KTA_GROUP_LTD. - Accounts

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

The new vehicle market contracted again in 2019.  Turnover decreased in 2019, contributed by the change in franchise at High Wycombe from Citroen to Suzuki, but gross profits increased.

However buoyed by strong performances over the group, operating profit increased some 59% from the previous year.

There are several risks that could influence the performance of KTA Group Ltd., and we are always mindful of these. These include and are not limited to:

Economic Conditions: Our profitability is influenced by the economic environment within the UK. Various factors including consumer confidence impact on spending including vehicle purchases. Interest rate movements, fuel costs, taxation costs etc. can all influence our performance. We try and mitigate these wherever possible and monitor the marketplaces that we operate within on an ongoing basis.

Manufacturer Relationships: We represent manufacturer partners and are dependent on these for a large proportion of our profits. We monitor closely the activities and marketing stances of these partners to ensure that we maximise our profits. We are confident that these partners will continue to provide a range of competitively priced, quality new vehicles to enable us to grow with their market aspirations.

Used Vehicle Prices: Used vehicle price volatility can present a significant risk if the market moves rapidly between the purchase and sale points. This can see a reduction in margins and an increased provision for unsold stock. KTA Group Ltd. mitigate this by regularly monitoring the used market and ensuring that the vehicles are priced in line with market trends. By doing this we reduce our exposure to these market fluctuations. The constant review enables us to monitor days in stock which is also a contributing factor to the risk of marketplace volatility.

Key Performance Indicators: We monitor a variety of KPI’s each month which are then compared to both the prior year and industry averages. A culture of Treating the Customer Fairly is maintained within the company and customer complaints or concerns are included within these KPI’s we review.

Undoubtedly 2020 has provided numerous challenges from the COVID-19 pandemic to Brexit. However the company is well placed to post a very strong result considering the year we have all had.

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 retailer.

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 6.

Ordinary dividends were paid amounting to £86,400. The directors do not recommend payment of a further dividend.

The company has a normal level of exposure to price, credit, liquidity and cash flow risks arising from its trading activities which are conducted in sterling. The company does not enter into any hedging transactions.

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;

•     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 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.

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.

Disclaimer of Opinion

We were engaged to audit the financial statements of KTA Group Ltd. (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).

We do not express an opinion on the accompanying financial statements of the Company.

Because of the significance of the matters described in the Basis for Disclaimer of Opinion section of our report, we have not been able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion on these financial statements.

Basis for Disclaimer of Opinion

In planning our audit for the financial year ended 31 December 2019, we were made aware that for a period of at least 6 years to 31 December 2019 certain personal directors’ expenses had been accounted for inappropriately as legitimate company expenses and costs. On enquiry with the board of directors it was established that a full voluntary disclosure has been made to HMRC, following which a detailed forensic examination would establish the quantum of the personal directors’ expenses that would then be subject to adjustment in the financial statements of the company. As the HMRC investigation is ongoing then we have not been able to satisfy ourselves, by alternative means, as to the extent of any required adjustments to these financial statements at 31 December 2019 and 2018.

As a result of the above matters, which we understand are material and pervasive, we were unable to determine the extent of the adjustments required in respect of unrecorded directors’ advances, VAT and other taxation liabilities, and therefore the impact that such adjustments would have on the statement of comprehensive income, balance sheet, statement of changes in equity, statement of cash flows, and notes to the financial statements.

Other information

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

Because of the significance of the matter described in the basis for disclaimer of opinion section of our report, we have been unable to form an opinion, whether based on the work undertaken in the course of the 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.

Notwithstanding our disclaimer of an opinion on the financial statements, in the light of the knowledge and understanding of the company and its environment obtained in the course of the audit performed subject to the pervasive limitation described above, we have not identified material misstatements in the strategic report and the directors' report.

Arising from the limitation of our work referred to above:

•     we have not obtained all the information and explanations that we considered necessary for the purpose of our audit; and

•     we were unable to determine whether adequate accounting records have been kept.

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:

•     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.

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 responsibility is to conduct an audit of the company’s financial statements in accordance with International Standards on Auditing and to issue an auditor’s report. However, because of the matters described in the Basis for Disclaimer of Opinion section of our report, we were not able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion on 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: https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's report.

Use of our report

This report is made solely to the company's 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.

KTA Group Ltd. is a private company limited by shares incorporated in England and Wales. The registered office is Worleys Garage, Hamilton Road, High Wycombe, Buckinghamshire, HP13 5PA.

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 on the historical cost convention, modified to include the revaluation of freehold properties and to include investment properties at fair value. The principal accounting policies adopted are set out below.

Uncertainty due to the recent COVID-19 outbreak has been considered as part of the company's adoption of the going concern basis. Current trading has been impacted by COVID-19. Following guidance provided by the UK Government, the company took the decision to close its dealership network temporarily on 2 occasions during the financial year to 31 December 2020.true

All appropriate measures have been put in place to reduce the impact on the company, including cost reduction and deferral of other capital expenditure projects. In addition the company has sought to utilise the Government’s furlough scheme as regards its employees. Based on the board’s latest forecasts the company is anticipated to operate within the level of its current facilities.

Based on the aforementioned assessment the directors believe that it remains appropriate to prepare the financial statements on a going concern basis.  However, forecasts may have to be revised if the UK Government introduces additional periods of lockdown if infection levels rise again. Equally the impact of COVID-19 on the wider economy remains uncertain and therefore demand for the company’s products and services may become difficult to quantify. The financial statements do not include any adjustments that would result from the current basis of preparation being deemed inappropriate.

Turnover comprises revenue recognised by the company in respect of goods and services supplied during the year, exclusive of Value Added Tax and trade discounts.

Sales of motor vehicles, parts and accessories are recognised on full payment or when finance is arranged. Any other manufacturers income in relation to achieving targets is recognised on an accruals basis. After sales revenue is recognised on the completion of the agreed work.

Goodwill is the difference between amounts paid on the acquisition of a business and the fair value of the identifiable assets and liabilities. It is amortised to the profit and loss account over its estimated economic life. Provision is made for any impairment. The estimated useful economic life is 7 years.

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.

Investment properties for which fair value can be measured reliably without undue cost or effort on an ongoing basis are measured at fair value annually with any change recognised in the profit and loss account.

At each reporting period end date, the company reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the company estimates the recoverable amount of the cash-generating unit to which the asset belongs. Impairment losses are recognised in profit and loss.

Motor vehicles are stated at the lower of cost and net realisable value. Costs include the purchase price, delivery charges and any direct costs incurred in bringing the vehicle in to a saleable condition.

Parts stocks are stated at the lower of cost and net realisable value. Costs include the purchase price and delivery charges incurred.

A provision is made for obsolete, slow-moving or defective items where appropriate.

Consignment stocks

The company holds consignment stock vehicles which are regarded as being effectively under the control of the company and are included within stock on the balance sheet as the company has the significant risks and rewards of ownership even though the legal title has not yet passed. Legal title does not pass to the company until the earlier of the company holding the vehicle for a specified period, adopting the vehicle by using it as a demonstrator vehicle, or selling the vehicle to a third party. The corresponding liability is included in trade creditors.

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.

Unless the arrangement constitutes a financing arrangement, debt instruments that are payable or receivable within one year are measured at the undiscounted amount of the cash or other consideration expected to be paid or received.

Other debt instruments are measured at amortised cost using the effective interest method.

Where an arrangement constitutes a financing transaction, the financial asset or liability is measured at the present value of the future payments discounted at a market rate of interest for a similar debt 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.

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.

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.

Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recognised in profit or loss immediately, together with any changes in the fair value of the hedged asset or liability that are attributable to the hedged risk.

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.

Assets held under finance leases, hire purchase contracts and other similar arrangements, which confer rights and obligations similar to those attached to owned assets, are capitalised as tangible fixed assets at the fair value of the leased asset (or, if lower, the present value of the minimum lease payments as determined at the inception of the lease) and are depreciated over the shorter of the lease terms and their useful lives. The capital elements of future lease obligations are recorded as liabilities, while the interest elements are charged to the profit and loss account over the period of the leases to produce a constant periodic rate of interest on the remaining balance of the liability.

Rentals under operating leases are charged on a straight-line basis over the lease term, even if the payments are not made on such a basis. Benefits received and receivable as an incentive to sign an operating lease are similarly spread on a straight-line basis over the lease term.

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.

The following are the critical judgements and estimates, that the directors have made in the process of applying the Company’s accounting policies and that have the most significant effect on the amounts recognised in the financial statements.

Used vehicle stock valuations

Used vehicle stock is purchased from auctions, other trade sources and private individuals. Used vehicle stock is a depreciating stock item and devalues monthly, making the estimated stock value uncertain. Senior management review values of stock on an annual basis against trade valuation publications. Any possible overvaluations are corrected by reducing the stock value through the profit and loss account in the accounting period the over-valuation is identified.

The carrying value of used vehicle stock at the end of the period was £739,347 (2018 - £999,802).

Investment property valuations

Consideration has been given by the directors as to the fair value of the investment property. In determining the fair value they have used representations from professional valuation experts and have considered the open market value of the property based upon their knowledge of the local market.

An analysis of the company's turnover is as follows:

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

Their aggregate remuneration comprised:

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

Investment property comprises Doves Volvo Dealership, Keepers Corner, Burstow, NR Crawley. The fair value of the investment property has been arrived at on the basis of a valuation carried out at 1 September 2015 by GE Commercial Property Consultants, Chartered Surveyors, who are not connected with the company. The valuation was made on an open market value basis by reference to market evidence of transaction prices for similar properties.

Included in vehicle stock is £101,923 (2018: £90,278) in relation to consignment stock. The corresponding amount is included within trade creditors.

Trade debtors are stated after provisions for impairment of £Nil (2018: £2,500).

Vehicle funding creditors totalling £969,963 (2018: £1,298,432) are included within trade creditors and in addition to being secured directly against the asset are secured by legal charge over the freehold properties of the company as well as by a fixed and floating charge over all present and future assets of the company.

The bank loan is secured over the investment property and freehold property of the company together with a charge over a personal property of the directors.

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 (after offset) for financial reporting purposes:

The profit and loss reserve represents cumulative profits or losses, including unrealised profit on the remeasurement of investment properties totalling £674,880 (2018: £674,880)

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:

At the reporting end date the company had contracted with tenants for the following minimum lease payments:

The directors of the company are considered to be the key management personnel. Directors remuneration is disclosed in note 6.

Other loans of £182,906 (2018: £182,906) relates to amounts due to the estate of Talib Hussain, the deceased brother of directors, K Hussain and A Hussain. The beneficiary has not yet been determined.

Included within creditors is an amount of £173,510 (2018: £130,310) due to directors.

In the opinion of the directors' there is no ultimate controlling party.