Welland Engineering Company Limited - Limited company accounts 20.1

WELLAND ENGINEERING COMPANY LIMITED

GROUP STRATEGIC REPORT,

REPORT OF THE DIRECTORS AND

CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 MARCH 2020

Page

Company Information

1

Group Strategic Report

2

Report of the Directors

3

Report of the Independent Auditors

4

to

5

Consolidated Income Statement

6

Consolidated Other Comprehensive Income

7

Consolidated Balance Sheet

8

Company Balance Sheet

9

Consolidated Statement of Changes in Equity

10

Company Statement of Changes in Equity

11

Consolidated Cash Flow Statement

12

Notes to the Consolidated Cash Flow Statement

13

Notes to the Consolidated Financial Statements

14

to

25

DIRECTORS:

E J R Farrow

C L Farrow

SECRETARY:

C L Farrow

REGISTERED OFFICE:

Welland Business Park

Clay Lake

Spalding

Lincolnshire

PE12 6BL

REGISTERED NUMBER:

00479009 (England and Wales)

AUDITORS:

Duncan & Toplis Limited, Statutory Auditor

Enterprise Way

Pinchbeck

Spalding

Lincolnshire

PE11 3YR

The directors present their strategic report of the company and the group for the year ended 31 March 2020.

REVIEW OF BUSINESS

The group continues to trade well, especially given the current Covid-19 crisis and a tough international market. Profitable Volumes declined over the previous period. Net margin declined again, due to a softening worldwide market for our products, clearance of some stock and less favourable currency positions from GBP gaining some strength across the period against the USD.

The balance sheet remains robust and it is anticipated that the group will be able to utilise this to support higher margin business and projects in the UK, which we focussed on last year. Additional investment in facilities, employees, equipment and IT projects across the period are starting to improve productivity. A buoyant and free-flowing generator market now looks some way away with Covid-19 likely to continue to eat into volumes and margins.

The business suffered from extended delivery times in the period on most standard product ranges and the increase in capacity was delayed due to an overrun on various projects. Further increases to capacity, stock and staffing numbers to limit the impact on customers during times of high demand will be required in 2020/21

Through the coming period the business intends to try to support its net margins in the difficult environment by focusing on employee productivity, material costs and overheads.

PRINCIPAL RISKS AND UNCERTAINTIES

The business faces risks across from a market in temporary decline, increased competition and decreasing credit quality in its export markets. Uncertainty surrounding the UK's future relationship with the European Union adds significant currency and operational risk. This will continue for the 2020/21 period and maybe even further.

Despite the risks, the business is well capitalised, has low net borrowing and a strong team to drive it forwards. Compared to competitors, we feel the risks are limited against all outcomes.

ON BEHALF OF THE BOARD:

C L Farrow - Director

27 November 2020

The directors present their report with the financial statements of the company and the group for the year ended 31 March 2020.

DIVIDENDS

Dividends were paid totalling £34.72 on A ordinary shares, £54.91 and £231.21 on B ordinary shares and £35.39 and £231.30 on C ordinary shares.

DIRECTORS

The directors shown below have held office during the whole of the period from 1 April 2019 to the date of this report.

E J R Farrow

C L Farrow

STATEMENT OF DIRECTORS' RESPONSIBILITIES

The directors are responsible for preparing the Group Strategic Report, the Report of the Directors 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 the group and of the profit or loss of the group 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 and the group's transactions and disclose with reasonable accuracy at any time the financial position of the company and the group 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 the group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

STATEMENT AS TO DISCLOSURE OF INFORMATION TO AUDITORS

So far as the directors are aware, there is no relevant audit information (as defined by Section 418 of the Companies Act 2006) of which the group's auditors are unaware, and each director has taken all the steps that he ought to have taken as a director in order to make himself aware of any relevant audit information and to establish that the group's auditors are aware of that information.

ON BEHALF OF THE BOARD:

C L Farrow - Director

27 November 2020

Opinion

We have audited the financial statements of Welland Engineering Company Limited (the 'parent company') and its subsidiaries (the 'group') for the year ended 31 March 2020 which comprise the Consolidated Income Statement, Consolidated Other Comprehensive Income, Consolidated Balance Sheet, Company Balance Sheet, Consolidated Statement of Changes in Equity, Company Statement of Changes in Equity, Consolidated Cash Flow Statement and Notes to the Consolidated Cash Flow Statement, 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 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 group's and of the parent company affairs as at 31 March 2020 and of the group's 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 Auditors' responsibilities for the audit of the financial statements section of our report. We are independent of the group 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 group'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 in the Group Strategic Report and the Report of the Directors, but does not include the financial statements and our Report of the Auditors 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 the audit:

-	the information given in the Group Strategic Report and the Report of the Directors for the financial year for which the financial statements are prepared is consistent with the financial statements; and

-	the Group Strategic Report and the Report of the Directors have been prepared in accordance with applicable legal requirements.

Matters on which we are required to report by exception

In the light of the knowledge and understanding of the group and the parent company and its environment obtained in the course of the audit, we have not identified material misstatements in the Group Strategic Report or the Report of the Directors.

We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion:

-	adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or

-	the parent company financial statements are not in agreement with the accounting records and returns; or

-	certain disclosures of directors' remuneration specified by law are not made; or

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

Responsibilities of directors

As explained more fully in the Statement of Directors' Responsibilities set out on page three, 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 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 group's and the parent company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the group or the parent company or to cease operations, or have no realistic alternative but to do so.

Auditors' responsibilities for the audit of the financial statements

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 a Report of the Auditors 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 www.frc.org.uk/auditorsresponsibilities. This description forms part of our Report of the Auditors.

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 a Report of the Auditors 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.

Alistair Main FCA (Senior Statutory Auditor)

for and on behalf of Duncan & Toplis Limited, Statutory Auditor

Enterprise Way

Pinchbeck

Spalding

Lincolnshire

PE11 3YR

7 December 2020

TURNOVER

Group and share of associates

18,005,895

17,274,981

Less:

Share of associates' turnover

(472,340

)

(100,787

)

GROUP TURNOVER

3

17,533,555

17,174,194

Cost of sales

15,563,902

15,822,755

GROSS PROFIT

1,969,653

1,351,439

Administrative expenses

1,223,409

520,980

OPERATING PROFIT

5

746,244

830,459

Profit/loss on sale of operatn

6

263,097

-

483,147

830,459

Income from interest in associated undertakings

26,016

73,053

Interest receivable and similar income

63,942

37,109

89,958

110,162

573,105

940,621

Interest payable and similar expenses

7

66,263

36,646

PROFIT BEFORE TAXATION

506,842

903,975

Tax on profit

8

58,076

195,019

PROFIT FOR THE FINANCIAL YEAR

448,766

708,956

Profit attributable to:

Owners of the parent

448,766

708,956

PROFIT FOR THE YEAR

448,766

708,956

OTHER COMPREHENSIVE INCOME

Fixed asset revaluation

Income tax relating to other comprehensive income

-

-

OTHER COMPREHENSIVE INCOME FOR THE YEAR, NET OF INCOME TAX

-

-

TOTAL COMPREHENSIVE INCOME FOR THE YEAR

448,766

708,956

Total comprehensive income attributable to:

Owners of the parent

448,766

708,956

FIXED ASSETS

Tangible assets

11

2,204,073

2,092,348

Investments

12

Interest in associate undertakings

19,735

26,664

2,223,808

2,119,012

CURRENT ASSETS

Stocks

13

2,450,141

3,061,248

Debtors

14

3,357,813

2,838,208

Cash at bank and in hand

437,636

762,235

6,245,590

6,661,691

CREDITORS

Amounts falling due within one year

15

2,787,424

3,269,451

NET CURRENT ASSETS

3,458,166

3,392,240

TOTAL ASSETS LESS CURRENT LIABILITIES

5,681,974

5,511,252

CREDITORS

Amounts falling due after more than one year

16

(691,998

)

(783,654

)

PROVISIONS FOR LIABILITIES

21

(154,690

)

(190,198

)

NET ASSETS

4,835,286

4,537,400

CAPITAL AND RESERVES

Called up share capital

22

1,152

1,152

Revaluation reserve

23

582,255

582,255

Capital redemption reserve

23

3,450

3,450

Retained earnings

23

4,248,429

3,950,543

SHAREHOLDERS' FUNDS

4,835,286

4,537,400

The financial statements were approved and authorised for issue by the Board of Directors and authorised for issue on 27 November 2020 and were signed on its behalf by:

C L Farrow - Director

FIXED ASSETS

Tangible assets

11

1,761,749

1,784,777

Investments

12

1,200,002

1,200,002

2,961,751

2,984,779

CURRENT ASSETS

Debtors

14

1,333,159

1,006,884

Cash at bank

102,338

264,967

1,435,497

1,271,851

CREDITORS

Amounts falling due within one year

15

635,939

714,804

NET CURRENT ASSETS

799,558

557,047

TOTAL ASSETS LESS CURRENT LIABILITIES

3,761,309

3,541,826

CREDITORS

Amounts falling due after more than one year

16

(691,998

)

(783,654

)

PROVISIONS FOR LIABILITIES

21

(75,513

)

(138,000

)

NET ASSETS

2,993,798

2,620,172

CAPITAL AND RESERVES

Called up share capital

22

1,152

1,152

Revaluation reserve

23

439,748

439,748

Capital redemption reserve

23

3,450

3,450

Retained earnings

23

2,549,448

2,175,822

SHAREHOLDERS' FUNDS

2,993,798

2,620,172

Company's profit for the financial year

524,506

498,791

The financial statements were approved and authorised for issue by the Board of Directors and authorised for issue on 27 November 2020 and were signed on its behalf by:

C L Farrow - Director

Called up

Capital

share

Retained

Revaluation

redemption

Total

capital

earnings

reserve

reserve

equity

£

£

£

£

£

Balance at 1 April 2018

1,151

3,382,947

582,255

3,450

3,969,803

Changes in equity

Issue of share capital

1

-

-

-

1

Dividends

-

(141,360

)

-

-

(141,360

)

Total comprehensive income

-

708,956

-

-

708,956

Balance at 31 March 2019

1,152

3,950,543

582,255

3,450

4,537,400

Changes in equity

Dividends

-

(150,880

)

-

-

(150,880

)

Total comprehensive income

-

448,766

-

-

448,766

Balance at 31 March 2020

1,152

4,248,429

582,255

3,450

4,835,286

Called up

Capital

share

Retained

Revaluation

redemption

Total

capital

earnings

reserve

reserve

equity

£

£

£

£

£

Balance at 1 April 2018

1,152

1,818,391

439,748

3,450

2,262,741

Changes in equity

Dividends

-

(141,360

)

-

-

(141,360

)

Total comprehensive income

-

498,791

-

-

498,791

Balance at 31 March 2019

1,152

2,175,822

439,748

3,450

2,620,172

Changes in equity

Dividends

-

(150,880

)

-

-

(150,880

)

Total comprehensive income

-

524,506

-

-

524,506

Balance at 31 March 2020

1,152

2,549,448

439,748

3,450

2,993,798

Cash flows from operating activities

Cash generated from operations

1

516,760

(2,550

)

Interest paid

(63,354

)

(31,808

)

Interest element of hire purchase payments paid

(2,909

)

(4,838

)

Tax paid

(265,775

)

(38,395

)

Net cash from operating activities

184,722

(77,591

)

Cash flows from investing activities

Purchase of tangible fixed assets

(309,773

)

(124,131

)

Purchase of fixed asset investments

6,929

(26,663

)

Sale of tangible fixed assets

20,580

65,645

Interest received

63,942

37,109

Dividends received

26,016

73,053

Net cash from investing activities

(192,306

)

25,013

Cash flows from financing activities

New loans in year

-

499,620

Loan repayments in year

(127,436

)

(79,510

)

Capital repayments in year

(21,032

)

(31,404

)

Amount introduced by directors

119,232

152,635

Dividends (drawn)/drawn

(136,899

)

(96,695

)

Share issue

-

1

Equity dividends paid

(150,880

)

(141,360

)

Net cash from financing activities

(317,015

)

303,287

(Decrease)/increase in cash and cash equivalents

(324,599

)

250,709

Cash and cash equivalents at beginning of year

2

762,235

511,526

Cash and cash equivalents at end of year

2

437,636

762,235

1.	RECONCILIATION OF PROFIT BEFORE TAXATION TO CASH GENERATED FROM OPERATIONS

2020

2019

£

£

Profit before taxation

506,842

903,975

Depreciation charges

181,665

164,446

Profit on disposal of fixed assets

(4,197

)

(23,522

)

Bad debt provision release

-

(172,051

)

Finance costs

66,263

36,646

Finance income

(89,958

)

(110,162

)

660,615

799,332

Decrease/(increase) in stocks

611,107

(1,850,115

)

Increase in trade and other debtors

(473,298

)

(38,595

)

(Decrease)/increase in trade and other creditors

(281,664

)

1,086,828

Cash generated from operations

516,760

(2,550

)

2.	CASH AND CASH EQUIVALENTS

The amounts disclosed on the Cash Flow Statement in respect of cash and cash equivalents are in respect of these Balance Sheet amounts:

Year ended 31 March 2020

31/3/20

1/4/19

£

£

Cash and cash equivalents

437,636

762,235

Year ended 31 March 2019

31/3/19

1/4/18

£

£

Cash and cash equivalents

762,235

511,582

Bank overdrafts

-

(56

)

762,235

511,526

3.	ANALYSIS OF CHANGES IN NET DEBT

At 1/4/19

Cash flow

At 31/3/20

£

£

£

Net cash

Cash at bank and in hand

762,235

(324,599

)

437,636

762,235

(324,599

)

437,636

Debt

Finance leases

(35,054

)

21,032

(14,022

)

Debts falling due within 1 year

(111,536

)

(1,450

)

(112,986

)

Debts falling due after 1 year

(769,632

)

77,634

(691,998

)

(916,222

)

97,216

(819,006

)

Total

(153,987

)

(227,383

)

(381,370

)

1.	STATUTORY INFORMATION

Welland Engineering Company Limited is a private company, limited by shares , registered in England and Wales. The company's registered number and registered office address can be found on the General Information page.

2.	ACCOUNTING POLICIES

Basis of preparing the financial statements

These financial statements have been prepared in accordance with Financial Reporting Standard 102 "The Financial Reporting Standard applicable in the UK and Republic of Ireland" and the Companies Act 2006. The financial statements have been prepared under the historical cost convention as modified by the revaluation of certain assets.

Turnover

Turnover is measured at the fair value of the consideration received or receivable, excluding discounts, rebates, value added tax and other sales taxes.

Revenue is recognised based on the terms of the sale, either on despatch from the company or on delivery and acceptance by the customer.

Tangible fixed assets

Depreciation is provided at the following annual rates in order to write off each asset over its estimated useful life.

Freehold property

-

2% on cost

Plant and machinery

-

25% on reducing balance, 20% on cost, 20% on reducing balance and 4% on cost

Fixtures and fittings

-

20% on cost

During the year the group have changed accounting policy from recognising non property assets at historical cost less accumulated depreciation to a revaluation model where assets are recognised at revaluation value less subsequent accumulated depreciation to ensure that its carrying value does not differ materially from its fair value at the reporting date. This provides more reliable and relevant information about the financial position of the company. Property was already recognised at valuation less depreciation.

Revaluations are undertaken with sufficient regularity to ensure the carrying amount does not differ materially from that which would be determined using fair value at the reporting date.

Fair values are determined from market based evidence. The last revaluation was undertaken at 31 March 2018 for non property assets and 31 March 2017 for property assets.

Revaluation gains and losses are recognised in the Statement of Comprehensive Income unless losses exceed the previously recognised gains or reflect a clear consumption of economic benefits, in which case the excess losses are recognised in the profit or loss.

Revalued assets are subsequently being depreciated at rates varying from 20% to 33% on revalued amount in order to write down assets to residual values over their remaining useful economic life.

Investments in subsidiaries and associates

Investments in subsidiary and associate undertakings are recognised at cost.

Stocks

Stocks are valued at the lower of cost and estimated selling price less costs to complete and sell, and after making due allowance for obsolete and slow moving items.

Taxation

Taxation for the year comprises current and deferred tax. Tax is recognised in the Consolidated Income Statement, except to the extent that it relates to items recognised in other comprehensive income or directly in equity.

Current or deferred taxation assets and liabilities are not discounted.

Current tax is recognised at the amount of tax payable using the tax rates and laws that have been enacted or substantively enacted by the balance sheet date.