Process Components Limited - Period Ending 2019-12-31

Registration number: 06916722

Prepared for the registrar

Process Components Limited

Annual Report and Financial Statements

for the Year Ended 31 December 2019

Process Components Limited

Contents

Company Information	1
Balance Sheet	2
Notes to the Financial Statements	3 to 12

Process Components Limited

Company Information

Directors

A Goodwin M Walsh

Company secretary

H Wild

Registered office

Rupert House London Road South Poynton Stockport SK12 1PQ

Auditors

Hazlewoods LLP Staverton Court Staverton Cheltenham GL51 0UX

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Process Components Limited

(Registration number: 06916722)
Balance Sheet as at 31 December 2019

	Note	31 December 2019  £	31 December 2018  £
Fixed assets
Intangible assets	4	156,875	173,285
Tangible assets	5	286,617	308,195
Investments	6	128,661	128,661
		572,153	610,141
Current assets
Stocks		1,511,530	1,175,213
Debtors	7	1,807,987	947,045
Cash at bank and in hand		503,030	356,428
		3,822,547	2,478,686
Creditors: Amounts falling due within one year	8	(2,501,954)	(1,420,248)
Net current assets		1,320,593	1,058,438
Total assets less current liabilities		1,892,746	1,668,579
Deferred tax liabilities	9	(27,106)	(34,494)
Net assets		1,865,640	1,634,085
Capital and reserves
Called up share capital	11	105	105
Profit and loss account		1,865,535	1,633,980
Total equity		1,865,640	1,634,085

These financial statements have been prepared in accordance with the special provisions relating to companies subject to the small companies regime within Part 15 of the Companies Act 2006.

These financial statements have been delivered in accordance with the provisions applicable to companies subject to the small companies regime and the option not to file the Profit and Loss Account has been taken.

Approved and authorised by the Board on 3 August 2020 and signed on its behalf by:
 

.........................................

A Goodwin
Director

The notes on pages 3 to 12 form an integral part of these financial statements.
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Process Components Limited

Notes to the Financial Statements for the Year Ended 31 December 2019

1

General information

The company is a private company limited by share capital, incorporated in England and Wales.

The address of its registered office is:
Rupert House
London Road South
Poynton
Stockport
SK12 1PQ

2

Accounting policies

Summary of significant accounting policies and key accounting estimates

The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.

Statement of compliance

These financial statements have been prepared in accordance with Financial Reporting Standard 102 Section 1A - 'The Financial Reporting Standard applicable in the UK and Republic of Ireland' and the Companies Act 2006.

Basis of preparation

These financial statements have been prepared using the historical cost convention except for, where disclosed in these accounting policies, certain items that are shown at fair value.

The presentational currency of the financial statements is Pounds Sterling, being the functional currency of the primary economic environment in which the company operates. Monetary amounts in these financial statements are rounded to the nearest Pound.

Group accounts not prepared

These financial statements are consolidated in the financial statements of Schenck Process Group.

The financial statements of Schenck Process Group may be obtained from the company's registered office.

Going concern

The directors have prepared forecast information which takes into account the current COVID-19 outbreak and its potential impact on the business. Like many businesses in the current environment, COVID-19 is expected to result in a period of reduced activity, resulting in a projected decrease in sales in the short term. Whilst the company will be able to reduce direct costs, there will still be a level of fixed costs that cannot be avoided. In addition, the collection of debtors is more uncertain. The forecasts indicate that the company will remain within its existing facilities. On the basis of this information, the directors consider it appropriate to prepare the financial statements on a going concern basis. As with a number of such businesses, however, it is difficult to accurately forecast the effect that COVID-19 will have on the company in the next 12 months.

Critical accounting judgements and key sources of estimation uncertainty
In the application of the company’s accounting policies, the directors are required to make judgements, estimates and assumptions about the carrying amounts 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 if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.
 

Judgements

No significant judgements have been made by management in preparing these financial statements.

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Process Components Limited

Notes to the Financial Statements for the Year Ended 31 December 2019

Key sources of estimation uncertainty

Management have assessed stock lines and have estimated the value of stock that requires provision in order to reflect the true value of stock within the financial statements. The carrying amount is £108,513 (2018 - £108,381).

Revenue recognition

Turnover comprises the fair value of the consideration received or receivable for the sale of goods and provision of services in the ordinary course of the company’s activities. Turnover is shown net of sales/value added tax, returns, rebates and discounts and after eliminating sales within the company.

Foreign currency transactions and balances

Transactions in foreign currencies are initially recorded at the functional currency rate prevailing at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated into the respective functional currency of the entity at the rates prevailing on the reporting period date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing on the initial transaction dates.

Non-monetary items measured in terms of historical cost in a foreign currency are not retranslated.

Tax

The tax expense for the period comprises current and deferred tax. Tax is recognised in the profit and loss account, except that a charge attributable to an item of income or expense recognised as other comprehensive income is also recognised directly in other comprehensive income.

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 countries where the company operates and generates taxable income.

Deferred income tax is recognised on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements and on unused tax losses or tax credits in the company. Deferred income tax is determined using tax rates and laws that have been enacted or substantively enacted by the reporting date.

The carrying amount of deferred tax assets are reviewed at each reporting date and a valuation allowance is set up against deferred tax assets so that the net carrying amount equals the highest amount that is more likely than not to be recovered based on current or future taxable profit.

Tangible assets

Tangible assets are stated in the statement of financial position at cost, less any subsequent accumulated depreciation and subsequent accumulated impairment losses.

The cost of tangible assets includes directly attributable incremental costs incurred in their acquisition and installation.

Depreciation

Depreciation is charged so as to write off the cost of assets, other than land and properties under construction over their estimated useful lives, as follows:

Asset class	Depreciation method and rate
Short leasehold land and buildings	5 years over the life of the lease
Plant and machinery	14 - 20% of cost per annum
Fixtures and fittings	10 - 33% of cost per annum

Business combinations

Business combinations are accounted for using the purchase method. The consideration for each acquisition is measured at the aggregate of the fair values at acquisition date of assets given, liabilities incurred or assumed, and equity instruments issued by the group in exchange for control of the acquired, plus any costs directly attributable to the business combination. When a business combination agreement provides for an adjustment to the cost of the combination contingent on future events, the group includes the estimated amount of that adjustment in the cost of the combination at the acquisition date if the adjustment is probable and can be measured reliably.

Goodwill

Goodwill is amortised over its useful life, which shall not exceed five years if a reliable estimate of the useful life cannot be made.

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Process Components Limited

Notes to the Financial Statements for the Year Ended 31 December 2019

Intangible assets

Goodwill arising on the acquisition of an entity represents the excess of the cost of acquisition over the company’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities of the entity recognised at the date of acquisition. Goodwill is initially recognised as an asset at cost and is subsequently measured at cost less accumulated amortisation and accumulated impairment losses. Goodwill is held in the currency of the acquired entity and revalued to the closing rate at each reporting period date.

Negative goodwill arising on an acquisition is recognised on the face of the balance sheet on the acquisition date and subsequently the excess up to the fair value of non-monetary assets acquired is recognised in profit or loss in the periods in which the non-monetary assets are recovered.

Separately acquired trademarks and licences are shown at historical cost.

Trademarks, licences (including software) and customer-related intangible assets acquired in a business combination are recognised at fair value at the acquisition date.

Trademarks, licences and customer-related intangible assets have a finite useful life and are carried at cost less accumulated amortisation and any accumulated impairment losses.

Amortisation

Amortisation is provided on intangible assets so as to write off the cost, less any estimated residual value, over their useful life as follows:

Asset class	Amortisation method and rate
Goodwill	10 years over its estimated useful economic life
Patents	10% of cost per annum
Software	10% of cost per annum

Investments

Investments in equity shares which are publicly traded or where the fair value can be measured reliably are initially measured at fair value, with changes in fair value recognised in profit or loss. Investments in equity shares which are not publicly traded and where fair value cannot be measured reliably are measured at cost less impairment.

Interest income on debt securities, where applicable, is recognised in income using the effective interest method. Dividends on equity securities are recognised in income when receivable.

Trade debtors

Trade debtors are amounts due from customers for merchandise sold or services performed in the ordinary course of business.

Trade debtors are recognised initially at the transaction price. All trade debtors are repayable within one year and hence are included at the undiscounted cost of cash expected to be received. A provision for the impairment of trade debtors is established when there is objective evidence that the company will not be able to collect all amounts due according to the original terms of the debtors.

Stocks

Stocks are stated at the lower of cost and estimated selling price less costs to complete and sell. Cost is determined using the first-in, first-out (FIFO) method.

The cost of finished goods and work in progress comprises direct materials and, where applicable, direct labour costs and those overheads that have been incurred in bringing the inventories to their present location and condition. At each reporting date, stocks are assessed for impairment. If stocks are impaired, the carrying amount is reduced to its selling price less costs to complete and sell; the impairment loss is recognised immediately in profit or loss.

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Process Components Limited

Notes to the Financial Statements for the Year Ended 31 December 2019

Trade creditors

Trade creditors are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Accounts payable are classified as current liabilities if the company does not have an unconditional right, at the end of the reporting period, to defer settlement of the creditor for at least twelve months after the reporting date. If there is an unconditional right to defer settlement for at least twelve months after the reporting date, they are presented as non-current liabilities.

Trade creditors are recognised initially at the transaction price and all are repayable within one year and hence are included at the undiscounted amount of cash expected to be paid.

Borrowings

Interest-bearing borrowings are initially recorded at fair value, net of transaction costs. Interest-bearing borrowings are subsequently carried at amortised cost, with the difference between the proceeds, net of transaction costs, and the amount due on redemption being recognised as a charge to the Profit and Loss Account over the period of the relevant borrowing.

Interest expense is recognised on the basis of the effective interest method and is included in interest payable and similar charges.

Borrowings are classified as current liabilities unless the company has an unconditional right to defer settlement of the liability for at least twelve months after the reporting date.

Leases

Leases in which substantially all the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases are charged to profit or loss on a straight-line basis over the period of the lease.

Share capital

Ordinary shares are classified as equity. Equity instruments are measured at the fair value of the cash or other resources received or receivable, net of the direct costs of issuing the equity instruments. If payment is deferred and the time value of money is material, the initial measurement is on a present value basis.

Dividends

Dividend distribution to the company’s shareholders is recognised as a liability in the financial statements in the reporting period in which the dividends are declared.

Defined contribution pension obligation

A defined contribution plan is a pension plan under which fixed contributions are paid into a pension fund and the company has no legal or constructive obligation to pay further contributions even if the fund does not hold sufficient assets to pay all employees the benefits relating to employee service in the current and prior periods.

Contributions to defined contribution plans are recognised as employee benefit expense when they are due. If contribution payments exceed the contribution due for service, the excess is recognised as a prepayment.

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Process Components Limited

Notes to the Financial Statements for the Year Ended 31 December 2019

Financial instruments

Classification
Financial instruments are classified and accounted for according to the substance of the contractual arrangement, as financial assets, financial liabilities or equity instruments. An equity instrument is any contract that evidences a residual interest in the assets of the company after deducting all of its liabilities. Where shares are issued, any component that creates a financial liability of the company is presented as a liability on the balance sheet. The corresponding dividends relating to the liability component are charged as interest expenses in the profit and loss account.

Recognition and measurement
All financial assets and liabilities are initially measured at transaction price (including transaction costs), except for those financial assets classified as at fair value through profit or loss, which are initially measured at fair value (which is normally the transaction price excluding transaction costs), unless the arrangement constitutes a financing transaction. If an arrangement constitutes a financing transaction, the financial asset or financial liability is measured at the present value of the future payments discounted at a market rate of interest for a similar debt instrument.

Impairment
Assets, other than those measured at fair value, are assessed for indicators of impairment at each balance sheet date. If there is objective evidence of impairment, an impairment loss is recognised in profit or loss as described below.

A non financial asset is impaired where there is objective evidence that, as a result of one or more events that occurred after initial recognition, the estimated recoverable value of the asset has been reduced. The recoverable amount of an asset is the higher of its fair value less costs to sell and its value in use.

The recoverable amount of goodwill is derived from measurement of the present value of the future cash flows of the cash-generating units ('CGUs') of which the goodwill is a part. Any impairment loss in respect of a CGU is allocated first to the goodwill attached to that CGU, and then to other assets within that CGU on a pro-rata basis.

Where indicators exist for a decrease in impairment loss, the prior impairment loss is tested to determine reversal. An impairment loss is reversed on an individual impaired asset to the extent that the revised recoverable value does not lead to a revised carrying amount higher than the carrying value had no impairment been recognised. Where a reversal of impairment occurs in respect of a CGU, the reversal is applied first to the assets (other than goodwill) of the CGU on a pro-rata basis and then to any goodwill allocated to that CGU.

For financial assets carried at amortised cost, the amount of an impairment is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the financial asset’s original effective interest rate.

For financial assets carried at cost less impairment, the impairment loss is the difference between the asset’s carrying amount and the best estimate of the amount that would be received for the asset if it were to be sold at the reporting date.

Where indicators exist for a decrease in impairment loss, and the decrease can be related objectively to an event occurring after the impairment was recognised, the prior impairment loss is tested to determine reversal. An impairment loss is reversed on an individual impaired financial asset to the extent that the revised recoverable value does not lead to a revised carrying amount higher than the carrying value had no impairment been recognised.

3

Staff numbers

The average number of persons employed by the company (including directors) during the year, was as follows:

	Year ended 31 December 2019  No.	1 July 2018 to 31 December 2018  No.
Average number of employees	36	34

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Process Components Limited

Notes to the Financial Statements for the Year Ended 31 December 2019

4

Intangible assets

	Goodwill  £	Patents  £	Software costs  £	Total £
Cost
At 1 January 2019	1,091,276	36,326	100,472	1,228,074
Additions acquired separately	-	-	55,736	55,736
At 31 December 2019	1,091,276	36,326	156,208	1,283,810
Amortisation
At 1 January 2019	1,042,858	11,931	-	1,054,789
Amortisation charge	48,418	3,633	20,095	72,146
At 31 December 2019	1,091,276	15,564	20,095	1,126,935
Carrying amount
At 31 December 2019	-	20,762	136,113	156,875
At 31 December 2018	48,418	24,395	100,472	173,285

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Process Components Limited

Notes to the Financial Statements for the Year Ended 31 December 2019

5

Tangible assets

	Short leasehold land and buildings £	Fixtures and fittings  £	Motor vehicles  £	Plant and machinery  £	Total £
Cost
At 1 January 2019	250,151	201,948	9,710	259,660	721,469
Additions	29,972	19,486	-	30,824	80,282
At 31 December 2019	280,123	221,434	9,710	290,484	801,751
Depreciation
At 1 January 2019	108,546	126,708	9,710	168,310	413,274
Charge for the period	43,247	27,243	-	31,370	101,860
At 31 December 2019	151,793	153,951	9,710	199,680	515,134
Carrying amount
At 31 December 2019	128,330	67,483	-	90,804	286,617
At 31 December 2018	141,605	75,240	-	91,350	308,195

Included within the net book value of land and buildings above is £128,330 (2018 - £141,605) in respect of freehold land and buildings.
 

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Process Components Limited

Notes to the Financial Statements for the Year Ended 31 December 2019

6

Investments

	2019 £	2018 £
Investments in subsidiaries	128,661	128,661

Details of undertakings

Details of the investments (including principal place of business of unincorporated entities) in which the company holds 20% or more of the nominal value of any class of share capital are as follows:

Undertaking	Registered office	Holding	Proportion of voting rights and shares held
			2019	2018

Subsidiary undertakings
Kemutec Group, Inc.	130 Wharton Road, Keystone Industrial Park, Bristol. PA. 19007	Ordinary	100%	100%
	United States of America
Kemutec S de RL de CV	Dr Martinez 137, Col Los Doctores, 64710 Monterrey Neuvo Leon	Ordinary	100%	100%
	Mexico
Kemutec B.V.	's Hertogenbosch Zwaenenstede 14, 5221 KA's-Hertogenbosch, The Netherlands	Ordinary	100%	100%
	Netherlands

The principal activity of Kemutec Group, Inc. is distribution of powder processing equipment.

The principal activity of Kemutec S de RL de CV is distribution of powder processing equipment.

The principal activity of Kemutec B.V. is distribution of powder processing equipment.

7

Debtors

	31 December 2019  £	31 December 2018  £
Trade debtors	671,872	371,186
Amounts owed by group undertakings	138,000	327,782
Other debtors	711,183	216,518
Prepayments	32,653	31,559
Corporation tax asset	254,279	-
	1,807,987	947,045

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Process Components Limited

Notes to the Financial Statements for the Year Ended 31 December 2019

8

Creditors

Creditors: amounts falling due within one year

	31 December 2019  £	31 December 2018  £
Due within one year
Trade creditors	1,331,938	704,311
Social security and other taxes	43,367	32,554
Outstanding defined contribution pension costs	15,201	14,028
Other creditors	838,863	457,150
Accrued expenses	272,485	142,279
Corporation tax liability	-	69,826
Deferred shares	100	100
	2,501,954	1,420,248

The holders of the deferred shares are entitled, in priority to the holders of any other shares, to a non-cumulative cash dividend of 5% per annum of the nominal value of each deferred share. On a return of capital, the holders of the deferred shares are entitled to the nominal amount of £1 per share after the Ordinary shares receive the amounts paid up to them together with £20,000,000. Members holding deferred shares are not entitled to receive notice nor attend and speak at any general meeting.

9

Deferred tax

Deferred tax assets and liabilities

2019	Liability £
Accelerated capital allowances	32,143
Other timing differences	(5,037)
	27,106

2018	Liability £
Accelerated capital allowances	36,078
Other timing differences	(1,584)
	34,494

10

Reserves

Share capital
Represents the issued equity share capital of the company.

Retained earnings
Represents cumulative profits or losses, net of dividends paid and other adjustments.

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Process Components Limited

Notes to the Financial Statements for the Year Ended 31 December 2019

11

Share capital

Allotted, called up and fully paid shares

	31 December 2019		31 December 2018
	No.	£	No.	£
Ordinary shares of £1 each	100	100	100	100
A Ordinary shares of £0.01 each	499	4.99	499	4.99
	599	105	599	105

The A Ordinary shares carry no voting rights and rank pari passu with Ordinary shares on dividend amounts in excess of £3,000,000. On return of capital, the holders of A Ordinary shares are entitled to a nominal amount of £1 per share after the Ordinary shares receive the amounts paid up to them together with £20,000,000. The holders of the A Ordinary shares are entitled to, subject to the rights of the deferred shareholders, the nominal value of each A share (including premium) plus an annually compounded return of 8% of the subscription price (including premium).

12

Dividends

	31 December 2019  £	31 December 2018  £
Dividends paid	500,000	900,000

13

Financial commitments, guarantees and contingencies

At 31 December 2019, the company had total commitments under non-cancellable operating leases over the remaining life of those leases of £897,661 (2018 - £721,982).

14

Related party transactions

During the year, the company incurred monitoring fees and rechargeable expenses of £nil (2018 - £21,899) from EPIC Private Equity LLP, advisor to EPE Special Opportunities plc. At the balance sheet date the amount owing to EPIC Private Equity LLP was £nil (2018 - £nil).

During the period, the company paid consultancy fees of £nil (2018 - £31,000) to Deerfield Group Limited, a business controlled by Robin Palmer, a previous director of the company. At the balance sheet date the amount owing to Deerfield Group Limited was £nil (2018 - £2,400).

Balances with group undertakings are disclosed in note 7 to these financial statements.

15

Parent and ultimate parent undertaking

The ultimate parent entity is Schenck Process Group, a company incorporated in Germany.

16

Non adjusting events after the financial period

On 1 January 2020, 100% of the share capital of the subsidiary entity, Kemutec Group Inc., was sold to Schenck Process LLC for consideration of $8.3million.

17

Audit report

The Independent Auditor's Report was unqualified. The name of the Senior Statutory Auditor who signed the audit report on 6 August 2020 was Paul Fussell, who signed for and on behalf of Hazlewoods LLP.

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