Autocraft Drivetrain Solutions Limited - Limited company accounts 20.1

REGISTERED NUMBER: 02847178 (England and Wales)

Page

Company Information  

1

Strategic Report  

2

Report of the Directors  

5

Report of the Independent Auditors  

6

Income Statement  

8

Other Comprehensive Income  

9

Balance Sheet  

10

Statement of Changes in Equity  

11

Notes to the Financial Statements

12

DIRECTORS:

M Hague-Morgan

J Seaton

S D Warburton

REGISTERED OFFICE:

Main Road

Belton

Grantham

Lincolnshire

NG32 2LY

REGISTERED NUMBER:

02847178 (England and Wales)

AUDITORS:

Rothmans Audit LLP

Statutory Auditors

Chartered Accountants

Fryern House

125 Winchester Road

Chandlers Ford

Hampshire

SO53 2DR

BANKERS:

National Westminster Bank PLC

27 - 28 St Peters Hill

Grantham

Lincolnshire

NG31 6QG

SOLICITORS:

Tollers

2 Castilian Street

Northampton

NN1 1JX

The directors present their strategic report for the year ended 31st December 2021.

REVIEW OF BUSINESS

The Company maintained its strong performance at the end of 2020 into the first half of 2021 and grew further in Q4 of 2021. Management accounts in 2022 indicate that this growth in turnover and profitability has been sustained. The company order book remains strong with numerous new business opportunities in the pipeline to sustain its main business whilst delivering growth into new markets including products and services for electric vehicles.

As forecast by the Group Strategy in 2015, which led to the acquisition of Vertex Engineering Solutions Limited and the formation of Autocraft Machining Solutions Limited, vehicle manufacturers are facing the challenge of migrating their new vehicle production from Internal Combustion Engines (ICE) to Electric Vehicles (EV) whilst needing to service the warranty and aftermarket requirements for engines in the vehicles that they have already sold to global markets. The vertical integration of the Group gives us a unique, flexible and cost competitive solution to allow vehicle manufacturers to divest of their legacy ICE and ongoing niche requirements to ensure that they can support existing vehicle customers for up to 15 years and markets with slower EV adoption with ICE.

Revenues increased in 2021 from £25.8m to £39.7m. The company made a profit of £1,883k compared to the previous years' profit of £1,142k.

The company's key financial indicators during the year were as follows:

2021

2020

£   

£   

Turnover

39,660

25,820

Operating profit before tax

2,205

1,540

Profit / (Loss) before tax

2,193

1,428

Profit / (Loss) for the financial year

1,883

1,142

Tangible fixed assets

5,034

4,551

Cash at bank

377

36

Other current assets

19,357

18,708

Net assets

11,430

9,806

The directors have satisfied themselves that it is appropriate for the financial statements to be prepared on a going concern basis.

PRINCIPAL RISKS AND UNCERTAINTIES

The Company has a risk review procedure embedded within its quarterly/monthly review procedures that evaluates the company's risk position. The principal risks and uncertainties facing the Company are broadly classed as Business, Brexit, competitive, legislative, credit, financial risks and more recently Covid-19.

Business Risks

The Company has traditionally offered a remanufacturing service to its customers where the customers either directly supply the materials we purchase or dictate where we buy them from. As a result there is a well-established and mutually reliant supply chain between the business, our customers and suppliers. As the Company has grown the business has invested in key roles to manage these customer and supplier relationships and it will continue to do so going forward. The strength and transparency of our customer and supplier relationships, supported by our long standing trading agreements for cost recovery, remains the basis of how we manage the risks of currency, material, commodity and energy costs. As these costs increase the cost of our remanufactured products are increasing less than that of a new alternative, therefore increasing our competitiveness and providing further market growth.

Brexit:

Following the referendum decision in 2016 for the UK to leave the EU the Directors have followed very closely the Governments position on the implications of Brexit on the cost and movement of goods between borders as a significant amount of our parts supply comes from Europe and our goods are sold worldwide. Uncertainties still exist with regards to the trade agreements reached and the impact this may have on the business in the future.  The directors continue to closely follow these developments and assess the impact on the business.

Competitive risks:

The Company is reliant on certain major companies for contracts. Generation of new contracts is subject to competitive tender based on financial and performance criteria.

Legislative risks:

The Company is most affected by health and safety, and environmental issues. The Company ensures compliance with UK and European laws by using professional consultancy to maintain best practice procedures. The Company continues to invest in research and development, to ensure that it remains at the forefront of developments in relevant drivetrain remanufacturing technologies and techniques.

Credit risk:

Credit risk is the risk that one party to a financial instrument will cause a loss for that other party by failing to discharge an obligation. Company policies are aimed at minimising such losses by ensuring customers satisfy credit worthiness procedures.

Financial risks:

The Company does not make use of financial instruments or derivatives.

Covid-19:

Our aim has been to maintain supply to our customers, where possible, whilst ensuring that we have the health and safety of our employees and stakeholders as our main priority. The Directors monitored the effect of the Covid-19 pandemic on a daily basis since its start in early 2020, and continue to do so.

CUSTOMERS, SUPPLIER AND EMPLOYEE RELATIONSHIPS

The Company continues to conduct its business by promoting an informal partnership model for mutual success with its Customers, Suppliers and Employees. The Covid-19 Pandemic tested these relationships and The Board carefully managed each of the challenges we and our Customers, Suppliers and Employees faced during this period via daily Directors Meetings and weekly Senior Reviews with these key stakeholders.

PEOPLE

Our people remain core to our present and long term success and as such recruitment, retention and development of our people remain vital to our long term success. To deliver the growth in 2021 the business introduced new ATS software and systems to manage its recruitment and established key external supply partnerships to ensure our talent acquisition was cost effective whilst delivering the people skills needed to ensure we delivered our growth in a sustainable way. The Company has strengthened our HR department to reflect the growth in the business and will continue to invest in its people and HR systems to support the Company's ongoing success.

ENVIRONMENTAL SUSTAINABILITY AND ENERGY CONSUMPTION

As a leading remanufacturer within the circular economy our environmental sustainability remains central to our business plans. The recent increases in energy costs will shorten investment paybacks and allow us to accelerate our plans to reduce energy consumption and also increase the amount of components we recover using our remanufacturing technologies. In doing so we will be able to mitigate some of the energy increases that we are faced with. In 2021 we further reduced the use of chemicals in our washing processes, and invested in LED lighting. Looking forward we plan to increase the use of biomass and explore other renewable energy sources.

FINANCIAL INSTRUMENTS

The Company's principal financial instruments are comprised of bank balances, invoice discounting, trade creditors, trade debtors, loans made to the Company and finance lease/hire purchase agreements. The main purpose of these instruments is to provide finance for the Company's operations.

Due to the nature of the financial instruments used by the Company there is no exposure to price risk. The Company's approach to managing other risks applicable to the financial instruments concerned is shown below.

In respect of bank facilities the liquidity risk is managed by maintaining a balance between the continuity of funding and flexibility through the use of invoice financing.

In respect of loans, these include loans between group companies and loans from financial institutions. The Company manages the liquidity risk by ensuring there are sufficient funds to meet amounts due.

The Company is a lessee in respect of finance leased/hire purchased assets. The liquidity risk in respect of these is managed in the same way as loans above.

Trade debtors are managed in respect of credit and cash flow risk by policies concerning the credit offered to customers and the regular monitoring of amounts outstanding for both time and credit limits.

Trade creditors liquidity risk is managed by ensuring sufficient funds are available to meet amounts due.

RESEARCH AND DEVELOPMENT

The Company continues to invest in research and development to identify new products and procedures.  The costs of research and development are written off to the income statement.

ON BEHALF OF THE BOARD:

M Hague-Morgan - Director

9 June 2022

The directors present their report with the financial statements of the company for the year ended 31 December 2021.

DIVIDENDS

The total distribution of dividends for the year ended 31 December 2021 will be £259k (2020: £227k).

DIRECTORS

The directors shown below have held office during the whole of the period from 1 January 2021 to the date of this report.

M Hague-Morgan

J Seaton

S D Warburton

Other changes in directors holding office are as follows:

S Harris ceased to be a director after 31 December 2021 but prior to the date of this report.

DISCLOSURE IN THE STRATEGIC REPORT

The directors have chosen to set out information in relation to principal risks and uncertainties, financial instruments, future developments and research and development in the strategic report.

STATEMENT OF DIRECTORS' RESPONSIBILITIES

STATEMENT AS TO DISCLOSURE OF INFORMATION TO AUDITORS

AUDITORS

The auditors,  Rothmans Audit LLP, will be proposed for re-appointment at the forthcoming Annual General Meeting.

ON BEHALF OF THE BOARD:

M Hague-Morgan - Director

9 June 2022

Opinion

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditors' responsibilities for the audit of the financial statements section of our report.  We are independent of the 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

In auditing the financial statements, we have concluded that the directors' use of the going concern basis of accounting in the preparation of the financial statements is appropriate.

Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the company's ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.

Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.

Other information

The directors are responsible for the other information. The other information comprises the information in the Strategic Report and the Report of the Directors, but does not include the financial statements and our Report of the Auditors thereon.

Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. 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 Report of the Directors for the financial year for which the financial statements are prepared is consistent with the financial statements; and

-

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

Matters on which we are required to report by exception

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

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

-

adequate accounting records have not been kept, 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 Statement of Directors' Responsibilities set out on page five, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, the directors are responsible for assessing the 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.

Auditors' responsibilities for the audit of the financial statements

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

The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below:

-

Obtained an understanding of the legal and regulatory frameworks that the company operates in, focusing on

those laws and regulations that had a direct effect on the Financial Statements or that had a fundamental effect

of the operations of the company.

-

Understanding how the company is complying with those regulations by making enquiries with management and

those responsible for the legal and compliance procedures, including discussions on risk of litigation and known

incidences of non-compliance. The key laws and regulations we considered in this context included the UK

Companies Act and Health & Safety regulations.

-

Discussions were held within the engagement team regarding how and where fraud might occur in the Financial

Statements and any potential indicators of fraud.  As part of this discussion, we identified potential risk areas

such as estimates used by management in accounting for accruals and related balances. The risks were

addressed by ensuring audit procedures assessed the reasonableness of the method for accounting for

contracts and the estimates made, and evaluating whether there was any sign of management bias.

-

Assessing the susceptibility of the company's financial statements to material misstatement, including how fraud

might occur, involved audit procedures including journal entry testing, with a focus on journals indicating large or

unusual transactions based on our understanding of the business, as well as journals made outside of normal

working hours.  These audit procedures were designed to provide reasonable assurance that the financial

statements were free from material fraud or error.

A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council's website at www.frc.org.uk/auditorsresponsibilities. This description forms part of our Report of the Auditors.

Use of our report

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

Kevin Richards (Senior Statutory Auditor)

for and on behalf of Rothmans Audit LLP

Statutory Auditors

Chartered Accountants

Fryern House

125 Winchester Road

Chandlers Ford

Hampshire

SO53 2DR

9 June 2022

TURNOVER

3

39,660

25,820

Cost of sales

34,146

22,140

GROSS PROFIT

5,514

3,680

Distribution costs

106

82

Administrative expenses

3,225

2,501

3,331

2,583

2,183

1,097

Other operating income

22

443

OPERATING PROFIT

6

2,205

1,540

Exceptional items

7

40

(78

)

2,245

1,462

Interest payable and similar expenses

8

52

34

PROFIT BEFORE TAXATION

2,193

1,428

Tax on profit

9

310

286

PROFIT FOR THE FINANCIAL YEAR

1,883

1,142

PROFIT FOR THE YEAR

1,883

1,142

OTHER COMPREHENSIVE INCOME

-

-

TOTAL COMPREHENSIVE INCOME FOR

THE YEAR

1,883

1,142

FIXED ASSETS

Tangible assets

11

5,034

4,551

CURRENT ASSETS

Stocks

12

6,040

4,395

Debtors

13

13,317

14,313

Cash at bank

377

36

19,734

18,744

CREDITORS

Amounts falling due within one year

14

12,886

12,836

NET CURRENT ASSETS

6,848

5,908

TOTAL ASSETS LESS CURRENT

LIABILITIES

11,882

10,459

CREDITORS

Amounts falling due after more than one

year

15

(199

)

(419

)

PROVISIONS FOR LIABILITIES

19

(253

)

(234

)

NET ASSETS

11,430

9,806

CAPITAL AND RESERVES

Called up share capital

20

115

115

Share premium

21

122

122

Retained earnings

21

11,193

9,569

SHAREHOLDERS' FUNDS

11,430

9,806

The financial statements were approved by the Board of Directors and authorised for issue on 9 June 2022 and were signed on its behalf by:

M Hague-Morgan - Director

Called up

share

Retained

Share

Total

capital

earnings

premium

equity

£'000

£'000

£'000

£'000

Balance at 1 January 2020

115

8,654

122

8,891

Changes in equity

Dividends

-

(227

)

-

(227

)

Total comprehensive income

-

1,142

-

1,142

Balance at 31 December 2020

115

9,569

122

9,806

Changes in equity

Dividends

-

(259

)

-

(259

)

Total comprehensive income

-

1,883

-

1,883

Balance at 31 December 2021

115

11,193

122

11,430

1.

COMPANY INFORMATION

Autocraft Drivetrain Solutions Limited was incorporated on 24 August 1993 under the Companies Act 1985, as a private limited company and is registered in England and Wales. The principal activity of Autocraft Drivetrain Solutions Limited is that of the remanufacture and manufacture of vehicle engines and components. The address of its head office and registered office is Main Road, Belton, Grantham, Lincolnshire, NG32 2LY.

2.

ACCOUNTING POLICIES

Basis of preparing the financial statements

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

The presentation currency is £ sterling, and the financial statements have been presented in round thousands.

Financial Reporting Standard 102 - reduced disclosure exemptions

The company has taken advantage of the following disclosure exemptions in preparing these financial statements, as permitted by FRS 102 "The Financial Reporting Standard applicable in the UK and Republic of Ireland":

•

the requirements of Section 7 Statement of Cash Flows;

•

the requirements of paragraphs 11.42, 11.44, 11.45, 11.47, 11.48(a)(iii), 11.48(a)(iv), 11.48(b) and 11.48(c);

•

the requirement of paragraph 33.7.

Related party exemption

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.

Revenue recognition

Revenue is recognised to the extent that the company obtained the right to consideration in exchange for its performance.  Revenue is measured at the fair value of the consideration received, excluding discounts, rebates, VAT and other sales taxes or duty. Revenue from the sale of goods is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer, usually on despatch of the goods.

Tangible fixed assets

Stocks

Stocks and work in progress are valued at the lower of cost and net realisable value, after making due allowance for obsolete and slow moving items. Cost includes all costs incurred in bringing each product to its present location and condition, as follows:

Raw materials, consumables and goods for resale

-

purchase cost on a first-in, first-out basis

Work in progress and finished goods    

-

cost of direct materials and labour plus attributable