FAGIOLI_LIMITED - Accounts

The director presents the strategic report for the year ended 31 December 2019.

The results for the year and financial position of the company are as shown in the financial statements.

As a provider of heavy lifting services, the company continues to service the construction, power and oil and gas industries. The company's activities are organised into the following areas during the year ended 31 December 2019:

- Heavy Lifting Services;

I consider that our key financial performance indicators are those that communicate the financial performance and strength of the company, these being turnover, operating profit and return on capital employed. Given the nature of the entity's operations non-financial key performance indicators are not considered significant.

Turnover decreased overall by 62.5% and the gross profit margin fell from 21% to 7% of revenues. The company made an operating loss before exceptional items, finance charges and taxation of £275,516 (2018: operating loss of £168,132) and a pre-tax loss of £286,550 (2018: pre-tax loss of £193,169). The major factor behind the decrease in turnover and gross profit margin is the decrease in large projects with third parties in the United Kingdom during the year.

The decrease in gross profit margin from 21% of turnover in 2018 to 7% in 2019 was the result of the mix between inter-group sales and third party sales in the United Kingdom changing significantly.. Intercompany projects accounted for 79% of revenues in the year ended 31 December 2019 compared to 53% in 2018.

After exceptional items, interest and taxation, a loss of £286,550 has been deducted from reserves compared to a loss of £193,169 deducted from reserves in 2018.

Return on capital employed has decreased from -7.72% in 2018 (including the exceptional gains and losses) to -16.02% in 2019. Return on capital employed is calculated as profit before interest and tax divided by capital employed, which constitutes total assets less current liabilities, less investments, less cash, plus overdrafts and other short term borrowings.

The financial figures for 2019 include an actuarial loss of £55,000 (2018: actuarial gain of £213,000) in respect of the final salary pension scheme as recorded in the statement of comprehensive income.

As for many businesses of our size, the business environment continues to be very challenging. The heavy lifting market worldwide is becoming more and more competitive and margins continue to be tight.

Going Concern

At year end, the company had net current assets of £1,783,722 (2018: £2,279,272), net assets of £1,979,079 (2018: £2,320,629) and recognised a net loss of £286,550 (2018: net loss of £193.169). The current economic conditions create uncertainty over the level of demand for the company's products and the long term development of the business. Despite these uncertainties, management is confident that the level of demand for the company's services and the long term development of the business remain robust. The company has secured the financial support from its parent company for at least 12 months from the date of approval of the financial statements.

As such, the director has a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future. Thus he continues to adopt the going concern basis in preparing the financial statements.

The company operates in a challenging business environment, providing its services in many different countries. The market worldwide is highly competitive and margins continue to be tight. The company distinguishes between market related risks, operating risks, liquidity risks and legal and regulatory risks. The most significant risks affecting the company's operations are described below, which in practice are mainly mitigated as a result of Fagioli SpA being the main projects administrator.

Market related risks

The company operates in a competitive market worldwide, where there remains some uncertainty in the general economic environment as a result of the global recession. For example in the short term there could be a reduction in large capital projects requiring the company's services. The company provides a significant proportion of its services through the Fagioli S.p.A. group, which is able to compete for projects on a worldwide basis, and to a large extent the geographical differentiation mitigates the company's market risk. Thanks to its presence in the energy sector the company is taking advantage of sustained growth in the emerging markets, which is compensating for the slow down in the more mature western markets.

Operational risks

The company's operations are dependent on the technical expertise of its management and staff, both at head office and in the field, and on the efficient and reliable operation of its plant and equipment used in lifting projects. Operational risk is mitigated by maintaining management and staff expertise through on-going training and development programmes, together with comprehensive procedures and the highest quality standards for the maintenance and re-furbishment of its lifting equipment and jacks whilst in use on contracts and between projects.

Customer credit risk

Although much of the company's revenue is derived from contracts within the Fagioli S.p.A. group, the company is exposed to risk in respect of trade receivables for work done for external customers. Customers are subject to credit checks and the outcome provides the basis for credit and payment terms for each customer. Where appropriate, stage payments are agreed during the course of a contract to optimise cash flows as well as reduce credit risk and excessive financial exposure.

Liquidity risks

There remains some uncertainty in the general economic environment as a result of the credit crunch. Liquidity risk is managed both at company and parent company level through close monitoring and control of cash flows to ensure adequate funding for the company's day to day operations. In addition the parent company, Fagioli S.p.A., has confirmed its intention to provide loan facilities and financial support to the company as required to enable it to continue to operate as a going concern and develop its business in the future.

Legal and regulatory risks

A significant amount of the company's revenue is derived from contracts within the Fagioli S.p.A. group which reduces the general legal and regulatory risk the company is exposed to. However, from time to time the company is involved in disputes in the normal course of business, and typically these are resolved promptly and do not involve significant amounts. To mitigate risk contracts and terms are agreed in advance for all significant work the company is involved in. The risks of operating in overseas countries are mitigated by operating in the main through the company's local subsidiary in the region concerned and taking local legal and financial advice where necessary.

On behalf of the board

The director presents his annual report and financial statements for the year ended 31 December 2019.

The principal activity of the company continued to be that of the provision of consultancy services, project managers and technical staff to the power, oil and gas industries and on projects administered by the Fagioli Group globally.

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

The results for the year are set out on page 7.

No ordinary dividends were paid. The director does not recommend payment of a final dividend.

In accordance with the company's articles, a resolution proposing that Azets Audit Services be reappointed as auditor of the company will be put at a General Meeting.

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;

•     state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements;

•     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.

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.

We have audited the financial statements of Fagioli Limited (the 'company') for the year ended 31 December 2019 which comprise 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 director's use of the going concern basis of accounting in the preparation of the financial statements is not appropriate; or

• the director has 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 director is 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 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 director's 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.

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 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 him 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.

Fagioli Limited is a private company limited by shares incorporated in England and Wales. The registered office is Brook House, 54A Cowley Mill Road, Uxbridge, Middlesex, UB8 2QE.

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. The principal accounting policies adopted are set out below.

The company has taken advantage of the exemption under section 400 of the Companies Act 2006 not to prepare consolidated accounts. The financial statements present information about the company as an individual entity and not about its group.

Fagioli Limited is a wholly owned subsidiary of Fagioli S.p.A., a company registered in Italy, and the results of Fagioli Limited are included in the consolidated financial statements of Fagioli S.p.A which are available from the company's registered office.

These financial statements are prepared on the going concern basis. The director has a reasonable expectation that the company will continue in operational existence for the foreseeable future. However, the director is aware of certain material uncertainties which may cause doubt on the company's ability to continue as a going concern.

At year end, the company had net current assets of £1,783,722 (2018: £2,279,272), net assets of £1,979,079 (2018: £2,320,629) and recognised a net loss of £286,550 (2018: net loss of £193,169).The current economic conditions create uncertainty over the level of demand for the company's products and the long term development of the business. Despite these uncertainties, management is confident that the level of demand for the company's services and the long term development of the business remain robust. The company has secured the financial support from its parent company for at least 12 months from the date of approval of the financial statements.

As such, the director has a reasonable expectation that the company has adequate resources to continue in operational existence for the foreseeable future. Thus he continues to adopt the going concern basis in preparing the financial statements.

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.

Turnover, related costs and attributable profit in respect of long-term contracts are ascertained according to the stage of completion of the contract and a prudent assessment of the contract outcome. Revenue on other contracts is recognised upon completion of the contract.

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:

Interests in subsidiaries are initially measured at cost and subsequently measured at cost less any accumulated impairment losses. The investments are assessed for impairment at each reporting date and any impairment losses or reversals of impairment losses are 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’ and Section 12 ‘Other Financial Instruments Issues’ 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.

Financial assets and liabilities are offset, with the net amounts presented in the financial statements, when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis or to realise the asset and settle the liability simultaneously.

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.

Other financial assets, including 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.

Financial assets, other than those held at fair value through profit and loss, are assessed for indicators of impairment at each reporting end date.

Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows have been affected. If an asset is impaired, the impairment loss is the difference between the carrying amount and the present value of the estimated cash flows discounted at the asset’s original effective interest rate. The impairment loss is recognised in profit or loss.

If there is a decrease in the impairment loss arising from an event occurring after the impairment was recognised, the impairment is reversed. The reversal is such that the current carrying amount does not exceed what the carrying amount would have been, had the impairment not previously been recognised. The impairment reversal is recognised in profit or loss.

Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire or are settled, or when the company transfers the financial asset and substantially all the risks and rewards of ownership to another entity, or if some significant risks and rewards of ownership are retained but control of the asset has transferred to another party that is able to sell the asset in its entirety to an unrelated third party.

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 creditors, bank loans, loans from fellow group companies and preference shares that are classified as debt, are initially recognised at transaction price unless the arrangement constitutes a financing transaction, where the debt instrument is measured at the present value of the future payments discounted at a market rate of interest. Financial liabilities classified as payable within one year are not amortised.

Debt instruments are subsequently carried at amortised cost, using the effective interest rate method.

Trade creditors are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Amounts 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 creditors are recognised initially at transaction price and subsequently measured at amortised cost using the effective interest method.

Derivatives, including interest rate swaps and forward foreign exchange contracts, are not basic financial instruments. Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently re-measured at their fair value. Changes in the fair value of derivatives are recognised in profit or loss in finance costs or finance income as appropriate, unless hedge accounting is applied and the hedge is a cash flow hedge.

Debt instruments that do not meet the conditions in FRS 102 paragraph 11.9 are subsequently measured at fair value through profit or loss. Debt instruments may be designated as being measured at fair value through profit or loss to eliminate or reduce an accounting mismatch or if the instruments are measured and their performance evaluated on a fair value basis in accordance with a documented risk management or investment strategy.

Financial liabilities are derecognised when the company’s contractual obligations expire or are discharged or cancelled.

Equity instruments issued by the company are recorded at the proceeds received, net of transaction costs. Dividends payable on equity instruments are recognised as liabilities once they are no longer at the discretion of the company.

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.

The company operates a defined benefit pension scheme. The amounts charged to operating profit are the current service costs and gains and losses on settlements and curtailments. They are included as part of staff costs. Past service costs are recognised immediately in the profit and loss account if the benefits have vested. If the benefits have not vested immediately, the costs are recognised over the period until vesting occurs. The interest cost and the expected return on assets are shown as a net amount of other finance costs or credits adjacent to interest. Actuarial gains and losses are recognised immediately in the statement of total recognised gains and losses.

Defined benefit schemes are funded, with the assets of the scheme held separately from those of the company, in separate trust administered funds. Pension scheme assets are measured at fair value and liabilities are measured on an actuarial basis using the projected unit method and discounted at a rate equivalent to the current rate of return on a high quality corporate bond of equivalent currency and term to the scheme liabilities. The actuarial valuations are obtained at least triennially and are updated at each balance sheet date. The resulting defined benefit asset or liability, net of the related deferred tax, is presented separately after other net assets on the face of the balance sheet.

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 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.

The turnover and loss before taxation are attributable to the one principal activity of the company carried out in the United Kingdom.

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

Their aggregate remuneration comprised:

The Director was employed by other group undertakings and his remuneration costs have been borne by those other group undertakings.The amount recharged to the Company is £nil (2018: nil).

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

A deferred tax asset has not been recognised in respect of the defined benefit pension scheme liability due to uncertainty as to the recoverability of the asset in the foreseeable future.

The company has accumulated tax trading losses of approximately £4,500,000 (2018: £4,006,000). A potential deferred tax asset of £855,000 (2018: £761,000) in respect of these tax losses has not been recognised in the financial statements at 31 December 2019 due to uncertainty over the amount and timing of the utilisation of these losses against future trading profits.

The company has capital losses carried forward of approximately £100,000 arising on the disposal of its former business premises in 2014. No deferred tax asset has been recognised in respect of these losses due to uncertainty over the amount and timing of the utilisation of these losses against future gains.

Details of the company's subsidiaries at 31 December 2019 are as follows:

The nature of business of all the subsidiaries is the supply of heavy lifting services.

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 company operates a defined benefit scheme for former employees.

The most recent actuarial valuations of plan assets and the present value of the defined benefit obligation were carried out at 31 December 2019 by a qualified independent actuary. The present value of the defined benefit obligation, the related current service cost and past service cost were measured using the projected unit credit method.

Assumed life expectations on retirement at age 65:

Amounts recognised in the profit and loss account

Amounts taken to other comprehensive income

The amounts included in the balance sheet arising from the company's obligations in respect of defined benefit plans are as follows:

Movements in the present value of defined benefit obligations

The defined benefit obligations arise from plans which are wholly or partly funded.

Movements in the fair value of plan assets

The actual return on plan assets was £866,000 (2018 - £85,000).

Fair value of plan assets at the reporting period end

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 COVID-19 pandemic is a non-adjusting event as at 31 December 2020 for the purposes of these financial statements.  The company has assessed the impact of COVID-19 on its ability to continue as a going concern.  The COVID-19 outbreak has developed rapidly in 2020 and has caused disruption to business, economic activities and impacted global markets.

Management continues to consider the potential implications of the COVID-19 pandemic, however at this stage it has not had a material impact on any of the balances in the company's financial statements.

The company has taken advantage of exemption, under the terms of Financial Reporting Standard 102 'The Financial Reporting Standard applicable in the UK and Republic of Ireland', not to disclose related party transactions with wholly owned subsidiaries within the group.

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

The following amounts were outstanding at the reporting end date:

The immediate parent company is Fagioli S.p.A, a company incorporated in Italy.

The ultimate parent and controlling party is QuattroR SGR S.p.A, a company incorporated in Italy.

Fagioli S.p.A is the smallest group in which the company is consolidated and QuattroR SGR S.p.A is the largest group in which the company is consolidated.

Copies of the consolidated financial statements of Fagioli S.p.A are available from its registered office;

Via Ferraris, 13

42049 S.Ilario D'Enza RE

Italy