HENRY_SPAIN_INVESTMENT_SE - Accounts

The director presents the strategic report for the year ended 31 December 2022.

Revenue and operating profit were lower than the previous year, but the business remains well capitalised and focused on delivering long term value for our investors and shareholders. Shareholder funds increased by a meagre 8.2% to £4,117,349, this was largely due to the change in prices of quoted company shares held. Our reaction to this event is to largely sit on our hands, and when prices become mouth-wateringly attractive to buy more! Warren Buffett always puts these things best when he says: "To refer to a personal taste of mine, I'm going to buy hamburgers the rest of my life. When hamburgers go down in price, we sing the 'Hallelujah Chorus' in the Buffett household, when hamburgers go up in price, we weep. For most people, it's the same with everything in life they will be buying - except stocks."

Despite the headwinds of higher interest rates, a cost-of-living crisis, wars and rumours of wars, there is still a place for advisers who buy quality, only invest in things they understand and hold for the long term.

We are delighted to have expanded our presence on the Market Harborough High Street and remain committed as ever to serving the local community. It amazes us that other institutions believe clients are best served by an online presence only (or at best a very long drive to do business face to face). At Henry Spain we like face to face and good old fashioned customer service. In recent months we have seen the benefit in both market towns of Oakham and Market Harborough. Don't tell the competition, as there is none!

Management continue to meet quarterly to regularly plan and control principal risks that affect the business namely:

• Capital Adequacy

It is essential for the business to remain well capitalised to meet the regulatory requirements of the FCA. The company currently has a surplus of £212,572. Our Pillar III disclosures can be found on our website at www.henryspain.co.uk.

• Client retention and suitability of advice

Our primary focus is on the needs of our clients and suitable advice and outcomes. We remained humbled at the continued opportunities to serve local people and to increase generational wealth over a long-term horizon.

• Asset allocation and stock selection in adherence with client portfolio mandates

Our discretionary portfolios are managed in line with agreed client mandates and careful consideration of portfolio constituents is regularly reviewed by our investment committee which meets quarterly.

The business remains conservatively managed. We exceed all thresholds required by the regulator for capital requirements. Client feedback remains extremely positive and we continue to improve the capabilities of our people while emphasising the importance to all staff of always acting in the best interests of our clients. Key performance indicators are reviewed regularly by management at quarterly board meetings.

On behalf of the board

The director presents his annual report and financial statements for the year ended 31 December 2022.

The principal activity of the company continued to be that of financial advice and planning.

The results for the year are set out on page 8.

Ordinary dividends were paid amounting to £80,000. The director does not recommend payment of a final dividend.

The director who held office during the year and up to the date of signature of the financial statements was as follows:

The director's interest in the shares of the company was as stated below:

The company does not intend to use leverage to increase shareholder returns. We rather hold excess cash waiting to take advantage of opportunities when either other businesses overextend themselves, or markets become excessively pessimistic. We believe that fractional ownership of other excellent franchises is a good use of excess shareholder funds. We will continue to remain long-term holders of businesses when they exhibit the following characteristics: a rational price, durable competitive advantage, shareholder orientated management and high returns on capital employed.

The business plan is simple. We operate in the two distinctive market towns of Market Harborough and Oakham. We continue to help local people create and maintain wealth. We plan to train and develop our staff to meet their full potential, investing heavily in our people's development. We seek to build a reputation for investment excellence by making sound investment decisions, which usually result in sound investment results. We have no plan to deviate from the day job in 2023 or beyond.

The auditors, Edward Thomas Peirson and Sons, will be proposed for re-appointment at the forthcoming Annual General Meeting.

So far as each person who was a director at the date of approving this report is aware, there is no relevant audit information of which the company’s auditor is unaware. Additionally, the directors individually have taken all the necessary steps that they ought to have taken as directors in order to make themselves aware of all relevant audit information and to establish that the company’s auditor is aware of that information.

The director is responsible for preparing the annual report and the financial statements in accordance with applicable law and regulations.

Company law requires the director to prepare financial statements for each financial year. Under that law the director has elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). Under company law the director must not approve the financial statements unless he is satisfied that they give a true and fair view of the state of affairs of the company and of the profit or loss of the company for that period. In preparing these financial statements, the director is required to:

•     select suitable accounting policies and then apply them consistently;

•     make judgements and accounting estimates that are reasonable and prudent;

•     prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business.

The director is responsible for keeping adequate accounting records that are sufficient to show and explain the company’s transactions and disclose with reasonable accuracy at any time the financial position of the company and enable them to ensure that the financial statements comply with the Companies Act 2006. He is also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

We have audited the financial statements of Henry Spain Investment Services Limited (the 'company') for the year ended 31 December 2022 which comprise the profit and loss account, the balance sheet, the statement of changes in equity, the 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).

In our opinion the financial statements:

•     give a true and fair view of the state of the company's affairs as at 31 December 2022 and of its profit for the year then ended;

•     have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and

•     have been prepared in accordance with the requirements of the Companies Act 2006.

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 director's 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 director 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 director is 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 director's report for the financial year for which the financial statements are prepared is consistent with the financial statements; and

• the strategic report and the director's report have been prepared in accordance with applicable legal requirements.

In the light of the knowledge and understanding of the company and its environment obtained in the course of the audit, we have not identified material misstatements in the strategic report and the director's report.

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, or returns adequate for our audit have not been received from branches not visited by us; or

•     the financial statements are not in agreement with the accounting records and returns; or

•     certain disclosures of 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 director's responsibilities statement, the director is 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 director determines 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 director is responsible for assessing the company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the director either intends to liquidate the company or to cease operations, or has no realistic alternative but to do so.

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud, is detailed below:

• the engagement partner ensured that the engagement team collectively had the appropriate experience, competence, capabilities and skills to identify or recognise non-compliance with laws and regulations;

• through discussions with the director and other staff, and from our commercial knowledge of the financial services profession, we identified the laws and regulations applicable to the company and focused on specific laws and regulations which we considered may have a direct material effect on the financial statements and operations of the company. These included FCA regulations, company law, taxation legislation and employment legislation; and

• we remained alert to instances of non-compliance throughout the audit and assessed the extent of compliance through discussions with the director and other staff, and examination of documentation including any FCA correspondence.

We assessed the susceptibility of the company's financial statements to material misstatement and obtained an understanding of how fraud might occur by:

• making enquiries of the director as to where he considered there was a susceptibility to fraud and his knowledge of any actual, suspected or alleged fraud; and

• considering the internal controls in place to mitigate the risk of fraud and non-compliance with laws and regulations.

To address the risk of fraud through management bias and override of controls, we:

• performed analytical procedures to identify unusual or unexpected relationships;

• reviewed the nominal ledger and, specifically, journal entries to identify large or unusual transactions and investigated them; and

• assessed the extent to which accounting entries relied on a high degree of judgement and/or estimation and, when deemed necessary, such as for financial assets held at fair value, obtained external evidence to support said judgement and/or estimation.

In response to the risk of irregularities and non-compliance with laws and regulations we designed procedures which included, but were not limited to:

• agreeing financial statement disclosures to supporting documentation;

• reviewing correspondence with the FCA, HMRC and the company's legal and other professional advisers;

• performing substantive procedures on material balances and transactions; and

• enquiring of the director as to any actual or potential litigation and claims.

There are inherent limitations in our audit procedures described above. The more removed that laws and regulations are from financial transactions, the less likely it is that we would become aware of non-compliance. Auditing standards also limit the audit procedures required to identify non-compliance with laws and regulations to enquiry of the directors and other management and the inspection of regulatory and legal correspondence, if any.

Material misstatements that arise due to fraud can be harder to detect than those that arise from error as they may involve deliberate concealment or collusion.

A further description of our responsibilities is available on the Financial Reporting Council’s website at: https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's report.

Use of our report

This report is made solely to the company's member 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 member those matters we are required to state to the member 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 member, for our audit work, for this report, or for the opinions we have formed.

The profit and loss account has been prepared on the basis that all operations are continuing operations.

Henry Spain Investment Services Limited is a private company limited by shares incorporated in England and Wales. The registered office is 49, High Street, Market Harborough, Leicestershire, LE16 7AF.

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, modified to include certain financial instruments at fair value. The principal accounting policies adopted are set out below.

Atruet the time of approving the financial statements, the director has a reasonable expectation that the company has adequate resources to continue in operational existence for the foreseeable future. Thus the director continues to adopt the going concern basis of accounting in preparing the financial statements.

Turnover is recognised at the fair value of the consideration received or receivable for financial planning and brokerage services provided in the normal course of business, and is shown net of VAT and other sales related taxes.

Initial planning fees are earned when client funds are taken into management and trail fees are accrued daily based on a percentage of the value of the funds under management. Brokerage commissions are earned when shares are purchased or sold on behalf of clients.

Intangible assets acquired separately from a business are recognised at cost and are subsequently measured at cost less accumulated amortisation and accumulated impairment losses.

Computer software developed for the company was never brought into use, it's value was written down to nil at the impairment review undertaken at the end of the preceding year.

Tangible fixed assets are initially measured at cost and subsequently measured at cost or valuation, net of depreciation and any impairment losses.

Depreciation is recognised so as to write off the cost or valuation of assets less their residual values over their useful lives on the following bases:

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 credited or charged to profit or loss.

At each reporting period end date, the company 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). 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.

Recoverable amount is the higher of fair value less costs to sell and value in use. 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.

Cash and cash equivalents are basic financial assets and include cash in hand, deposits held at call with banks, other short-term liquid investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities.

The company has elected to apply the provisions of Section 11 ‘Basic Financial Instruments’ of FRS 102 to all of its financial instruments.

Financial instruments are recognised in the company's balance sheet when the company becomes party to the contractual provisions of the instrument.

Investments in equity instruments which are not subsidiaries, associates or joint ventures, are initially measured at fair value, which is normally the transaction price. Such assets are subsequently carried at fair value and the changes in fair value are recognised in profit or loss, except that investments in equity instruments that are not publicly traded and whose fair values cannot be measured reliably are measured at cost less impairment.

All other basic financial assets, which include debtors and cash and bank balances, are initially measured at transaction price including transaction costs and are subsequently carried at amortised cost using the effective interest method. Financial assets classified as receivable within one year are not amortised.

Basic financial liabilities, including creditors and accruals, are initially recognised at transaction price and subsequently measured at amortised cost using the effective interest method. Financial liabilities classified as payable within one year are not amortised.

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 company’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 carrying amount of deferred tax assets is reviewed at each reporting end date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited in the profit and loss account, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax assets and liabilities are offset when the company has a legally enforceable right to offset current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority.

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.

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 leases asset are consumed.

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.

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.

In the application of the company’s accounting policies, the director is 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.

Turnover is fully derived from the rendering of services in the U.K.

Government grants receivable in the preceding year were from the Coronavirus Job Retention Scheme to compensate for continuing to pay employees' wages during the period they are not due to the Covid-19 pandemic.

The average monthly number of persons (including directors) employed by the 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 1 (2021 - 1).

The directors are the only members of key management personnel.

Investment income includes the following:

All gains/(losses) relate to listed investments.

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:

Impairment tests have been carried out where appropriate and the following impairment losses have been recognised in profit or loss:

More information on impairment movements in the year is given in note 12.

The net carrying value of tangible fixed assets includes the following in respect of assets held under finance leases or hire purchase contracts.

The fair value of all listed investments is taken to be the open market value of identical shares on an active stock market.

Unrealised net fair value gains of £70,764 (2021 - £505,679) and unrealised net fair value losses of £558,255 (2021 - £91,131) are included in the profit and loss account under the heading of gains/(losses) on revaluation of investments.

Gains of £58,405 (2021 - £505,162) and losses of £390,912 (2021 - £7,141) have been transferred to the investment revaluation reserve, these being the value of all unrealised net fair value gains and the reversal of all unrealised net fair value gains above the original cost of the investments respectively. The corresponding movements in the deferred tax provision to these gains and losses have also been transferred to the investment revaluation reserve.

Current asset investments represent the company's only financial assets measured at fair value through profit and loss.

The main risk the company's current asset investments expose them to is market risk, that being that the fair value of the investments will fluctuate. Both credit and liquidity risk are considered to be minimal.

Finance lease and hire purchase contract payments represent rentals payable by the company for certain items of plant and machinery. Finance leases total £1,239 (2021 - £2,465) and have no purchase options at the end of the lease periods, hire purchase contracts total £82,336 (2021 - £97,351) and ownership of the assets will transfer to the company after the final payments are made. The average lease term is 3 years and no restrictions are placed on the use of the assets.

The following are the major deferred tax liabilities and assets recognised by the company and movements thereon:

The deferred tax liability set out above is expected to decrease by £5,334 over the next 12 months, this is due to the expected depreciation charge on all qualifying assets exceeding capital allowances by £22,680. The effective corporation tax rate for the next 12 months is expected to be 23.52%.

The company makes contributions to the personal pension funds of all qualifying employees. At 31 December 2022 there were contributions due of £5,430 (2021 - £3,743), including £2,235 (2021 - £1,695) deducted from employees wages to be paid over on their behalf, which are included in accruals and deferred income.

All unrealised gains, and the reversal of unrealised gains, on current asset investments are, to the extent that they are above their original purchase value, transferred to this reserve net of the corresponding deferred taxation provision. This is done so that only profits that have been realised are included in retained earnings.

At 31 December 2021 the company was engaged in two employment tribunals with former employees, the maximum value of these claims being £70,000. Both tribunals have been settled for a total of £7,000 without any acceptance of liability in the current year.

At the reporting end date the company had outstanding commitments for future minimum lease payments under non-cancellable operating leases, which fall due as follows:

The above figures represent leases on the two properties from which the company operates which have 2.60 and 8.83 years left to run respectively.

During the year the company entered into the following transactions with related parties:

Entities with control, joint control or significant influence over the entity

T M Spain

The company is controlled by Mr T M Spain, a director, who owns the entire share capital. During the year, Mr Spain received dividends totalling £80,000, (2021 - £80,000) from the company, details of his remuneration as well as his director's current account with the company can be found in notes 6 and 27 respectively.

Other related parties

Close family member of the controlling party

The company received income of £8 (2021 - £357) for services provided to close family members of Mr T M Spain.

Close family members of Mr Spain received remuneration totalling £61,203 (2021 - £75,003) and had pension contributions of £1,488 (2021 - £11,300) made on their behalf by the company. In the preceding year the company was able to claim grants from the Coronavirus Job Retention Scheme totalling £20,322 in respect of these.

Henry Spain Property Limited - A company controlled by Mr T M Spain, a director and the sole shareholder of the company

The company paid rent of £29,890 (2021 - £18,000) to Henry Spain Property Limited and at 31 December 2022 had made prepayments totalling £Nil (2021 - £1,500) on account of these rents.

From time to time, the company had made cash loans to and paid expenses on behalf of Henry Spain Property Limited and at 31 December 2022 Henry Spain Property Limited owed them £938,596 (2021 - £523,979) in respect of such transactions. No interest is payable on the balances outstanding which are repayable on demand.

Other companies in which Mr T M Spain, a director and the sole shareholder of the company, is a member of the key management personnel

The company holds shares in, and has from time to time, made purchases and sales of shares in, other companies of which Mr T M Spain is a member of key management personnel. During the year, the company made purchases totalling £65,523 (2021 - £100,000) and sales totalling nil (2021 - £29,932) in such shares, losses in the value of the shares held in these companies totalled £302,203 (2021 - gains totalled £209,442) and at 31 December 2022 the total value of the shares held was £486,080 (2021 - £722,760).

Mr T M Spain, operates a director's current account with the company to which expenses of £469 (2021 - £1,469), that he had incurred on behalf of the company as well as undrawn dividends and wages of £80,743 (2021 - £80,000) have been credited and to which drawings and payments made on his behalf by the company of £185,141 (2021 - £213,112) have been debited. At 31 December 2022 Mr Spain owed £497,939 (2021 - £385,597) to the company in respect of such transactions. The maximum debit balance on the account, in the year, was £497,939 (2021 - £385,597) and Mr Spain paid the company interest totalling £8,413 (2021 - £6,417), calculated on the daily debit balance outstanding at the Official Rate of 2.00%. No interest is payable by the company on credit balances and both credit and debit balances are repayable on demand.

The ultimate controlling party is T M Spain.