The directors present the strategic report and financial statements for the year ended 30 September 2021.
Our principal trading activity has been the manufacture of hygiene paper products for the Away from Home (AFH) market which includes the food, leisure, hospitality, office, industry and medical sectors.
COVID caused us many disruptions this year but we used the periods of low demand to focus on investing in people and increasing efficiencies. Maintaining our investments in place, people, processes and productivity will strengthen the company to be better placed to meet the increased demand in the post-Covid market.
We have invested heavily in the site as part of our Future Factory programme. A brand new waste extraction system was installed to automatically remove waste from the production lines.
A new access and security system was installed in all of the buildings onsite. The staff canteen, locker rooms and workshops were refurbished to a very high standard representing our commitment to staff welfare.
This is ongoing as next year we are looking at adding new offices, further extensions to our production facility, a new gatehouse and the resurfacing of our service yard. Also, plans are in place to further reduce our carbon footprint by replacing our gas powered FLT's with electric FLT's.
With the appointment of a new production manager and health and safety manager, a full programme of training has been introduced to develop effective and safe teams. A new rewards programme is being developed and will be introduced in the new year.
Our SAP system was upgraded to the latest version and new process innovations are being explored to further integrate our machines with our ERP system. Utilising IOT and AI, it is possible to gather much more data to help with maintenance and production planning.
We have put on order two end of line pallet stacking and pallet handling systems to fully automate Line 1 and Line 4. These should be fully operational in early 2022.
In light of the ongoing ambiguity related to the pandemic, demand has been very mixed this year with periods of heightened demand in our products followed by periods of reduced demand in sectors that were adversely affected by the pandemic. Overall, demand remained consistent for consumer tissue, while we experienced a temporary reduction in demand for Away from Home products given the impact that Covid-19 and the resulting lockdowns had on businesses, in particular restaurants, leisure, hotels and schools. This temporary reduction in demand was offset by increases in demand from the online, wholesale and health sectors. We have taken steps to adjust production capacity to meet these increasing demands from these sectors. Our wide range of products and diverse customer base enabled us to mitigate troughs in demand and maintain our turnover close to our target for this year (£28m). The planned investments will provide much needed capacity next year to meet the increased demands of hygiene paper products once the sectors fully open back up. We are projecting to grow by 25-30% next year if we have no further lockdowns.
The directors continue to assess the important risks faced by the group including risks associated with Brexit and COVID. The directors plan to continue with the strategy which has led to the satisfactory results.
We are expecting a difficult business environment ahead with continued disruption in the supply chain caused by COVID impacting on all supply routes, container shortages, limited availability of transport and port congestion. A rise in energy costs, shipping/transport costs, packaging and raw materials will continue to push up manufacturing costs and costs of materials in the coming year. To mitigate this, we have built up good stock levels, continue to invest in improving productivity and enhance our recruitment and retention programmes. No doubt we will implement price increases to recover these costs. Our strong trading relationships locally and globally with suppliers and customers puts us in a strong position to mitigate these challenges and we are confident that we will come out of this period as a very resilient group.
Our strategy is to continue to grow the business through strategic investments that will introduce new products to our product range enhancing our product offering and providing a one stop shop for our customers. In the coming year our investments will be focussed on productivity, automation and further site improvements. We will continue to maintain and strengthen our balance sheet with a view to exploring bigger investment opportunities that will increase our bottom line and market share. The group has developed a strong relationship with its finance providers which has resulted in a generous working capital facility agreed at competitive borrowing rates to help fund continued growth. The group has continued to recruit the best people that are able to grow and develop in a fast growing business where productivity and innovation drives improvements throughout the business.
The directors continue to measure the performance of the group by reference to turnover growth, overall gross profit and net profitability of its subsidiary which are monitored on a monthly basis. We are pleased to report that the business has demonstrated its resilience in this challenging climate by maintaining its turnover and profitability.
On behalf of the board
The directors present their annual report and financial statements for the year ended 30 September 2021.
The results for the year are set out on page 8.
Ordinary dividends were paid amounting to £379,500. 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, Pierce C.A. Limited, is deemed to be reappointed under section 487(2) of the Companies Act 2006.
We have audited the financial statements of Star Tissue Holdings Limited (the 'parent company') and its subsidiaries (the 'group') for the year ended 30 September 2021 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 FRS 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 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' 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.
In the light of the knowledge and understanding of the group and the parent company and its environment obtained in the course of the audit, we have not identifie d material misstatements in the strategic report and the directors' r eport .
We have nothing to report in respect of the following matters where 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' 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 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 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 .
In identifying and assessing risks of material misstatement in respect of irregularities we considered the following:
The nature of the industry and the group and company’s control environment.
Results of our enquiries of management.
The group and company’s procedures and controls on compliance with laws and regulations and the risks of fraud.
Discussions among the audit engagement team concerning potential indicators of fraud.
We are also required to perform specific procedures to respond to the risk of management override.
As a result of our audit procedures we did not identify a material risk of fraud or other non-compliance with laws and regulations .
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 c ompany has not presented its own profit and loss account and related notes. The c ompany’s profit for the year was £1,032,199 (2020 - £2,486,477).
Star Tissue Holdings Limited (“the company”) is a private limited company domiciled and incorporated in England and Wales . The registered office is Waterfall Street, Blackburn, Lancashire, BB2 2BN.
The group consists of Star Tissue 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 a mounts in these financial statements are rounded to the nearest £.
The financial statements have been prepared under the historical cost convention, as modified to include the revaluation of the group's leasehold land and buildings. The principal accounting policies adopted are set out below.
The consolidated group financial statements consist of the financial statements of the parent company Star Tissue Holdings Limited together with all entities controlled by the parent company (its subsidiaries) and the group’s share of its interests in joint ventures and associates .
All financial statements are made up to 30 September 2021 . 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 g roup.
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 directors have a reasonable expectation that the company and group ha ve adequate resources to continue in operational existence for the foreseeable future. Thus the directors continue to adopt the going concern basis of accounting in preparing the financial statements.
In forming their assessment, the directors have given due regard to the worldwide Coronavirus pandemic, Covid-19, and its impact on the group . The directors are of the opinion that the group has adequate resources and that they have put in place the necessary safeguards to continue trading through this period.
Turnover is recognised at the fair value of the consideration received or receivable for goods and services provided in the normal course of business, and is shown net of VAT and other sales related taxes. The fair value of consideration takes into account trade discounts, settlement discounts and volume rebates.
Revenue from the sale of goods is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer (usually on dispatch of the goods), the amount of revenue can be measured reliably, it is probable that the economic benefits associated with the transaction will flow to the entity and the costs incurred or to be incurred in respect of the transaction can be measured reliably.
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 .
I n 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 and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any).
At each reporting date, an assessment is made for impairment. Any excess of the carrying amount of stocks over its estimated selling price less costs to complete and sell is recognised as an impairment loss in profit or loss. Reversals of impairment losses are also recognised in profit or loss.
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.
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 m ethod 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.
Financial assets, other than those held at fair value through profit and loss , are assessed for indicators of impairment at each reporting end date.
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 , bank loans 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.
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. If not, they are presented as non-current liabilities. Trade creditors are recognised initially at transaction price and subsequently measured at amortised cost using the effective interest method.
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.
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.
The group’s liability for tax is calculated using tax rates that have been enacted or substantively enacted by the reporting end date.
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 on a straight line basis.
Rentals payable under operating leases, including any lease incentives received, are charged to profit or loss on a straight line basis over the term of the relevant lease except where another more systematic basis is more representative of the time pattern in which economic benefits from the lease d asset are consumed.
Government grants are recognised at the fair value of the asset receive d or receivable when there is reasonable assurance that the grant conditions will be met and the grants will be received.
A grant that specifies performance conditions is recognised in income when the performance conditions are met . Where a grant does not specify performance conditions it is recognised in income when the proceeds are received or receivable . A grant received before the recognition criteria are satisfied is recognised as a liability.
Grants received in respect of capital expenditure are amortised on a straight line basis at 7.5% per annum in line with the depreciation policy on the plant and machinery assets to which they relate.
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 estimates and assumptions which have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities are as follows.
Stocks provision assessments are considered to be a key accounting estimate for which management review the results of regular stock counts in determining the extent to which provisions should be made against slow-moving or obsolete stocks.
Debtor recoverability is considered to be a key accounting estimate for which management continuously monitor customer debt recoveries through credit control procedures and make assessments regarding the extent to which bad debt provisions are considered necessary.
The average monthly number of persons (including directors) employed by the group and company during the year was:
Their aggregate remuneration comprised:
Dividends paid to the directors during the year amounted to £379,500 (2020 - £379,500).
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 carrying value of land and buildings comprises:
The net carrying value of tangible fixed assets includes the following in respect of assets held under finance leases or hire purchase contracts.
Land and buildings includes a valuation of £1,700,000 carried out at 30 September 2018 by Knight Frank LLP , independent valuers not connected with the company on the basis of market value , plus additions subsequent to this date carried at historic cost . The valuation conform ed to International Valuation Standards and was based on recent market transactions on arm's length terms for similar properties.
Land and buildings are carried at valuation. If land and buildings were measured using the cost model, the carrying amounts for the group and company would have been approximately £1,810,543 (2020 - £1,781,389), being cost £1,999,722 (2020 - £1,931,820) and depreciation £189,179 (2020 - £150,431).
Details of the company's subsidiaries at 30 September 2021 are as follows:
The group's bankers, HSBC Bank plc, hold as security fixed and floating charges over all of the group's property and other assets, together with a cross guarantee over all group borrowings.
The group also operates an invoice discounting facility with HSBC Invoice Finance (UK) Limited whereby working capital is provided to the subsidiary company under an agreement to purchase that company's eligible debts, against which fixed and floating charges have been granted over the subsidiary company's assets.
The group bank loan borrowings carry interest payable at a rate of 2.5% over the bank's base rate.
Obligations under finance lease and hire purchase agreements are secured by fixed charges on the assets concerned.
The following are the major deferred tax liabilities and assets recognised by the group and company, and movements thereon:
Grants have been made available under the Regional Growth Fund to facilitate the acquisition of items of plant and machinery.
D efined contribution pension scheme s are operated for all qualifying employees. The assets of these schemes are held separately from those of the group in independently administered funds.
At the reporting end date the group had outstanding commitments for future minimum lease payments under non-cancellable operating leases, which fall due as follows:
Amounts contracted for but not provided in the financial statements:
Advances or credits have been granted by the group to its directors as follows: