SHELLY_MOTORS_LIMITED - Accounts

The directors present the strategic report for the year ended 31 December 2019.

The turnover for the year increased by 9.7% from £20,446,115 in 2018 to £22,432,167 in 2019 with an increase in gross profit from £1,052,365 in 2018 to £1,097,984 in 2019 although that was a fall from 5.15% to 4.89% in the margin.

The year saw an operating loss on ordinary activities of (£56,398) against a profit in 2018 of £46,543.

The net current assets of the company decreased from £1,035,398 to £947,726 in the year, and the overall total equity of the company fell from (£182,551) to (£515,140) largely on account of some exceptional costs incurred in the year as detailed in the accounts.

2019 was focussed on setting the company up for the future and bedding in a new computer system to streamline processes across the business. Shelly Motors has been a Kia Motors and Mitsubishi franchised dealership since 2016, however at the beginning of 2019 negotiations started with Mitsubishi to terminate this contract, and as at 30th December 2019 Mitsubishi left the site. Due to this the higher management team have taken time to work closely with Kia Motors to ensure the future running of the company with a support package for 2020 and 2021.

Shelly Motors have loans in New Zealand Dollars which results in foreign exchange exposure. Brexit has raised some uncertainties in all markets, which means inventory costs have increased and these increases have to be passed onto customers. This combination of uncertainty and higher prices may force potential customers to delay or stop their purchase. Shelly Motors limits this exposure by using all available marketing both from a marketing 3rd party and from Kia Motors support, also by using customer loyalty and communications to ensure customers are always updated for them to make informed decisions.

In 2019 Shelly Motors were recognised by Kia Motors for Sales Excellence, which is based on Retail Sales Volume, Sales versus Target Sales and Retail Sales Penetration. Shelly Motors have been praised for the improvement in Customer Satisfaction especially in aftersales and have regular meetings with Kia Motors to keep the emphasis on customer satisfaction.

Over the last year retail market share has increased and stabilized at 9.4%, with an overall market share of 5.9% proving the success of the site and its staff. There is now a strong and young management team committed to the company and searching for new revenue streams and driving performance. 2019 was the first full year on the new DMS implemented in November 2018, the staff have taken to the new system and refined processes because of it, reducing risks across each department and allowing more monitoring and analysis to strive for constant improvement.

Supplying cars to the local area improves our future aftersales opportunities, in turn this provides a positive opportunity for future repeat business.

The key performance indicators the directors consider to be important measurements of the business are as follows:

                Year Ended 31st December 2018    Year Ended 31st December 2019

New Car Units Registered            541                    637

Used Car Units Sold            451                    503

Retail Hours Sold                3,948                    4,958

Parts Front Counter Turnover        £36,144                    £67,271

Heavy emphasis is on customer satisfaction to ensure there is a returning client base, over 2018 and 2019 focus has been shifted onto customer reviews and letters received on the internet, in the post and feedback given directly to the manufacturers. A project was undertaken mid-2019 to set up the Shelly Motors service plan securing customers to come back in coming years with pre-paid services and MOTs, this has launched in 2020 and all Sales and Aftersales staff have payment schemes around these service plans and the Kia Motors service plans to drive sales.

For 2020, the management team and staff are looking forward to a fresh start as a Kia standalone dealership and with a showroom upgrade and refurbishment starting in March 2020 the customers will have a fresh and inviting surrounding to visit. Again Kia Motors have supported Shelly Motors throughout this process and have offered help with designing and providing furniture to finish the new look showroom.

On behalf of the board

The directors present their annual report and financial statements for the year ended 31 December 2019.

The principal activity of the company continued to be that of a motor car dealership.

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

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

No ordinary dividends were paid. The directors do not recommend payment of a final dividend.

No preference dividends were paid.

2020 has been a tough start for many businesses across the world due to the COVID-19 pandemic, Q1 for Shelly Motors started well however with the pandemic forcing the showroom to close in the middle of the busiest month of the year profit fell behind budget. A new budget will be formed to counter the impact once more is known, with many suppliers and funders helping with holding fees and deferring payments cash flow has not yet become a problem, the management team are monitoring this closely and are in close contact with the Shelly family to ensure cash is available when needed.

The auditor, Bryden Johnson Limited, is deemed to be reappointed under section 487(2) of the Companies Act 2006.

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 directors are responsible for preparing the annual report and the financial statements in accordance with applicable law and regulations.

Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have 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 directors must not approve the financial statements unless they are 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 directors are 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 directors are 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. They are 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 Shelly Motors Limited (the 'company') for the year ended 31 December 2019 which comprise the profit and loss account, the statement of comprehensive income, the balance sheet, the statement of changes in equity, the statement of cash flows and notes to the financial statements, including a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (United Kingdom Generally Accepted Accounting Practice).

In our opinion the financial statements:

•     give a true and fair view of the state of the company's affairs as at 31 December 2019 and of its loss 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

We have nothing to report in respect of the following matters in relation to which the ISAs (UK) require us to report to you where:

• the directors' use of the going concern basis of accounting in the preparation of the financial statements is not appropriate; or

• the directors have not disclosed in the financial statements any identified material uncertainties that may cast significant doubt about the company’s ability to continue to adopt the going concern basis of accounting for a period of at least twelve months from the date when the financial statements are authorised for issue.

Other information

The directors are responsible for the other information. The other information comprises the information included in the annual report, other than the financial statements and our auditor’s report thereon. 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.

In connection with our audit of the financial statements, 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 audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the financial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.

We have nothing to report in this regard.

Opinions on other matters prescribed by the Companies Act 2006

In our opinion, based on the work undertaken in the course of our audit:

• the information given in the strategic report and the directors' report for the financial year for which the financial statements are prepared is consistent with the financial statements; and

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

In the light of the knowledge and understanding of the company and its environment obtained in the course of the audit, we have not identified material misstatements in the strategic report and the directors' 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 directors' remuneration specified by law are not made; or

•     we have not received all the information and explanations we require for our audit.

As explained more fully in the directors' responsibilities statement, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, the directors are responsible for assessing the company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the company or to cease operations, or have no realistic alternative but to do so.

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

A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s website at: http://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.

Use of our report

This report is made solely to the company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company's members, as a body, for our audit work, for this report, or for the opinions we have formed.

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

Shelly Motors Limited is a private company limited by shares incorporated in England and Wales. The registered office is Warren Place, Birch Vale, Cobham, Surrey, United Kingdom, KT11 2PX.

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 Section 1A - small entities”) 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 on the historical cost convention. The principal accounting policies adopted are set out below.

The company continues to be dependent upon the continued financial support of its stakeholders. If this support were to be withdrawn the company would no longer be able to operate. However as at the time of this report the directors consider the company to be a going concern and the accounts have been prepared under this assumption.true

Turnover is recognised at the fair value of the consideration received or receivable for goods and services provided in the normal course of business, and is shown net of VAT and other sales related taxes. The fair value of consideration takes into account trade discounts, settlement discounts and volume rebates.

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.

Stocks are stated at the lower of cost and estimated selling price less costs to complete and sell.

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’ and Section 12 ‘Other Financial Instruments Issues’ of FRS 102 to all of its financial instruments.

Financial instruments are recognised in the company's statement of financial position when the company becomes party to the contractual provisions of the instrument.

Basic financial assets, which include debtors and cash and bank balances, are initially measured at transaction price including transaction costs and are subsequently carried at amortised cost using the effective interest method unless the arrangement constitutes a financing transaction, where the transaction is measured at the present value of the future receipts discounted at a market rate of interest. Financial assets classified as receivable within one year are not amortised.

Trade debtors, loans and other receivables that have fixed or determinable payments that are not quoted in an active market are classified as 'loans and receivables'. Loans and receivables are measured at amortised cost using the effective interest method, less any impairment.

Interest is recognised by applying the effective interest rate, except for short-term receivables when the recognition of interest would be immaterial. The effective interest method is a method of calculating the amortised cost of a debt instrument and of allocating the interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts through the expected life of the debt instrument to the net carrying amount on initial recognition.

Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the company after deducting all of its liabilities.

Basic financial liabilities, including trade and other payables, bank loans and loans from fellow group companies, are initially recognised at transaction price and subsequently measured at amortised cost using the effective interest method.

Trade payables 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 payment is due within one year or less. If not, they are presented as non-current liabilities. Trade payables are recognised initially at transaction price and subsequently measured at amortised cost using the effective interest method.

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.

The costs of short-term employee benefits are recognised as a liability and an expense, unless those costs are required to be recognised as part of the cost of stock or fixed assets.

The cost of any unused holiday entitlement is recognised in the period in which the employee’s services are received.

Termination benefits are recognised immediately as an expense when the company is demonstrably committed to terminate the employment of an employee or to provide termination benefits.

Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due.

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.

Transactions in currencies other than pounds sterling are recorded at the rates of exchange prevailing at the dates of the transactions. At each reporting end date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the reporting end date. Gains and losses arising on translation in the period are included in profit or loss.

In the application of the company’s accounting policies, the directors are required to make judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised where the revision affects only that period, or in the period of the revision and future periods where the revision affects both current and future periods.

In 2019 the company was subject to a VAT inspection in relation to the treatment of transactions on vehicle finance as part of vehicle sales. This has been an industry wide review carried out by HMRC and has had a detrimental effect on many smaller motor traders. The impact of the review for the company in the year was £134,000.

In 2019 the company's relationship with Mitsubishi was terminated as noted in the director's report. The resulting impact of this termination for the company is £125,000 which relates to losses on the sale of stock post year end, the reclaiming of support costs by Mitsubishi and the further stock losses as a result of Mitsubishi withdrawing from the UK market as a whole.

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

Their aggregate remuneration comprised:

The actual charge/(credit) for the year can be reconciled to the expected (credit)/charge for the year based on the profit or loss and the standard rate of tax as follows:

Included in creditors is an amount of £612,500 (2018: £522,500) for which a charge over the security deposit included in debtors has been given.

Deferred tax assets and liabilities are offset where the company has a legally enforceable right to do so. The following is the analysis of the deferred tax balances for financial reporting purposes:

The deferred tax liability set out above is expected to reverse within [12 months] and relates to accelerated capital allowances that are expected to mature within the same period.

The company operates a defined contribution pension scheme for all qualifying employees. The assets of the scheme are held separately from those of the company in an independently administered fund.

The redeemable preference shares are redeemable at any time and with not less than four weeks notice by the company in writing in accordance with the Company's Memorandum and Articles of Association, at the discretion of the Company.

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:

Included in creditors due after more than one year is an amount of £1,925,007 (2018: £1,655,140) due to Lejand Holdings, a company under the control of Mrs L Shelly, a director of the company.

During the year the company was charged loan interest of £11,775 (2018: £23,400) from Lejand Holdings.

Included in creditors due within one year is a balance of £78,155 (2018: £87,697) due to Mr A Shelly, a director of the company and £30,917 (2018: £60,042) due to AS Pension Investments (Epsom) Limited, a company that Mr A Shelly is a director of.