The directors present the strategic report for the year ended 31 December 2021.
Clariant Distribution UK Ltd ('the Company') is a subsidiary of the global speciality chemicals business, Clariant AG (the "Group"). In 2021 the Company was active in the business areas of Care Chemicals, Catalysis & Energy and Natural Resources. Since 2010, when the Group integrated its European sales activities within a new company, Clariant SE, the UK Branch of Clariant SE has taken on the responsibility of sales and related activities of the Company. The Company employs sales and customer services employees, the costs of which are recharged to Group companies, primarily the UK Branch of Clariant SE. The Company also operates a laboratory and office for the Oil Refinery business.
The Group has five strategic pillars which define its future path: increase profitability; reposition portfolio; add value with sustainability; foster innovation and R&D; and intensify growth. Clariant's mission is to build leading positions in the business we are in, adopting functional excellence as part of our culture and to create value through appreciating the needs of our customers, our employees, our shareholders and our environment.
Profit before tax remained at £28,000 in 2021 (2020: £28,000). No dividends were paid or proposed in the year (2020 - £NIL). The Company's assets exceeded its liabilities at the end of the year by £ 1,526 ,000 (2020 -
£1,503,000).
As the compan y , primarily the UK Branch of Clariant SE, to which the Company provides its services are expected to continue to trade profitably in 2022, it is envisaged the Company will also remain profitable in the coming year. During 2021 and into 2022 the Company's management is continuing to monitor the impact of Covid-19 on the business. Due to the operating structure of the Company little impact is expected in other business units as a result of Covid-19.
As the Company provides sales and marketing services to Group companies it must adapt to operating changes in those companies to ensure it provides the appropriate level of service at an acceptable level of cost.
Environmental risks
Mandatory principles on Environment, Safety and Health ("ESH") are laid down in the Group's ESH guidelines which form an integral part of business processes and strategic planning.
Corporate Sustainability & Regulatory Affairs have built on the Group's principles by drawing up an ESH strategy, a set of guidelines and targets that are mandatory worldwide and by assigning responsibilities. As well as complying with national laws and regulations, the ESH policy commits Clariant to ethical and sustainable operations in all its business activities and includes participation in the Global Responsible Care initiative of the chemical industry.
The management team uses KPls to monitor and manage performance against strategic objectives. The principal KPI for the Company is the control of operating expenses.
Operating expenses were 28% down in 2021 compared with 2020, mainly due to a reduction in group service charges. There is a corresponding reduction in operating income.
In addition to Company law, Clariant provides a clear framework within which the directors must operate, and these are set out within the Clariant Bylaws of the Executive Committee and the associated Terms of Reference. The directors ensure that they act in good faith, using their own skill and judgment to assess the long term consequences of their decisions, in order to promote the overall success of the Company. The directors recognise the need to fully engage with a diverse range of stakeholders and consider the interests of these groups when making decisions to ensure that they act fairly between members. The directors promote the Company’s values and reinforce the Clariant Code of Ethics throughout the organisation to support employees and the wider workforce to act in line with these values and safeguard compliance with local regulations.
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 8.
No ordinary dividends were paid. The directors do not recommend payment of a final dividend.
The directors who held office during the year and up to the date of signature of the financial statements were as follows:
The principal risks and uncertainties are discussed within the Strategic Report.
The directors' view on the future outlook for the company was outlined in the Strategic Report.
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.
We have audited the financial statements of Clariant Distribution UK Ltd (the 'company') for the year ended 31 December 2021 which comprise the profit and loss account, the balance sheet, the statement of changes in equity 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 FRS 101 ‘Reduced Disclosure Framework’ (United Kingdom Generally Accepted Accounting Practice).
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
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' 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.
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 .
We gained an understanding of the legal and regulatory framework applicable to the company and the industry in which it operates and considered the risk of acts by the company that were contrary to applicable laws and regulations, including fraud. We designed audit procedures to respond to the risk, recognising that the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involved deliberate concealment by, for example, forgery or intentional misrepresentations, or through collusion.
We focused on laws and regulations, relevant to the company, which could give rise to a material misstatement in the financial statements. Our tests included agreeing the financial statement disclosures to underlying supporting documentation, enquiries with management, review of company minutes and legal expenses. There are inherent limitations in the audit procedures described and, the further removed non-compliance with laws and regulations is from the events and transactions reflected in the financial statements, the less likely we would become aware of it.
As part of our audit, we addressed the risk of management override of internal controls, including testing of journals and review of the nominal ledger. We evaluated whether there was evidence of bias by the directors that represented a risk of material misstatement due to fraud.
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.
Clariant Distribution UK Ltd ("the Company") provides sales and marketing services to Group companies, mainly in the United Kingdom.
The Company is a private· company, incorporated and domiciled in England, United Kingdom. The address of its registered office is Airedale House, 423 Kirkstall Road, Leeds, LS4 2EW.
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 £.
As permitted by FRS 101, the company has taken advantage of the following disclosure exemptions from the requirements of IFRS:
the requirements of IFRS 7 Financial Instruments: Disclosures;
the requirements of paragraphs 91-99 of IFRS 13 Fair Value Measurement;
the requirements of paragraphs 10(d), 10(f), 16, 38A, 38B, 38C, 38D, 40A, 40B, 40C, 40D, 111 and 134-136 of IAS 1 Presentation of Financial Statements;
the requirements of IAS 7 Statement of Cash Flows;
the requirements of paragraphs 30 and 31 of IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors;
the requirements of paragraphs 17 and 18A of IAS 24 Related Party Disclosures
the requirements in IAS 24 Related Party Disclosures to disclose related party transactions entered into between two or more members of a group, provided that any subsidiary which is a party to the transaction is wholly owned by such a member.
Where required, equivalent disclosures are given in the group accounts of Clariant AG. The group accounts of Clariant AG are available to the public and can be obtained from Investor Relations at Hardstrasse 61, CH-4133, Pratteln, Switzerland.
Depreciation is charged so as to allocate the cost of assets less their residual value over their estimated useful lives, using the straight line method.
The assets' residual values, useful lives and depreciation methods are reviewed, and adjusted prospectively if appropriate, or if there is an indication of a significant change since the last reporting date.
Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised in profit or loss.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.
Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.
Creditors are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers.
Creditors are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method.
Equity instruments issued by the company are recorded at the proceeds received, net of direct issue costs. Dividends payable on equity instruments are recognised as liabilities once they are no longer at the discretion of the company.
The tax expense for the year comprises current and deferred tax. Tax is recognised in profit or loss except that a charge attributable to an item of income and expense recognised as other comprehensive income or to an item recognised directly in equity is also recognised in other comprehensive income or directly in equity respectively.
The current income tax charge is calculated on the basis of tax rates and laws that have been enacted or substantively enacted by the balance sheet date in the countries where the Company operates and generates income.
Deferred tax balances are recognised in respect of all timing differences that have originated but not reversed by the Balance Sheet date, except that:
The recognition of deferred tax assets is limited to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits;and
Any deferred tax balances are reversed is and when all conditions for retaining associated tax allowances have been met.
Deferred tax balances are not recognised in respect of permanent difference except in respect of business combinations, when deferred tax is recognised on the differences between the fair values of assets acquired and the future tax deductions available for them and the differences between the fair values of liabilities acquired and the amount that will be assessed for tax. Deferred tax is determined using tax rates and laws that have been enacted of substantively enacted by the balance sheet date.
The Company as a lessee
The Company assesses whether a contract is or contains a lease, at inception of a contract. The Company recognises a right-of-use asset and a corresponding lease liability with respect to all lease agreements in which it is the lessee, except for short-term leases (defined as leases with a lease term of 12 months or less) and leases of low value assets. For these leases, the Company recognises that lease payments as an operating expense on a straight-line basis over the term of the lease unless another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.
Lease payments included in the measurement of the lease liability comprise:
fixed lease payments (including in-substance fixed payments), less any lease incentives;
The lease liability is included in 'Creditors' on the Balance Sheet.
The lease liability is subsequently measured by increasing the carrying amount to reflect interest on the lease liability (using the effective interest method) and by reducing the carrying amount to reflect the lease payments made.
The right-of-use assets comprise the initial measurement of the corresponding lease liability, lease payments made at or before the commencement day and any initial direct costs. They are subsequently measured at cost less accumulated depreciation and impairment losses.
Right-of-use assets are depreciated over the shorter period of lease term and useful life of the underlying asset. If a lease transfers ownership of the underlying asset or the cost of the right-of-use asset reflects that the Company expects to exercise a purchase option, the related right-of-use asset is depreciated over the useful life of the underlying asset. The depreciation starts at the commencement date of the lease.
The right-of-use assets are included in the 'Intangible Assets', 'Tangible Fixed Assets' and 'Investment Property' lines, as applicable, in the Balance Sheet.
The Company applies IAS 36 to determined whether a right-of-use assets is impaired and accounts for any identified impairment loss as described in note 1.4.
As a practical expedient, IFRS 16 permits a lessee not to separate non-lease components, and instead account for any lease and associated non-lease components as a single arrangement. The Company has used this practical expedient.
The company makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. These estimates and assumptions that have a significant risk of causing material adjustment to the carrying amounts of assets and liabilities within the next financial year are addressed below.
Useful economic lives of property, plant and equipment
The annual depreciation charge for property, plant and equipment is sensitive to changes in the estimated useful lives and residual values of the assets. The useful economic lives and residual values are re-assessed annually. They are amended when necessary to reflect current estimates, based on technological advancement, future investments, economic utilisation and the physical condition of the assets. See note 8 for the carrying amount of the property, plant and equipment, and note 1.4 for the useful economic lives for each class of assets.
The average monthly number of persons (including directors) employed by the company during the year was:
Their aggregate remuneration comprised:
Included in wages and salaries are additional employment costs of £NIL (2020 - £113,000) in respect of severance payments.
Due to the impact of the Covid-19 pandemic in 2020, the Company took advantage of available government support schemes including contribution towards wages and salaries of £NIL in the year ended 31 December 2021 (2020 - £12,000). Grants received have been netted off with staff costs in the statement of comprehensive income.
The directors received no remuneration for their services to the Company during the year (2020 - £NIL). A J Lock, N Scothern, C Ericsson and T A Otteslev are remunerated for their services to the UK Group and their costs are borne by the parent company, Clariant Services UK Ltd.
The directors' emoluments paid by Clariant Services UK Ltd are solely in respect of duties under the directors' contracts of employment with Clariant Services UK Ltd and no separate directors' fees are payable.
The charge for the year can be reconciled to the profit per the profit and loss account as follows:
At 31 December 2021 the enacted rate of corporation tax due to come into force on 1 April 2023 was 25%, an increase from the current of 19%. However, it was announced in the fiscal statement on 24 September 2022 that the increase to 25% is to be reversed and that the Corporation tax rate will remain at 19%.
In light of this, FRS101 requires these accounts to uplift the deferred tax asset to reflect the enacted rate of 25%. However, this will be reversed in the year ended 31 December 2022 financial statements if the change to maintain the corporation tax rate of 19% is enacted or substantively enacted before that date. The impact of this would be to decrease the deferred tax asset by £204,000.
Tangible fixed assets includes right-of-use assets, as follows:
Included in amounts owed by group undertakings are loans receivable of £1,353,000 (2020 - £1,342,000) which are unsecured and repayable on demand with no interest charged.
Included in amounts owed by group undertakings is a loan receivable of £15,000 (2020 - £24,000) which is denominated in Euros, unsecured and repayable on demand with no interest charged.
Other amounts owed by group companies represent trading balances, which are unsecured and are payable in accordance with the Group's intercompany payment terms.
Amounts owed to group undertakings represents trading balances, which are unsecured and are payable in accordance with the Group's intercompany payment terms.
Lease liabilities are classified based on the amounts that are expected to be settled within the next 12 months and after more than 12 months from the reporting date, as follows:
The following are the major deferred tax liabilities and assets recognised by the company and movements thereon during the current and prior reporting period.
The dilapidation provision arises from the legal obligation to reinstate leasehold properties to their original state at the end of the lease terms. It is envisaged that these amount will be settled at the end of the leases.
The company is a participating employer of the Clariant Pension Plan (the "Plan"), a scheme which is managed by an independent Trustee body and comprises both Defined Benefit and Defined Contribution sections. The Plan is funded by contributions from the Company and its employees. Total contributions in respect of the Defined Benefit Section are based on the advice of a qualified independent actuary. On 31 December 2001 the existing Defined Benefit Section of the Plan was closed to new members and a new Defined Contribution Section of the Plan was established for new Employees from 1 January 2002.
The details of the scheme are as follows:
The Clariant Pension Plan - Defined Benefit Section
The most recent actuarial valuation was carried out at 1 April 2021 by an independent actuary using the projected unit method. The review indicated that the value of the assets of the Plan exceeded the benefits earned up to the valuation date by £11,300,000 allowing for a pre-retirement discount rate of Gilt curve plus a term margin of 1.5% and a post retirement discount rate of Gilt curve plus 0.25%. Future pension increase range between 0% and 5%, dependent on the terms of the pension offered. The market value of the Plan's assets was £404,500,000 as at 1 April 2021.
On 1 April 2016 the Defined Benefit Section of the Plan was closed for future accrual and all employees transferred to the Defined Contribution Section of the Plan.
IAS 19 disclosures
As permitted by IAS 19 'Employee benefits' the contributions paid by the Company to the Plan are accounted for as though to a defined contribution scheme. This arises since the share of assets and liabilities relating to the Company cannot be separately identified.
At 31 December 2021 the surplus of the Plan was £36,334,000 (2020 - £27,509,000). Full details of the Plan are provided in the financial statements of the principal employer, Clariant Production UK Ltd, which are publicly available.
The Clariant Pension Plan - Defined Contribution Section
The Defined Contribution Section is funded by the payment of contributions into personal accounts held under trust. These personal accounts are independent of the Company and are invested with a professional investment manager appointed by the Trustee. The charge against profit is the amount of employer contributions payable to the pension scheme in respect of the accounting year.
The immediate parent undertaking is Clariant Services UK Ltd.
The ultimate parent undertaking and controlling party is Clariant AG, a company incorporated in Switzerland.
Clariant AG is the parent undertaking of the smallest and largest group of undertakings to consolidate these financial statements at 31 December 2021. The consolidated financial statements of Clariant AG can be obtained from Investor Relations at Hardstrasse 61, CH-4133, Pratteln, Switzerland.