to which the asset belongs.
The 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 in the group's balance sheet when the group becomes party to the contractual provisions of the instrument.
Financial assets and liabilities are offset and the net amounts presented in the financial statements when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis or to realise the asset and settle the liability simultaneously.
Basic financial assets, which include debtors and cash and bank balances, are initially measured at transaction price including transaction costs. Financial assets classified as receivable within one year are not amortised.
All of the group's financial assets are basic financial instruments.
Financial assets are assessed for indicators of impairment at each reporting end date.
Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows have been affected. If an asset is impaired, the impairment loss is the difference between the carrying amount and the present value of the estimated cash flows discounted at the asset’s original effective interest rate. The impairment loss is recognised in profit or loss.
If there is a decrease in the impairment loss arising from an event occurring after the impairment was recognised, the impairment is reversed. The reversal is such that the current carrying amount does not exceed what the carrying amount would have been, had the impairment not previously been recognised. The impairment reversal is recognised in profit or loss.
Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire or are settled, or when the group transfers the financial asset and substantially all the risks and rewards of ownership to another entity, or if some significant risks and rewards of ownership are retained but control of the asset has transferred to another party that is able to sell the asset in its entirety to an unrelated third party.
Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the group after deducting all of its liabilities.
Basic financial liabilities, including creditors and loans from fellow group companies, are initially recognised at transaction price. Financial liabilities classified as payable within one year are not amortised.
Debt instruments are subsequently carried at amortised cost, using the effective interest rate method.
Trade creditors are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Amounts payable are classified as current liabilities if payment is due within one year or less. Trade creditors are recognised initially at transaction price.
All of the group's financial liabilities are basic financial instruments.
Financial liabilities are derecognised when the group's contractual obligations expire or are discharged or cancelled.
Equity instruments issued by the group are recorded at the proceeds received, net of transaction costs. Dividends payable on equity instruments are recognised as liabilities once they are no longer at the discretion of the group.
The tax expense represents the sum of the tax currently payable and deferred tax.
The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the profit and loss account because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting end date.
Deferred tax liabilities are generally recognised for all timing differences and deferred tax assets are recognised to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits. Such assets and liabilities are not recognised if the timing difference arises from goodwill or from the initial recognition of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit.
The costs of short-term employee benefits are recognised as a liability and an expense, unless those costs are required to be recognised as part of the cost of stock or fixed assets.
The cost of any unused holiday entitlement is recognised in the period in which the employee’s services are received.
Termination benefits are recognised immediately as an expense when the company is demonstrably committed to terminate the employment of an employee or to provide termination benefits.
Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due.
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessees. All other leases are classified as operating leases.
Assets held under finance leases are recognised as assets at the lower of the assets fair value at the date of inception and the present value of the minimum lease payments. The related liability is included in the balance sheet as a finance lease obligation. Lease payments are treated as consisting of capital and interest elements. The interest is charged to profit or loss so as to produce a constant periodic rate of interest on the remaining balance of the liability.
Government grants are recognised at the fair value of the asset received or receivable when there is reasonable assurance that the grant conditions will be met and the grants will be received.
Transactions in currencies other than pounds sterling are recorded at the rates of exchange prevailing at the dates of the transactions. At each reporting end date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the reporting end date. Gains and losses arising on translation in the period are included in profit or loss.
In the application of the group’s accounting policies, the directors are required to make judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised where the revision affects only that period, or in the period of the revision and future periods where the revision affects both current and future periods.
The following judgements (apart from those involving estimates) have had the most significant effect on amounts recognised in the financial statements.
Depreciation is provided so as to write down the assets to their residual values over their estimated useful lives. The selection of these residual values and estimated lives requires the exercise of management judgement and is reviewed at each balance sheet date.
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.
At each balance sheet date, management undertake an assessment of the value at which stock items are held within the accounts.
Using the costs incurred against the stock items and the orders outstanding, an estimation is made by management as to whether the value of the stock is impaired and if a provision is required.
Tangible fixed assets are reviewed for impairment if events or changes in circumstances indicate that the carrying amount may not be recoverable. When a review for impairment is conducted, the recoverable amount is equal to the expected recoverable value prepared on the basis of management’s assumptions and estimates.
At each balance sheet date, management undertake a review of the outstanding debtors balances and estimate the balance that should either be impaired or provided against.
This calculation is based on the financial position of the customers, the historical speed of payment and any ongoing discussions.
The average monthly number of persons (including directors) employed by the group and company during the year was:
Their aggregate remuneration comprised:
The number of directors for whom retirement benefits are accruing under defined contribution schemes amounted to 2 (2022 - 2).
The actual charge for the year can be reconciled to the expected charge for the year based on the profit or loss and the standard rate of tax as follows:
The Chancellor announced his intention to increase the headline rate of corporation tax to 25% from 1 April 2023. Yhis policy was substantively enacted on 25 May 2021.
The net carrying value of tangible fixed assets includes the following in respect of assets held under finance leases or hire purchase contracts.
Details of the company's subsidiaries at 30 April 2023 are as follows:
Registered office addresses (all UK unless otherwise indicated):
All finance leases are secured over the items to which they relate.
All finance leases are secured over the items to which they relate.
Finance lease payments represent rentals payable by the company or group for certain items of plant and machinery and motor vehicles. Leases include purchase options at the end of the lease period, and no restrictions are placed on the use of the assets. The average lease term is 2-5 years. All leases are on a fixed repayment basis and no arrangements have been entered into for contingent rental payments.
The following are the major deferred tax liabilities and assets recognised by the group and company, and movements thereon:
As the group has not finalised its capital expenditure plans for the next financial year, it is not possible to clarify the unwinding of the net deferred tax liability over the next 12 months.
A defined contribution pension scheme is operated for all qualifying employees. The assets of the scheme are held separately from those of the group in an independently administered fund.
Each class of shares has full voting rights and ranks pari passu in all other respects, other than having different rights to dividends.
The remuneration of key management personnel is as follows.
The following amounts were outstanding at the reporting end date:
Dividends totalling £0 (2022 - £4,600,000) were paid in the year in respect of shares held by the company's directors and their close family.
In the opinion of the directors, the company is ultimately controlled by the Sharp and Weatherill families.