Setco Automotive (UK) Limited Company accounts

SETCO AUTOMOTIVE (UK) LIMITED - Company Information

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COMPANY REGISTRATION NUMBER: 5628324

SETCO AUTOMOTIVE (UK) LIMITED

FINANCIAL STATEMENTS

31 March 2020

SETCO AUTOMOTIVE (UK) LIMITED

FINANCIAL STATEMENTS

YEAR ENDED 31 MARCH 2020

Contents	Pages

Officers and professional advisers 1

Strategic report 2 to 3

Directors' report 4 to 5

Independent auditor's report to the members 6 to 8

Profit and loss account 9

Balance sheet 10

Statement of changes in equity 11

Statement of cash flows 12

Notes to the financial statements 13 to 22

SETCO AUTOMOTIVE (UK) LIMITED

OFFICERS AND PROFESSIONAL ADVISERS

The board of directors	U H Sheth
	J B S Gujral

Company secretary	J C Wibberley

Registered office	York Avenue
	Haslingden
	Rossendale
	Lancashire
	BB4 4HU

Auditor	Wheawill & Sudworth Limited
	Chartered Accountants & statutory auditor
	35 Westgate
	Huddersfield
	HD1 1PA

Bankers	Barclays Bank plc
	10 Market Place
	Bradford
	BD1 1XW

Solicitors	AEA Associates Limited
	3 The Quadrant
	Warwick Road
	Coventry
	CV1 2DY

SETCO AUTOMOTIVE (UK) LIMITED

STRATEGIC REPORT

YEAR ENDED 31 MARCH 2020

The directors present their report for the financial year ended 31 March 2020. Principal activity and business review The principal activity of the company during the year continued to be the assembly and distribution of clutches and associated products within the commercial vehicle sector . The subsidiary company also operates in this sector. Performance and developments during the year The company incurred a loss of £1,038,531 compared with a restated loss of £881,654 in 2019. This loss included a net group interest charge of £815,783 (2019: £744,079). The company has not recognised a revaluation uplift on land and buildings this year (2019: £298,568). The UK operation is also dependent on supply from the parent company on an arms-length pricing formula. At the operational EBITDA level excluding irrecoverable overseas taxes the company continued to post a positive return. In the 2020 financial year, turnover was £2,718,119, a decrease of 14.4% over the previous year as a result of overall economic slow-down in general and in MHCV segment in particular. The group strategy of maximising export sales is beginning to bear fruit and now accounts for a significant proportion of overall revenue. However, margins are lower than home trade and this impacts on the UK site profitability. Balancing this to the overall group strategy is the fact that this export growth consumes a a higher proportion of internally manufactured products. Behind the overall operational results, the principal focus of the UK operation remains to develop for the parent company new product groups and individual series product designs. The UK operation is tasked with identifying and delivering a sustainable market development strategy in its areas of responsibility, utilising the world class manufacturing facilities in India backed by a quality product. Principal risks and uncertainties The company maintains strong relationships with each of its customers and has established credit control parameters. Foreign currency exposure is managed through various hedging arrangements. Financial instruments The company's principal financial instruments comprise bank balances, trade creditors, trade debtors and loans from the parent company. The main purpose of these instruments is to raise funds for the company's operations and to finance the company's operations. Price risk is managed by monitoring and reacting to changes in market rates. The company's approach to managing other risks applicable to the financial instruments concerned is shown below. In respect of loans these comprise loans from the parent company. The company manages the liquidity risk by ensuring there are sufficient funds to meet the payments. The loans from the parent company over 180 days carry an interest charge of 11.07%. Trade debtors are managed in respect of credit and cash flow by policies concerning the credit offered to customers and the regular monitoring of amounts outstanding for both time and credit limits. Credit insurance arrangements are also in place. Trade creditors liquidity risk is managed by ensuring sufficient funds are available to meet amounts due. Research and development The company continues to track and make use of technical developments and strives to develop new processes that increase efficiency in all aspects of the company's operations. The focus for the dedicated R&D team is to further develop the product range, improve the engineering facilities and enhance the technical knowledge required to meet the expectations of the major European OEMs. Financial key performance indicators The directors use a range of key performance indicators to aid management of the company. These include measures on orders received and outstanding, gross margin achieved, cash generation and stock turnover. Outlook COVID-19 lockdown in the UK and across Europe has had a major negative impact on trading during April and May 2020, though some recovery has been evident thereafter. The Government Coronavirus Job Retention Scheme (or furlough scheme) has been well utilised by the company and has helped to replenish some of the financial losses endured by the company during lockdown. The directors continue to examine opportunities for further development of the business and its efficiencies. Various cost rationalisation initiatives have been implemented during 2020 and would extend well into 2021. This, coupled with management focus on a. Introduction of clutch related truck components b. Introduction of non-clutch related truck components c. Independent 'Business to Consumer' e-commerce platform d. Distribution of machined iron castings into UK and Europe will result in substantial improvement in company's performance. Considering the results of the current financial year up to the date of this report, the directors are reasonably confident the company can continue to trade for at the least the next twelve months from the date of approval of these financial statements. They have received assurances from the parent company that, if necessary, the parent company will provide additional working capital facilities and subordinate amounts owed to it in favour of amounts owed to external creditors.

This report was approved by the board of directors on 24 August 2020 and signed on behalf of the board by:

U H Sheth

Director

SETCO AUTOMOTIVE (UK) LIMITED

DIRECTORS' REPORT

YEAR ENDED 31 MARCH 2020

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

Principal activities

Directors

The directors who served the company during the year were as follows:

U H Sheth
J B Sumner
J B S Gujral	(Appointed 25 October 2019)

None of the directors hold any shares in the company. U H Sheth and J B S Gujral hold 27,628,630 and 20,000 shares respectively in the parent company, Setco Automotive Limited. J B Sumner resigned as a director on 30 April 2020.

Dividends

The directors do not recommend the payment of a dividend.

Disclosure of information in the strategic report

In accordance with Section 414C(11), Companies Act 2006, the following information required to be contained in this report is set out in the company's Strategic Report on page 2: principal activities, business review, future developments, financial risks and research and development.

Directors' responsibilities statement

The directors are responsible for preparing the strategic report, directors' 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 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 judgments 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. Auditor

Each of the persons who is a director at the date of approval of this report confirms that:

- so far as they are aware, there is no relevant audit information of which the company's auditor is unaware; and - they have taken all steps that they ought to have taken as a director to make themselves aware of any relevant audit information and to establish that the company's auditor is aware of that information.

This report was approved by the board of directors on 24 August 2020 and signed on behalf of the board by:

U H Sheth

Director

SETCO AUTOMOTIVE (UK) LIMITED

INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF SETCO AUTOMOTIVE (UK) LIMITED

YEAR ENDED 31 MARCH 2020

Opinion

We have audited the financial statements of Setco Automotive (UK) Limited (the 'company') for the year ended 31 March 2020 which comprise the profit and loss account, balance sheet, statement of changes in equity, statement of cash flows and the related notes, 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 March 2020 and of its loss for the year then ended; - have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; - 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.

Emphasis of matter

In forming our opinion we have considered the adequacy of the disclosure made in note 3 of the financial statements regarding the going concern status of the company. The company has incurred a further significant loss during the year and had net liabilities at 31 March 2020. Current year trading is being challenged by the impact of Covid-19 and the company requires further working capital support from the parent company. The financial statements have been prepared on a going concern basis due to the company having secured on-going parent company funding sufficient to enable the company to trade for the foreseeable future. In In view of the significance of this matter we consider that it should be drawn to your attention but our opinion is not qualified in this respect.

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

In our opinion, 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.

Matters on which we are required to report by exception

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 or the directors' report. We have nothing to report in respect of the following matters in relation to which 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.

Responsibilities of directors

As explained more fully in the directors' responsibilities statement set out on page 4, 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.

Auditor's 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 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. As part of an audit in accordance with ISAs (UK), we exercise professional judgment and maintain professional scepticism throughout the audit. We also: - Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. - Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the internal control. - Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors. - Conclude on the appropriateness of the directors' use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the company's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the company to cease to continue as a going concern. - Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. 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.

David M Butterworth

(Senior Statutory Auditor)

For and on behalf of

Wheawill & Sudworth Limited

Chartered Accountants & statutory auditor

35 Westgate

Huddersfield

HD1 1PA

24 August 2020

SETCO AUTOMOTIVE (UK) LIMITED

PROFIT AND LOSS ACCOUNT

YEAR ENDED 31 MARCH 2020

		2020	2019
Note		£	£
Turnover	4	2,718,119	3,176,068

Cost of sales	( 1,763,047)	( 2,081,050)
	------------	------------
Gross profit	955,072	1,095,018

Distribution costs		( 162,754)	( 170,402)
Administrative expenses		( 811,573)	( 946,600)
Other operating income	5	13,725	16,945
Stock write down		( 200,000)	( 400,000)
		------------	------------
Operating loss	6	( 205,530)	( 405,039)

Interest payable and similar expenses	10	( 833,001)	( 775,183)
		------------	------------
Loss before taxation		( 1,038,531)	( 1,180,222)

Tax on loss from ordinary activities	11	–	–
		------------	------------
Loss for the financial year		( 1,038,531)	( 1,180,222)
		------------	------------

Revaluation of tangible assets	–	298,568
	------------	------------
Total comprehensive income for the year	( 1,038,531)	( 881,654)
	------------	------------

All the activities of the company are from continuing operations.

SETCO AUTOMOTIVE (UK) LIMITED

BALANCE SHEET

31 March 2020

	2020	2019
Note	£	£

Fixed assets

Tangible assets	13	1,088,595	1,096,540
Investments	14	3,000,000	3,000,000
		------------	------------
		4,088,595	4,096,540

Current assets

Stocks	15	2,001,640	2,256,332
Debtors	16	1,240,845	1,524,745
Cash at bank and in hand		465,258	117,446
		------------	------------
		3,707,743	3,898,523

Creditors: amounts falling due within one year	17	3,900,222	6,244,347
		------------	------------
Net current liabilities		192,479	2,345,824
		------------	------------
Total assets less current liabilities		3,896,116	1,750,716

Creditors: amounts falling due after more than one year	19	4,183,931	1,000,000
		------------	------------
Net (liabilities)/assets		( 287,815)	750,716
		------------	------------

Capital and reserves

Called up share capital	22	2,734,269	2,734,269
Revaluation reserve	23	572,139	586,511
Profit and loss account	23	( 3,594,223)	( 2,570,064)
		------------	------------
Shareholders (deficit)/funds		( 287,815)	750,716
		------------	------------

These financial statements were approved by the board of directors and authorised for issue on 24 August 2020 , and are signed on behalf of the board by:

U H Sheth

Director

Company registration number: 5628324

SETCO AUTOMOTIVE (UK) LIMITED

STATEMENT OF CHANGES IN EQUITY

YEAR ENDED 31 MARCH 2020

			Called up share capital	Revaluation reserve	Profit and loss account	Total
Note			£	£	£	£
At 1 April 2018 (as previously reported)			2,734,269	294,851	( 2,727,520)	301,600
Effects of changes in accounting policies			–	–	1,330,770	1,330,770
			------------	------------	------------	------------
At 1 April 2018 (restated)			2,734,269	294,851	( 1,396,750)	1,632,370
			------------	------------	------------	------------

Loss for the year					( 1,180,222)	( 1,180,222)
Other comprehensive income for the year:
	Revaluation of tangible assets	13	–	298,568	–	298,568
	Reclassification from revaluation reserve to profit and loss account		–	( 6,908)	6,908	–
			------------	------------	------------	------------
Total comprehensive income for the year			–	291,660	( 1,173,314)	( 881,654)

At 31 March 2019			2,734,269	586,511	( 2,570,064)	750,716

Loss for the year					( 1,038,531)	( 1,038,531)
Other comprehensive income for the year:
	Reclassification from revaluation reserve to profit and loss account		–	( 14,372)	14,372	–
			------------	------------	------------	------------
Total comprehensive income for the year			–	( 14,372)	( 1,024,159)	( 1,038,531)

			------------	------------	------------	------------
At 31 March 2020			2,734,269	572,139	( 3,594,223)	( 287,815)
			------------	------------	------------	------------

SETCO AUTOMOTIVE (UK) LIMITED

STATEMENT OF CASH FLOWS

YEAR ENDED 31 MARCH 2020

	2020	2019
	£	£

Cash flows from operating activities

Loss for the financial year	( 1,038,531)	( 1,180,222)

Adjustments for:
Depreciation of tangible assets	42,235	37,176
Amortisation of intangible assets	–	127,908
Interest payable and similar expenses	833,001	775,183

Changes in:
Stocks	254,692	908,350
Trade and other debtors	287,038	( 71,817)
Trade and other creditors	( 2,885)	( 504,801)
	------------	------------
Cash generated from operations	375,550	91,777

Interest paid	( 407,882)	–
	------------	------------
Net cash (used in)/from operating activities	( 32,332)	91,777
	------------	------------

Cash flows from investing activities

Purchase of tangible assets	( 34,290)	( 17,552)
	------------	------------
Net cash used in investing activities	( 34,290)	( 17,552)
	------------	------------

Cash flows from financing activities

Proceeds from loans from group undertakings	414,434	( 62,313)
Interest paid	–	( 1,962)
	------------	------------
Net cash from/(used in) financing activities	414,434	( 64,275)
	------------	------------

Net increase in cash and cash equivalents	347,812	9,950
Cash and cash equivalents at beginning of year	117,446	107,496
	------------	------------
Cash and cash equivalents at end of year	465,258	117,446
	------------	------------

SETCO AUTOMOTIVE (UK) LIMITED

NOTES TO THE FINANCIAL STATEMENTS

YEAR ENDED 31 MARCH 2020

1. General information

The company is a private company limited by shares, registered in England and Wales. The address of the registered office is York Avenue, Haslingden, Rossendale, Lancashire, BB4 4HU.

2. Statement of compliance

These financial statements have been prepared in compliance with FRS 102, 'The Financial Reporting Standard applicable in the UK and the Republic of Ireland'.

3. Accounting policies

Basis of preparation

The financial statements have been prepared on the historical cost convention unless otherwise specified within these accounting policies. The financial statements are prepared in sterling which is the functional currency of the entity.

Consolidated financial statements

The financial statements present information about the company as an individual undertaking. The company has taken advantage of the exemption in S401 Companies Act 2006 from the obligation to prepare and deliver consolidated financial statements as the results are included in the accounts of a larger group.

Going concern

The parent company, Setco Automotive Limited, has confirmed that it will provide adequate working capital facilities to enable the company to trade and meet its obligations as they fall due for at least the next twelve months from the date of approval of these financial statements. This funding support encompasses additional requirements as a result of the challenges caused by Covid-19. It has also provided guarantees in support of the company's external finance facilities and subordinated amounts owed to it in favour of amounts owed to external creditors. Consequently, the directors consider it appropriate to prepare these financial statements on a going concern basis. The financial statements do not include any adjustments that would result from a withdrawal of this support.

Debtors and creditors receivable/payable within one year Debtors and creditors with no stated interest rate and receivable or payable within one year are recorded attransaction price. Any losses arising from impairment are recognised in the profit and loss account in other administrative expenses.

Changes in accounting policies

The company re-assessed its accounting for investments in subsidiary undertakings with respect to measurement after initial recognition. The company had previously measured investments using the cost model whereby, after initial recognition of the asset classified as an investment, the asset was carried at cost less accumulated impairment losses. On 31 March 2019, the company elected to change the method of accounting for investments in subsidiary undertakings, as the company believes that the revaluation model provides more relevant information to the users of its financial statements. In addition, available valuation techniques provide reliable estimates of the investments fair value. The company applied the revaluation model retrospectively. After initial recognition, investments in subsidiary undertakings are measured at fair value with changes recognised in profit or loss. For details refer to Note 14.

Judgements and key sources of estimation uncertainty

The preparation of the financial statements requires management to make judgements, estimates and assumptions that affect the amounts reported for assets and liabilities as at the balance sheet date and the amounts reported for revenues and expenses during the year. However, the nature of estimation means that actual outcomes could differ from those estimates. These estimates and judgements are continually reviewed and are based on experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Accounting estimates and assumptions are made concerning the future and, by their nature, will rarely equal the related actual outcome.

Revenue recognition

Turnover comprises the value of sales excluding value added tax and trade discounts. Revenue is recognised at the date of invoicing to the customers.

Foreign currencies

Transactions in foreign currencies are translated at the exchange rate ruling at the date of the transaction. Monetary assets and liabilities in foreign currencies are translated at the rates of exchange ruling at the balance sheet date. Where exchange differences result from the translation of foreign currency borrowings raised to acquire foreign assets they are taken to reserves and offset against the differences arising from the translation of those assets. All other exchange differences are dealt with through the profit and loss account.

Operating leases

Lease payments are recognised as an expense over the lease term on a straight-line basis. The aggregate benefit of lease incentives is recognised as a reduction to expense over the lease term, on a straight-line basis.

Intangible assets

Intangible assets are initially recorded at cost, and are subsequently stated at cost less any accumulated amortisation and impairment losses. Any intangible assets carried at revalued amounts, are recorded at the fair value at the date of revaluation, as determined by reference to an active market, less any subsequent accumulated amortisation and subsequent accumulated impairment losses. Intangible assets acquired as part of a business combination are recorded at the fair value at the acquisition date.

Amortisation

Amortisation is calculated so as to write off the cost of an asset, less its estimated residual value, over the useful life of that asset as follows:

	Development costs	-	Five years commencing when sales begin.

If there is an indication that there has been a significant change in the revenue generation, useful life or residual value of an intangible asset, the amortisation rate is revised accordingly to reflect the new estimates.

Tangible assets

Tangible assets are initially recorded at cost, and subsequently stated at cost less any accumulated depreciation and impairment losses. Any tangible assets carried at revalued amounts are recorded at the fair value at the date of revaluation less any subsequent accumulated depreciation and subsequent accumulated impairment losses. An increase in the carrying amount of an asset as a result of a revaluation, is recognised in other comprehensive income and accumulated in equity, except to the extent it reverses a revaluation decrease of the same asset previously recognised in profit or loss. A decrease in the carrying amount of an asset as a result of revaluation, is recognised in other comprehensive income to the extent of any previously recognised revaluation increase accumulated in equity in respect of that asset. Where a revaluation decrease exceeds the accumulated revaluation gains accumulated in equity in respect of that asset, the excess shall be recognised in profit or loss.

Depreciation

Depreciation is calculated so as to write off the cost or valuation of an asset, less its residual value, over the useful economic life of that asset as follows:

Freehold property	-	25-40 years straight line
Plant & machinery	-	4-7 years straight line
Computer equipment	-	3 years straight line

Freehold land is not depreciated. The part of the annual depreciation charge of revalued assets which relates to the surplus over cost is transferred from the revaluation reserve to the profit and loss account.

Investments

Investments are initially recorded at cost and are subject to an annual impairment review. Profits or losses arising from disposals of fixed asset investments are treated as part of the results from ordinary activities. Revaluations of investments are recorded through the profit and loss account.

Impairment of fixed assets

A review for indicators of impairment is carried out at each reporting date, with the recoverable amount being estimated where such indicators exist. Where the carrying value exceeds the recoverable amount, the asset is impaired accordingly. Prior impairments are also reviewed for possible reversal at each reporting date. For the purposes of impairment testing, when it is not possible to estimate the recoverable amount of an individual asset, an estimate is made of the recoverable amount of the cash-generating unit to which the asset belongs. The cash-generating unit is the smallest identifiable group of assets that includes the asset and generates cash inflows that largely independent of the cash inflows from other assets or groups of assets.

Stocks

Stocks are stated at the lower of cost and net realisable value. Cost is based on the cost of purchase on a weighted average basis.

Financial instruments

Financial instruments are classified and accounted for, according to the substance of the contractual arrangement, as either financial assets, financial liabilities or equity instruments. An equity instrument is any contract that evidences a residual interest in the assets of the company after deducting all of its liabilities.

Defined contribution plans

The company operates a defined contribution pension scheme. The amount charged to the profit and loss account in respect of pension costs is the contributions payable in the year.

4. Turnover

Turnover arises from:

	2020	2019
	£	£
Sale of goods	2,718,119	3,176,068
	------------	------------

The percentage of turnover attributable to overseas markets was 48% (2019: 51%).

5. Other operating income

	2020	2019
	£	£
R&D tax credit	13,725	16,945
	------------	------------

6. Operating profit

Operating profit or loss is stated after charging/crediting:

	2020	2019
	£	£
Amortisation of intangible assets	–	127,908
Depreciation of tangible assets	42,235	37,176
Foreign exchange differences	4,482	( 20,323)
	------------	------------

7. Auditor's remuneration

	2020	2019
	£	£
Fees payable for the audit of the financial statements	8,750	8,500
	------------	------------

Fees payable to the company's auditor for other services:

Other non-audit services	3,500	3,000
	------------	------------

8. Staff costs

The average number of persons employed by the company during the year, including the directors, amounted to:

	2020	2019
	No.	No.
Production staff	8	8
Administrative staff	12	14
	------------	------------
	20	22
	------------	------------

The aggregate payroll costs incurred during the year, relating to the above, were:

	2020	2019
	£	£
Wages and salaries	172,319	269,119
Social security costs	80,791	87,004
Other pension costs	21,992	36,063
	------------	------------
	275,102	392,186
	------------	------------

9. Directors' remuneration

The directors' aggregate remuneration in respect of qualifying services was:

	2020	2019
	£	£
Remuneration	38,607	62,204
Company contributions to defined contribution pension plans	4,430	14,428
	------------	------------
	43,037	76,632
	------------	------------

The number of directors who accrued benefits under company pension plans was as follows:

	2020	2019
	No.	No.
Defined contribution plans	1	2
	------------	------------

10. Interest payable and similar expenses

	2020	2019
	£	£
Interest on banks loans and overdrafts	17,218	31,104
Other interest payable and similar charges	815,783	744,079
	------------	------------
	833,001	775,183
	------------	------------

11. Tax on loss from ordinary activities

Reconciliation of tax income

The tax assessed on the loss on ordinary activities for the year is higher than (2019: higher than) the standard rate of corporation tax in the UK of 19 % (2019: 19 %).

	2020	2019
	£	£
Loss on ordinary activities before taxation	( 1,038,531)	( 1,180,222)
	------------	------------
Loss on ordinary activities by rate of tax	( 197,321)	( 224,242)
Effect of expenses not deductible for tax purposes	371	( 241)
R&D expenditure credits	–	4,024
Deferred tax not recognised	196,950	220,459
	------------	------------
Tax on loss	–	–
	------------	------------

The company has tax losses arising in the UK of £5.6m (2019: £4.5m) that are available for offset against future taxable profits.

Deferred tax assets have not been recognised in respect of these losses as the period over which they may be utilised is uncertain. They have been considered when assessing deferred tax in relation to the revaluation of property and investments.

12. Intangible assets

	Development costs
	£
Cost
At 1 April 2019 and 31 March 2020	878,000
	------------
Amortisation
At 1 April 2019 and 31 March 2020	878,000
	------------
Carrying amount
At 31 March 2020	–
	------------
At 31 March 2019	–
	------------

13. Tangible assets

	Land and buildings	Plant and machinery	Equipment	Total
	£	£	£	£
Cost
At 1 April 2019	1,213,987	426,311	237,330	1,877,628
Additions	–	14,251	20,039	34,290
	------------	------------	------------	------------
At 31 March 2020	1,213,987	440,562	257,369	1,911,918
	------------	------------	------------	------------
Depreciation
At 1 April 2019	213,987	344,703	222,398	781,088
Charge for the year	25,352	13,142	3,741	42,235
	------------	------------	------------	------------
At 31 March 2020	239,339	357,845	226,139	823,323
	------------	------------	------------	------------
Carrying amount
At 31 March 2020	974,648	82,717	31,230	1,088,595
	------------	------------	------------	------------
At 31 March 2019	1,000,000	81,608	14,932	1,096,540
	------------	------------	------------	------------

Certain fixed assets were included at independent professional valuations undertaken in January 2006. An independent professional valuation of the freehold land and property was undertaken in October 2016 by Parkinson Chartered Surveyors who are a qualified valuer as defined within the RICS Valuation Professional Standards Manual. This indicated that the aggregate market value was £738,000 compared to the net book value of £593,338 which resulted in a revaluation surplus of £144,662 which was been recognised in the previous year's financial statements. Given the availability of indexation allowance and tax losses generally no deferred tax liability has been recognised. A further independent professional valuation was carried out in July 2018. This indicated a valuation in the range of £1.25m/£1.3m. To allow for current economic uncertainties the directors considered a lower value of £1m was appropriate and this has been included in the financial statements.

Tangible assets held at valuation

In respect of tangible assets held at valuation, the aggregate cost, depreciation and comparable carrying amount that would have been recognised if the assets had been carried under the historical cost model are as follows:

	Freehold property
	£
At 31 March 2020
Aggregate cost	751,622
Aggregate depreciation	(201,890)
	------------
Carrying value	549,732
	------------

At 31 March 2019
Aggregate cost	751,622
Aggregate depreciation	(187,619)
	------------
Carrying value	564,003
	------------

14. Investments

	Shares in group undertakings
	£
Cost
At 1 April 2019 and 31 March 2020	3,000,000
	------------
Impairment
At 1 April 2019 and 31 March 2020	–
	------------

Carrying amount
At 31 March 2020	3,000,000
	------------
At 31 March 2019	3,000,000
	------------

Subsidiaries, associates and other investments

The company's subsidiary undertakings are as follows:

		Details of investments	Proportion held by company	Nature of business

Setco Automotive (NA) Inc	2,625 (2019: 2,625) shares of $1000 each	100%	Manufacturing and distribution of
			clutches, compressors, hydraulic pressure converters and miscellaneous parts.

This company is incorporated and based in the USA. The capital and reserves and profit/(loss) for the subsidiary company as at 31 March 2020 was as follows:

	2020	2019
	£	£
Capital and reserves	1,755,384	1,817,619
Loss (2019 profit) for the year	(164,142)	233,629

Based on the current and forward trading profit of the subsidiary company the directors have revalued the carrying value of the investment to £3m. This valuation was based on a financial appraisal undertaken by the auditor of the subsidiary company. Given the availability of indexation allowance and tax losses generally no deferred tax provision has been recognised.

15. Stocks

	2020	2019
	£	£
Goods for re-sale and consumables	2,001,640	2,256,332
	------------	------------

16. Debtors

	2020	2019
	£	£
Trade debtors	510,798	775,117
Amounts owed by group undertakings	698,217	710,847
Prepayments and accrued income	31,780	38,731
Other debtors	50	50
	------------	------------
	1,240,845	1,524,745
	------------	------------

Amounts due from group undertakings are repayable on demand but are not wholly recoverable within one year.

17. Creditors: amounts falling due within one year

	2020	2019
	£	£
Trade creditors	95,746	111,056
Amounts owed to group undertakings	3,657,663	5,998,903
Accruals and deferred income	127,662	75,994
Social security and other taxes	18,299	18,046
Invoice discounting facility	–	40,243
Other creditors	852	105
	------------	------------
	3,900,222	6,244,347
	------------	------------

18. Invoice discounting facility

The invoice discounting facility of £nil (2019: £40,243) disclosed in current liabilities represented advances made under invoice discounting arrangements with the company's bankers. The loan value was secured against book debts.

19. Creditors: amounts falling due after more than one year

	2020	2019
	£	£
Amounts owed to group undertakings	4,183,931	1,000,000
	------------	------------

20. Secured indebtedness

	2020	2019
	£	£
Aggregate amount of secured liabilities	–	40,243
	------------	------------

21. Employee benefits

Defined contribution plans

The amount recognised in profit or loss as an expense in relation to defined contribution pension plans was £ 21,992 (2019: £ 36,063 ).

22. Called up share capital

Issued, called up and fully paid

	2020		2019
	No.	£	No.	£
Ordinary shares of £ 1 each	2,014,269	2,014,269	2,014,269	2,014,269
Ordinary "A" shares of £ 1 each	720,000	720,000	720,000	720,000
	------------	------------	------------	------------
	2,734,269	2,734,269	2,734,269	2,734,269
	------------	------------	------------	------------

The various classes of shares rank pari passu except in certain respects, the principal ones being as follows: 1. In a general meeting of the company, the ordinary shares carry one vote per share, the "A" ordinary shares carry nine votes per share and the preference shares generally carry no voting rights. 2. Any preference shares in issue have certain preferential rights in relation to dividends and return of capital on a winding up of the company. WEW Holdings Limited, Mauritius owns 640,000 (88.89%) of the "A" ordinary shares and Setco Automotive Limited owns 80,000 (11.11%) of the "A" ordinary shares. Setco Automotive Limited owns 2,014,269 ordinary shares which represents 100% of the ordinary shares.

23. Reserves

Revaluation reserve - This reserve records the value of asset revaluations and fair value movements on assets recognised in other comprehensive income. Profit and loss account - This reserve records retained earnings and accumulated losses.

24. Analysis of changes in net debt

	At 1 Apr 2019	Cash flows	At 31 Mar 2020
	£	£	£
Cash at bank and in hand	117,446	347,812	465,258
Debt due within one year	(5,998,903)	2,341,240	(3,657,663)
Debt due after one year	(1,000,000)	(3,183,931)	(4,183,931)
	------------	------------	------------
	( 6,881,457)	( 494,879)	( 7,376,336)
	------------	------------	------------

SETCO AUTOMOTIVE (UK) LIMITED

NOTES TO THE FINANCIAL STATEMENTS (continued)

YEAR ENDED 31 MARCH 2020

25. Operating leases

The total future minimum lease payments under non-cancellable operating leases are as follows:

	2020	2019
	£	£
Not later than 1 year	16,311	19,249
Later than 1 year and not later than 5 years	8,348	15,225
	------------	------------
	24,659	34,474
	------------	------------

26. Related party transactions

During the year the company had sales of £6,960 (2019: £4,101), purchases of £6,010 (2019: £3,970) by Setco Automotive (NA) Inc. Interest of £30,660 (2019: £29,142) was charged to Setco Automotive (NA) Inc., and the amount due from that company at the balance sheet date is £698,217 (2019: £710,847). During the year the company was charged management fees of £31,100 (2019: £nil) by WEW Holdings Limited, Mauritius. During the year the company made sales of £nil (2019: £nil) to Setco MEA DMCC, a company incorporated in Dubai which is wholly owned by Setco Automotive Limited. The amount due from that company at the balance sheet date is £8,886 (2019: £8,886). During the year the company made purchases of £631,441 (2019: £684,117) and made sales of £nil (2019: £315) with the parent company, Setco Automotive Limited. The amount owed to that company at 31 March 2020 within one year was £3,666,549 (2019: £6,007,789) and after more than one year £4,183,931 (2019: £1,000,000). Amounts due to the parent company over 180 days carry an interest charge of 11.07%. The interest charge for the year amounted to £846,443 (2019: £773,221). The parent company has confirmed that, if necessary, it will provide adequate working capital facilities to enable the company to continue to trade for at the least the next twelve months from the date of approval of these financial statements. In addition, the parent company has agreed to subordinate amounts owed to it in favour of amounts owed to external creditors.

27. Controlling party

The company's ultimate controlling parent company is Setco Automotive Limited, a company which is registered in India. There is no one controlling party of this company.