Consolidated Cashflow

Six months ended 30 September 2021

Notes to the unaudited financial statements

Six months ended 30 September 2021

1       General Information 

On 5 November 2021 Mark's Electrical Group plc (formerly Marks Electrical Holdings) became a publicly listed Group, listed on the Alternative investment Market ("AIM"), a market operated by the London Stock Exchange. The Group is domiciled in the UK and its registered office is 4 Boston Road, Leicester, LE4 1AU.

The principal activity of the Group throughout the period is the supply of domestic electrical appliances and consumer electronics in the United Kingdom.

2       Accounting policies

2.1       Basis of preparation

The unaudited interim financial statements of Marks Electrical Group plc for the six months ended 30 September 2021 were authorised for issue by the Board of Directors on 17 November 2021 and signed on its behalf by Joshua Egan.

This interim announcement and consolidated interim financial information have been prepared in accordance with the recognition and measurement requirements of International Financial Reporting Standards issued by the International Accounting Standards Board, as adopted by the United Kingdom.

The principal accounting policies used in preparing the interim results are those the Group expects to apply in its financial statements for the year ending 31 March 2022. A full description of accounting policies is contained within the historical financial information included in the AIM admission document which is available on our website.

There are no new standards, interpretations and amendments which are not yet effective in these financial statements, expected to have a material effect on the Group's future financial statements.

The financial information does not contain all the information that is required to be disclosed in a full set of IFRS financial statements.  The financial information for the period ended 30 September 2021 is unaudited and does not constitute the Group's statutory financial statements for the period.

The comparative financial information for the full year ended 31 March 2021 has been derived from the financial information for that period included in the Group's AIM admission document.  The statutory financial statements for the year ended 31 March 2021 were prepared under UK GAAP and have been filed at Companies House.  The auditor's report on those financial statements was unqualified, did not include references to any matters to which the auditor drew attention by way of emphasis without qualifying its report and did not contain a statement under section 498(2)-(3) of the Companies Act 2006.

The interim financial information has been prepared on a going concern basis under the historical cost convention unless otherwise specified within these accounting policies. The financial information and the notes to the financial information are presented in thousands of pounds sterling ('£'000'), the functional and presentation currency of the Group, except where otherwise indicated.

The policies have been consistently applied to all periods presented, unless otherwise stated.

The principal accounting policies adopted in the preparation of the financial statements are set out below. These policies have been consistently applied to all the periods presented, unless otherwise stated. The Group have applied the requirements of IFRS 16 Leases from 1 April 2018, in advance of its effective date of 1 January 2019, to facilitate consistent presentation across the periods shown within the financial statements. The effects of adoption have been recognised directly in opening retained earnings.

2.2       Going concern

The Group has traded positively during the COVID-19 period and has continued to invest for growth throughout the period.

The board of Directors have completed a rigorous going concern assessment and taken the following actions to test or enhance the robustness of the Companies liquidity levels for a period of at least twelve-months from the date of approval of the document. As part of their assessment, the Mark's Electrical board has considered:

·      The cash flow forecasts and the revenue projections for the Group

·      Reasonably possible changes in trading performance, including severe yet plausible downside scenarios.

·      An assessment of historical forecasting accuracy by comparing forecast cash flows to those actually achieved by the Group

·      The Group's robust policy towards liquidity and cash flow management.

·      The Group's ability to successfully manage the principal risks outlined in this report.

After reviewing the forecasts and risk assessments and making other enquiries, the board has formed the judgement at the time of approving the financial statements that there is a reasonable expectation that Group has adequate resources to continue in operational existence for at least twelve months from the date of approval of these financial statements.

2.3       New standards, amendments and interpretations

The Group has adopted the following new standards and interpretations in these financial statements

throughout the track record period, with a transition date of 1 April 2018.

▪ IFRS 9 - Financial instruments (effective 1 January 2018 and early adopted);

▪ IFRS 15 - Revenue from Contracts with Customers (effective 1 January 2018);

▪ IFRS 16 - Leases (effective 1 January 2019 and early adopted); and

▪ IFRIC 23 - Uncertainty over Income Tax Positions (effective 1 January 2019 and early adopted).

IFRS 9 Financial instruments

IFRS 9 'Financial Instruments' replaced IAS 39 'Financial Instruments: Recognition and Measurement'. It makes major changes to the previous guidance on the classification and measurement of financial assets and introduces an 'expected credit loss' model for the impairment of financial assets. Given there have been no changes in the classification or measurement of financial assets and liabilities a detailed table has not been provided.

(i)            Recognition, classification, and measurement of financial instruments 

The Group has assessed which business models apply to its financial instruments at the date of initial application and has designated the financial assets and financial liabilities into the appropriate IFRS 9 measurement categories based on the facts and circumstances at that date. As at 1 April 2017, there were no significant classification and measurement adjustments. The financial assets and liabilities for the Group are classified and measured at amortised cost.

(ii)           Impairment of financial assets

The impact of the new accounting methodology for determining the impairment provision for trade receivables resulted in no material change in the provision. Under the new policy a loss allowance for expected credit losses is recognised based upon the lifetime expected credit losses in cases where the credit risk on trade and other receivables has increased significantly since initial recognition.

In cases where the credit risk has not increased significantly the Group measures the loss allowance at an amount equal to the 12-month expected credit loss. This assessment is performed on a collective basis considering forward-looking information.

Trade receivables longer than one year overdue and specific risk trade receivables with no reasonable expectation of recovery are impaired and hence provided for in full unless reliable supporting information to determine otherwise is available. No recognition, measurement, or classification changes have been recorded on adoption of IFRS 9.

IFRS 15 Revenue from Contracts with Customers

IFRS 15 became effective on 1 January 2018 and superseded the revenue recognition included in IAS 18 Revenue, IAS 11 Construction Contracts, and the related interpretations.

Under IFRS 15, revenue is now recognised to depict the transfer of promised goods or services to a customer in an amount that reflects the consideration to which the Group expects to be entitled in exchange for those goods and services. The underlying principle is a five-step approach to determine performance obligations, the consideration and the allocation thereof, and timing of revenue recognition. IFRS 15 also includes guidance on the presentation of assets and liabilities arising from contracts with customers, which depends on the relationship between Mark's Electricals performance and the customers' payment.

The Group is in the business of providing online retail and supply of domestic electrical appliances and consumer electronics. Income is recognised when the products have been dispatched. No recognition, measurement, or classification changes have been recorded on adoption of IFRS 15.

IFRS 16 Leases 

IFRS 16 became effective on 1 January 2019 and superseded IAS 17 Leases and the related interpretations. IFRS 16 has been early adopted throughout the financial statements. IFRS 16 sets out the principles for the recognition, measurement, presentation and disclosure of leases and has been applied using the fully retrospective approach. Under IFRS 16 the main difference for the Group is that certain leases that the Group holds as a lessee are recognised on the balance sheet, as both a right-of-use ('ROU') asset and a largely offsetting lease liability. Low value and short-term leases were excluded from these calculations under the practical expedients allowed in the standard. The ROU asset is depreciated in accordance with IAS 16 'Property, Plant and Equipment' and the liability is increased for the accumulation of interest and reduced by cash lease payments. There is no impact on cashflow. In the statement of comprehensive income, the Group recognises a depreciation charge and an interest charge instead of a straight-line operating cost. This changes the timing of cost recognition on the lease, resulting in extra cost in early years of the lease, and reduced cost towards the end of the lease. Judgements made by the Directors in the application of these accounting policies that have a significant effect on these financial statements together with estimates with a significant risk of material adjustment in the next year are discussed in note 2.11 to the financial statements.

IFRIC 23 Uncertainty over Income Tax Positions

IFRIC 23 clarifies how to recognise and measure current and deferred income tax assets and liabilities when there is uncertainty over income tax treatments. The standard is effective for financial years commencing on or after 1 January 2019 and has been early adopted throughout these financial statements. The application of IFRIC 23 did not have any financial impact as the directors do not consider there to be any uncertainty over income tax treatments for the Group  

New standards, amendments and interpretations not yet adopted

The following standards, amendments and interpretations are not yet effective and have not been early adopted by the Group:

IFRIC 22 Foreign Currency Transactions and Advance Consideration 

IFRIC 22 clarifies which exchange rate to use in transactions that involve advance consideration paid or received in a foreign currency. There is not considered to be an impact of this standard on the Group.

2.4       Revenue recognition

Revenue from contracts with customers is recognised when or as the Group satisfies a performance obligation by transferring a promised good or service to a customer. A good or service is transferred when the customer obtains control of that good or service. The transfer of electrical appliances and consumer electronics sold by the Group usually coincides with the delivery of the item to the customer and the customer taking physical possession. The Group principally satisfies its performance obligations at a point in time and recognises revenue on dispatch.

Revenue is measured at the fair value of the consideration received, excluding discounts, rebates and sales taxes or duty. Production based taxes are not included in revenue, they are paid on production and recorded within cost of sales.

Amounts received in advance for electrical appliances sales are recorded as contract liabilities and revenue is recognised as the performance obligations are met.

2.5       Net finance costs

Finance expense

Finance expense comprises of interest payable and finance leases interest which are expensed in the period in which they are incurred and reported in finance costs. Finance income

Finance income relates to deposit income

2.6       Current and deferred taxation

The tax expense for the period comprises current and deferred tax.  Tax is recognised in the consolidated statement of comprehensive income, except that a charge attributable to an item of income or 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 reporting date in the UK where the Group operates and generate taxable income.

Deferred tax balances are recognised in respect of all timing differences that have originated but not reversed by the balance sheet date, except:

-       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;

-       Any deferred tax balances are reversed if and when all conditions for retaining associated tax allowances have been met; and

-       Where timing differences relate to interests in subsidiaries, associates, branches and joint ventures and the Group can control their reversal and such reversal is not considered probable in the foreseeable future.

Deferred tax balances are not recognised in respect of permanent differences 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 income tax is determined using tax rates and laws that have been enacted or substantively enacted by the reporting date.

2.7       Property plant and equipment

Property, plant and equipment is stated at historical cost less accumulated depreciation and any accumulated impairment losses. Historical cost includes expenditure that is directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management.

Depreciation is charged so as to allocate the cost of assets less their residual value over their estimated useful lives, over the shorter of the lease term and the estimated useful life, using the straight-line method.  Depreciation is provided on the following straight line basis:

-       Plant and machinery between five and 10 years

-       Fixtures and fittings and equipment three to five years

-       Motor vehicles three years

-       Leasehold improvements 10 years

-       Freehold buildings 50 years

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 the statement of comprehensive income.

Freehold property and improvements are recorded at fair value less accumulated depreciation. Depreciation is measured between ten and fifty years, effective from the date of each valuation. Valuations are undertaken with sufficient regularity to ensure the carrying amount is not materially misstated. Revaluation movements, and associated deferred tax, are recorded through other comprehensive income to the extent they do not reverse a previous decrease recognised through profit and loss.

2.8       Leased assets

At inception of a contract, the Group assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.

To assess whether a contract conveys the right to control the use of an identified asset, the Group assesses whether: an identified physically distinct asset can be identified; and the Group has the right to obtain substantially all of the economic benefits from the asset throughout the period of use and has the ability to direct the use of the asset over the lease term being able to restrict the usage of third parties as applicable.

All leases are accounted for by recognising a right-of-use asset and a lease liability except for:

-       Leases of low value assets; and

-       Leases with a duration of 12 months or less. 

Lease liabilities are measured at the present value of the contractual payments due to the lessor over the lease term, with the discount rate determined by reference to the rate inherent in the lease unless (as is typically the case) this is not readily determinable, in which case the Group incremental borrowing rate on commencement of the lease is used.

On initial recognition, the carrying value of the lease liability also includes:

-       amounts expected to be payable under any residual value guarantee;

-       the exercise price of any purchase option granted in favour of the Group if it is reasonably certain to assess that option;

-       any penalties payable for terminating the lease, if the term of the lease has been estimated on the basis of the termination option being exercised.

-       Right of use assets are initially measured at the amount of the lease liability, reduced for any lease incentives received, and increased for:

-       lease payments made at or before commencement of the lease;

-       initial direct costs incurred; and

-       the amount of any provision recognised where the Group is contractually required to dismantle, remove or restore the leased asset.

Subsequent to initial measurement lease liabilities increase as a result of interest charged at a constant rate on the balance outstanding and are reduced for lease payments made. Right-of-use assets are amortised on a straight-line basis over the remaining term of the lease or over the remaining economic life of the asset if, rarely, this is judged to be shorter than the lease term. When the Group revises its estimate of the term of any lease (because, for example, it re-assesses the probability of a lessee extension or termination option being exercised), it adjusts the carrying amount of the lease liability to reflect the payments to make over the revised term, which are discounted at the same discount rate that applied on lease commencement. An equivalent adjustment is made to the carrying value of the right-of-use asset, with the revised carrying amount being amortised over the remaining (revised) lease term.

2.9       Cash and cash equivalents

Cash and cash equivalents comprise cash at bank and in hand and short term highly liquid deposits which are subject to an insignificant risk of changes in value.

2.10     Inventory

Stocks are valued at the lower of cost and net realisable value, after making due allowance for obsolete and slow moving items, as well as provisioning for rebates receivable. Cost is determined using the first in first out method. The carrying amount of stock sold is recognised as an expense in the period in which the related revenue is recognised.

2.11     Financial assets

The Group classifies its financial assets at amortised cost.  Financial assets do not comprise prepayments. Management determines the classification of its financial assets at initial recognition.

Financial Assets recognised at amortised cost

The Group's financial assets held at amortised cost comprise trade and other receivables and cash and cash equivalents in the consolidated statement of financial position.

These assets are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market.  They arise principally through the provision of goods and services to customers (e.g. trade receivables), but also incorporate other types of financial assets where the objective is to hold their assets in order to collect contractual cash flows and the contractual cash flows are solely payments of the principal and interest. They are initially recognised at fair value plus transaction costs that are directly attributable to their acquisition or issue and are subsequently carried at amortised cost using the effective interest rate method, less provision for impairment.

Impairment provisions for trade receivables are recognised based on the simplified approach within IFRS 9 using the lifetime expected credit losses. During this process the probability of the non-payment of the trade receivables is assessed. This probability is then multiplied by the amount of the expected loss arising from default to determine the lifetime expected credit loss for the trade receivables. For trade receivables, which are reported net; such provisions are recorded in a separate provision account with the loss being recognised within administrative expenses in the consolidated statement of comprehensive income. On confirmation that the trade receivable will not be collectable, the gross carrying value of the asset is written off against the associated provision.

Impairment provisions for other receivables are recognised based on the general impairment model within IFRS 9. In doing so, the Group follows the 3-stage approach to expected credit losses.  Step 1 is to estimate the probability that the debtor will default over the next 12 months.  Step 2 considers if the credit risk has increased significantly since initial recognition of the debtor.  Finally, Step 3 considers if the debtor is credit impaired, following the criteria under IFRS 9.

Financial assets recognised at fair value through profit or loss

Financial instruments such as forwards, swaps and forward exchange contracts are classified as derivative financial assets and liabilities at fair value through profit or loss. Derivative financial assets and liabilities are initially measured at fair value at the date the derivative contract is entered into and are subsequently remeasured to fair value at each financial period end date. The resulting gain or loss is recognised in fair value gains/(losses) through profit or loss immediately. The Group does not apply hedge accounting.

A derivative with a positive fair value is recognised as a financial asset, whereas derivative with a negative fair value is recognised as a financial liability, unless a bilateral netting agreement exists between the Group and the counterparty, in which case derivative financial asst and liability positions with the counterparty are aggregated to produce a single netted asset or liability.

The fair value of the derivative contracts us based on their observable prices in the exchange marketplace requiring no significant adjustment.

2.12     Financial liabilities

The Group measures its financial liabilities at amortised cost. All financial liabilities are recognised in the statement of financial position when the Group becomes a party to the contractual provision of the instrument.

Financial liabilities measured at amortised cost

The Group's financial liabilities held at amortised cost comprise trade payables and other short-dated monetary liabilities, and bank and other borrowings in the consolidated statement of financial position.

Trade payables and other short-dated monetary liabilities are initially recognised at fair value and subsequently carried at amortised cost using the effective interest rate method.

Bank and other borrowings are initially recognised at fair value net of any transaction costs directly attributable to the issue of the instrument.  Such interest-bearing liabilities are subsequently measured at amortised cost using the effective interest rate method, which ensures that any interest expense over the period to repayment is at a constant rate on the balance of the liability carried in the consolidated statement of financial position.

For the purposes of each financial liability, interest expense includes initial transaction costs and any premium payable on redemption, as well as any interest or coupon payable while the liability is outstanding.

Unless otherwise indicated, the carrying values of the Group's financial liabilities measured at amortised cost represents a reasonable approximation of their fair values.

2.13     Impairment of assets

Assets that are subject to depreciation or amortisation are assessed at each reporting date to determine whether there is any indication that the assets are impaired. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units or CGUs).

Where there is any indication that an asset may be impaired, the carrying value of the asset (or CGUs to which the asset has been allocated) is tested for impairment. An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset's (or CGU's) fair value less costs to sell and value in use. Non-financial assets that have been previously impaired are reviewed at each reporting date to assess whether there is any indication that the impairment losses recognised in prior periods may no longer exist or may have decreased. Goodwill is reviewed for impairment on an annual basis, with any impairment to goodwill not reversed at a later period.

2.14     Government grants

Other operating income represents includes Government grants for the Job Retention Scheme.

Government grants are recognised at their fair value where there is a reasonable assurance that the grant will be received, and the Group will comply with all attached conditions. Government grants relating to costs are deferred and recognised in profit or loss over the period necessary to match them with the costs that they are intended to compensate.

In the year ended 31 March 2020 and 2021, the Group utilised the Government's Coronavirus Job Retention Scheme ('CJRS'), which allows for businesses to submit claims for repayment of furlough or flexible furlough employee wages as a result of COVID-19. The grant income received has been accounted for in accordance with IAS 20 'Accounting for Government Grants and Disclosure of Government Assistance' and shown in other operating income in the income statement and personnel costs have been shown gross of grant income.

3.     Significant accounting estimates and judgements

The Group makes certain estimates and assumptions regarding the future. Estimates and judgements are continually evaluated based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. In the future, actual experience may differ from these estimates and assumptions. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

Judgements

The following are the areas requiring the use of judgement that may significantly impact the financial statements.

Useful economic lives of property, plant and equipment and intangible assets

Property, plant and equipment are depreciated, and intangible assets are amortised over their useful lives. Useful lives are based on management's estimates, which are periodically reviewed for continued appropriateness. Changes to estimates can result in variations in the carrying values and amounts charged to the statement of comprehensive income in specific periods.
 

Estimates and assumptions 

The following are areas require significant estimates and assumptions that may significantly impact the financial statements:

Freehold property valuation

In the comparative number for financial year ended 31 March 2021, one of the key areas of estimation uncertainty was the valuation of the freehold property held by the Group. The Group uses external Chartered Surveyors to carry out the valuation to minimise the judgement required when valuing the property. The valuation was carried out on a market value basis and was in accordance with RICS Valuation - Global Standards (incorporating the IVSC International Valuation Standards) effective from 31 January 2020. The directors considers that the valuation prepared represents the fair value of freehold land and buildings at 31 March 2021, as such the valuation was incorporated into the financial statements. During the period the property was disposed of.

Fixed asset investments

Estimates and assumptions are used to determine the carrying value of unlisted investments at fair value through profit and loss. The fixed asset investment is a buying group ("Euronics") which the Group is part and is entitled to a share of profit from based on purchases made during any given period. The fixed asset investment is made up of an initial buy-in cost plus share of profits accrued since entering Euronics. Due to the lack of visibility of Euronics profit year to date the Group estimates the current periods profit share based on a percentage of total purchases from Euronics. The profits from Euronics are seldom distributed, however if the Group were to leave Euronics, the total accrued profits including the initial buy-in cost would become payable in full.

Historical tax schemes

At the period end, and year ended 31 March 2021, the Group held provision on the Balance Sheet for potential liabilities in relation to historical tax schemes that Mark Smithson, the majority shareholder of the Group, entered into through the Group. The Group took advice on the potential liabilities of the schemes and at the year ended 31 March 2021 accrued a reliable estimate to cover liabilities that may arise. Mark Smithson has indemnified the Group for any unaccrued liabilities that may arise.

3.      Earnings per share

(a)   Earnings

*Adjusted earnings form the underlying trading result after tax of the Group.

(b)   Number of shares

*The adjustment for shares issued at IPO (5 November 2021) relates to the capital raised by the Group and the all-employee share incentive plan. This gives a true reflection of earnings per share for the users of the financial statements, however, does not reflect the share position on 30 September 2021 pre-float. Prior years have also been adjusted to make earnings per share more comparable. Note, the adjustment for the all-employee share incentive plan does not include the potentially dilutive effect of management incentive plans that will be put in place during H2-22.

(c)   Earnings per share

*Based on adjusted basic weighted average number of shares as disclosed in 4 (b) above.

4.      Taxation

Income tax expense is recognised based on management's best estimate of the average annual income tax rate expected for the full financial year applied to the pre-tax income of the interim period. The income tax expense for the six months ended 30 September 2021 is £442,630 (HY21: £551,305). The Group's adjusted consolidated effective tax rate for the six months ended 30 September 2021 is 19.0% (HY21: 19.0%).

5.      Dividends paid

Dividends paid during the period totalled £3,883,000 (FY21: £nil).

6.      Tangible assets

7.      Right of use assets

8.      Lease liabilities

Finance costs recognised in the income statement in relation to lease liabilities:

9.      Post balance sheet events

On 5 November 2021, Marks Electrical Group plc successfully listed on the Alternative Investment Market of the London Stock Exchange. In doing so, 27,272,727 shares were placed on the market, 22,727,273 from existing shares and 4,545,454 new shares, from which the Group raised capital of £5,000,000.

On 1 October 2021, Marks Electrical Limited disposed of the freehold property to Mavrek Properties Limited (a company controlled by Mark Smithson - CEO) for it's carrying value of £5,176,000. The property was immediately leased back to MEL.

10.    Operating exceptional charges

The Group presents as exceptional items on the face of the Statement of Comprehensive Income those material items of income and expense which the Directors consider, because of their size or nature and expected non-recurrence, merit separate presentation to facilitate financial comparison with prior periods and to assess trends in financial performance. Exceptional items are included in Administration expenses in the Consolidated Statement of Comprehensive Income but excluded from Adjusted EBITDA as management believe they should be considered separately to gain an understanding of the underlying profitability of the business.

11.    Transition to IFRS

The Group's effective IFRS transition date for the purposes of this financial information was 1 April 2018. The effects of transition to IFRS on the balance sheets at 1 April 2018, 31 March 2019, 31 March 2020 and 31 March 2021 and the income statements for the years ended 1 April 2018, 31 March 2019, 31 March 2020 and 31 March 2021, are shown below. In preparing the consolidated historical financial information the Group has applied IFRS for the first time from 1 April 2018. The principles and requirements for first time adoption of IFRS are set out in IFRS 1. The Group did not take advantage of any exemptions under IFRS 1.

The transition adjustments required on applying IFRS, as numbered in the tables below, were:

IFRS 16 standard was effective from 1 January 2019, with early adoption applicable. The Group has applied the modified retrospective approach, the first day of the first period included in the financial statements under IFRS. Adjustments have been made to leases under IFRS 16, to recognise leases previously recognised as operating leases as right-of-use assets and to recognise finance leases previously recognised as property, plant and equipment (PPE) as right-of use assets.

The impact of the standard as of 1 April 2018 has resulted in an initial recognition of right-of-use assets with a net book value of £818,910 and total lease liabilities of £738,789. As part of this recognition, a reclassification of finance leases from PPE to right-of-use asset of £373,918 has been made along with the associated hire purchase creditor amounting to £286,460. £7,337 has been recognised as an adjustment to retained earnings.

In the year end March 2019, reclassification adjustments between PPE and the right of use asset amounting to £204,845 were made. The total impact on right of use assets was a net decrease of £536, after amortisation of £205,381 charged on these assets. Hire purchase creditors have been reclassified to lease liabilities. The total impact on the profit and loss resulted in a net decrease to administration expenses of £12,911 and increased finance expense of £14,382.

In the year end March 2020, reclassification adjustments between PPE and the right of use asset amounting to £284,022 were made and an additional lease was entered into resulting in an addition to the right of use asset of £117,167. The total impact on right of use assets was a net increase of £178,721 after amortisation of £222,468 charged on these assets. Hire purchase creditors have been reclassified to lease liabilities. The total impact on the profit and loss resulted in a net decrease to administration expenses of £13,978 and increased finance expense of £8,003.

In the year end March 2021, reclassification adjustments between PPE and the right of use asset amounting to £263,187 were made.. During the year a new lease was entered into for the freehold property which resulted in an addition of £616,143 to the right of use asset amount. The total impact on right of use assets was a net increase of £644,657 after amortisation of £234,673 charged on the assets Hire purchase creditors have been reclassified to lease liabilities. The total impact on the profit and loss resulted in a net decrease to administration expenses of £14,740 and increased finance expense of £20,916

The transition adjustments have no impact on the net cash flow for the years presented. However, the cash flow statement has been adjusted for the revised IFRS result for the year and the changes in balances and classification resulting from the transition to IFRS. The amounts are explained above and impact cash flow classification as follows:

On transition to IFRS, an adjustment has been made to reclassify a balance of £432,636 from the revaluation reserve to retained earnings on 1 April 2018. The balance related to revaluations of investments that are treated as fair value through the income statement under IFRS.

In the year end March 2020, £81,195 has been re-classified from other comprehensive income to administrative expenses as it was incorrectly classified as an increase to the revaluation reserve.

Statement of Financial Position

at 1 April 2018

Statement of Financial Position

At 31 March 2019

Statement of profit or loss and other comprehensive income

at 31 March 2019

Statement of Financial Position

at 31 March 2020

Statement of profit or loss and other comprehensive income

at 31 March 2020

Statement of Financial Position

at 31 March 2021

Statement of profit or loss and other comprehensive income

at 31 March 2021