Castle Precision Engineering (Glasgow) - Limited company accounts 20.1

REGISTERED NUMBER: SC039355 (Scotland)

Strategic Report,

Report of the Directors and

Financial Statements

for the Year Ended 31 December 2021

for

Castle Precision Engineering

(Glasgow) Limited

Page

Company Information

1

Strategic Report

2

Report of the Directors

3

Report of the Independent Auditors

4

Income Statement

7

Other Comprehensive Income

8

Balance Sheet

9

Statement of Changes in Equity

10

Cash Flow Statement

11

Notes to the Cash Flow Statement

12

Notes to the Financial Statements

14

DIRECTORS:

Mrs R Tiefenbrun

Y L Tiefenbrun

Miss R E Tiefenbrun

SECRETARY:

J Forrest

REGISTERED OFFICE:

241 Drakemire Drive

Castlemilk

Glasgow

G45 9SZ

REGISTERED NUMBER:

SC039355 (Scotland)

AUDITORS:

O'Haras Chartered Accountants, Statutory Auditors

Radleigh House

1 Golf Road

Clarkston

Glasgow

G76 7HU

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

REVIEW OF BUSINESS

In the twelve months to 31 December 2021, the company continued to experience very challenging trading conditions as result of the unprecedented Covid-19 global pandemic.

Covid-19 continued to have a significant impact on the business and its operating environment - particularly in relation to its civil widebody (international) aerospace activities. Government backed schemes including CBILS & Furlough were utilised to support through the disruption.

During this period, global vaccination programmes began deployment and whilst domestic travel markets demonstrated a remarkable initial ability to recover by summer 2021, international travel was either not permitted for large periods of the year or operated in accordance with chaotic inter-country open-closed traffic light systems. In addition to this, varied paces of global vaccination and emergence of more transmissible waves through winter periods, such as Omicron, set back international aviation recovery multiple times.

Other business segments the company delivers to, including defence & medical along with sub segments in freight & business jet aviation, remained steady throughout.

Despite the market and health challenges, the business was able to press ahead with a number of its key strategic plans including joint green-lighting of a delayed aero-engine customer in-load, resumption of the previously paused refurbishment of the central 235 facility, securing of additional financing to see out worst case market scenarios and re-launch of the Company Zero Defects programme in the drive towards growth ready Operational Excellence.

On the back of these and other activities, the Company received major honours from key customer, Rolls-Royce, receiving the 'Pioneering the Power that Matters' in recognition of Castle's customer focus, dedication and performance through the Covid-19 impact.

Gearing remained relatively high, but balance sheet remained very solid and the business cash generative. The strength of foundation allowed the business to continue to resolve significant cashflow challenges associated with pausing supply chains in 2020.

With revenues of £18.01m in FY2021, the Company recovered a marginal proportion of the circa 21% top line reduction experienced in the previous full year report. A net profit of 1.79% reflects the challenges of the period and the success of all measures taken through 2020 and 2021 to deliver a profitable result during this most difficult operating environment.

Returns to relative normality and recovery path is expected to start FY 2023 and reach pre-pandemic levels circa 2024/2025 in line with the broader aviation market; FY 2022 is expected to be another difficult and uneven period for business as the unprecedented impacts of Covid-19 continue.

ON BEHALF OF THE BOARD:

Y L Tiefenbrun - Director

5 September 2022

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

DIVIDENDS

No dividends will be distributed for the year ended 31 December 2021.

DIRECTORS

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

Mrs R Tiefenbrun

Y L Tiefenbrun

Miss R E Tiefenbrun

STATEMENT OF DIRECTORS' RESPONSIBILITIES

The directors are responsible for preparing the Strategic Report, the Report of the Directors and the financial statements in accordance with applicable law and regulations.

Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the company and 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;

-	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.

STATEMENT AS TO DISCLOSURE OF INFORMATION TO AUDITORS

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

AUDITORS

The auditors, O'Haras Chartered Accountants, Statutory Auditors, will be proposed for re-appointment at the forthcoming Annual General Meeting.

ON BEHALF OF THE BOARD:

Y L Tiefenbrun - Director

5 September 2022

Opinion

We have audited the financial statements of Castle Precision Engineering (Glasgow) Limited (the 'company') for the year ended 31 December 2021 which comprise the Income Statement, Other Comprehensive Income, Balance Sheet, Statement of Changes in Equity, Cash Flow Statement and Notes to the Cash Flow Statement, Notes to the Financial Statements, including a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 102 'The Financial Reporting Standard applicable in the UK and Republic of Ireland' (United Kingdom Generally Accepted Accounting Practice).

In our opinion the financial statements:

-	give a true and fair view of the state of the company's affairs as at 31 December 2021 and of its profit for the year then ended;

-	have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and

-	have been prepared in accordance with the requirements of the Companies Act 2006.

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditors' responsibilities for the audit of the financial statements section of our report. We are independent of the 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 three, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

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

We made enquiries of management as to whether there were any known or suspected instances of non compliance with laws and regulations.

We gained an understanding of management's internal controls designed to prevent and detect irregularities in their day-to-day operations.

We considered how fraud might occur in this company and designed our tests accordingly.

As in all audits, we also addressed the risk of management override of internal controls, including reviewing journals and evaluating whether there was evidence of bias by the directors that represented a risk of material misstatement due to fraud.

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.

John O'Hara CA (Senior Statutory Auditor)

for and on behalf of O'Haras Chartered Accountants, Statutory Auditors

Radleigh House

1 Golf Road

Clarkston

Glasgow

G76 7HU

5 September 2022

REVENUE

18,012,554

17,273,710

Cost of sales

13,368,806

12,528,399

GROSS PROFIT

4,643,748

4,745,311

Administrative expenses

4,518,816

4,916,802

124,932

(171,491

)

Other operating income

315,464

963,591

OPERATING PROFIT

4

440,396

792,100

Interest payable and similar expenses

5

117,424

86,070

PROFIT BEFORE TAXATION

322,972

706,030

Tax on profit

6

-

-

PROFIT FOR THE FINANCIAL YEAR

322,972

706,030

PROFIT FOR THE YEAR

322,972

706,030

OTHER COMPREHENSIVE INCOME

-

-

TOTAL COMPREHENSIVE INCOME FOR THE YEAR

322,972

706,030

FIXED ASSETS

Property, plant and equipment

7

6,548,357

7,016,403

CURRENT ASSETS

Inventories

8

4,112,089

6,223,397

Debtors

9

1,865,890

1,381,523

Cash at bank and in hand

4,698,994

2,727,890

10,676,973

10,332,810

CREDITORS

Amounts falling due within one year

10

3,890,268

3,464,881

NET CURRENT ASSETS

6,786,705

6,867,929

TOTAL ASSETS LESS CURRENT LIABILITIES

13,335,062

13,884,332

CREDITORS

Amounts falling due after more than one year

11

2,133,068

3,005,310

NET ASSETS

11,201,994

10,879,022

CAPITAL AND RESERVES

Called up share capital

15

3,000

3,000

Retained earnings

16

11,198,994

10,876,022

SHAREHOLDERS' FUNDS

11,201,994

10,879,022

The financial statements were approved by the Board of Directors and authorised for issue on 5 September 2022 and were signed on its behalf by:

Y L Tiefenbrun - Director

Called up

share

Retained

Total

capital

earnings

equity

£

£

£

Balance at 1 January 2020

3,000

10,169,992

10,172,992

Changes in equity

Total comprehensive income

-

706,030

706,030

Balance at 31 December 2020

3,000

10,876,022

10,879,022

Changes in equity

Total comprehensive income

-

322,972

322,972

Balance at 31 December 2021

3,000

11,198,994

11,201,994

Cash flows from operating activities

Cash generated from operations

1

3,209,178

725,661

Interest paid

(58,816

)

(25,835

)

Interest element of hire purchase payments paid

(58,608

)

(60,235

)

Net cash from operating activities

3,091,754

639,591

Cash flows from investing activities

Purchase of tangible fixed assets

(316,712

)

(1,475,994

)

Sale of tangible fixed assets

200

-

Net cash from investing activities

(316,512

)

(1,475,994

)

Cash flows from financing activities

New loans in year

-

2,000,000

Loan repayments in year

(403,465

)

-

Capital movement in the year

(400,668

)

586,551

Net cash from financing activities

(804,133

)

2,586,551

Increase in cash and cash equivalents

1,971,109

1,750,148

Cash and cash equivalents at beginning of year

2

2,727,885

977,737

Cash and cash equivalents at end of year

2

4,698,994

2,727,885

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

31/12/21

31/12/20

£

£

Profit before taxation

322,972

706,030

Depreciation charges

783,858

726,378

Loss on disposal of fixed assets

700

-

Finance costs

117,424

86,070

1,224,954

1,518,478

Decrease in inventories

2,111,308

347,896

(Increase)/decrease in trade and other debtors

(484,367

)

273,857

Increase/(decrease) in trade and other creditors

357,283

(1,414,570

)

Cash generated from operations

3,209,178

725,661

2.	CASH AND CASH EQUIVALENTS

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

Year ended 31 December 2021

31.12.21

1.1.21

£

£

Cash and cash equivalents

4,698,994

2,727,890

Bank overdrafts

-

(5

)

4,698,994

2,727,885

Year ended 31 December 2020

31.12.20

1.1.20

£

£

Cash and cash equivalents

2,727,890

977,737

Bank overdrafts

(5

)

-

2,727,885

977,737

3.	ANALYSIS OF CHANGES IN NET (DEBT)/FUNDS

At 1.1.21

Cash flow

At 31.12.21

£

£

£

Net cash

Cash at bank and in hand

2,727,890

1,971,104

4,698,994

Bank overdrafts

(5

)

5

-

2,727,885

1,971,109

4,698,994

Debt

Finance leases

(1,601,232

)

400,668

(1,200,564

)

Debts falling due within 1 year

(407,407

)

(37,001

)

(444,408

)

Debts falling due after 1 year

(1,592,593

)

440,466

(1,152,127

)

(3,601,232

)

804,133

(2,797,099

)

Total

(873,347

)

2,775,242

1,901,895

1.	STATUTORY INFORMATION

Castle Precision Engineering (Glasgow) Limited is a private company, limited by shares , registered in Scotland. The company's registered number and registered office address can be found on the Company Information page.

2.	ACCOUNTING POLICIES

Basis of preparing the financial statements

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

Going concern

The directors are satisfied that the Company will have access to sufficient funds to ensure that all liabilities will be met as they fall due over a period of at least 12 months from the approval date of these financial statements. Consequently, the directors consider it appropriate to prepare the financial statements on a going concern basis.

Revenue

Revenue is shown exclusive of VAT and is generated from the provision of engineering services. Revenue is recognised when goods are dispatched or made available for collection.

Tangible fixed assets

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

Freehold property

-

2% on cost

Improvements to property

-

2% on cost

Plant and machinery

-

10% on cost

Office and computer equipment

-

30% on reducing balance

Motor vehicles

-

25% on reducing balance

Government grants

Grants are accounted for under the accruals model as permitted by FRS 102. Grants relating to expenditure on tangible fixed assets are credited to the profit and loss account at the same rate as the depreciation on the assets to which the grant relates. The deferred element of grants is included in creditors as deferred income. Grants of a revenue nature are recognised in "other income" within profit or loss in the same period as the related expenditure. This includes the Government Coronavirus Job Retention Scheme ('Furlough').

Work in progress

Work in Progress is stated at the lower of cost and net realisable value. For partially shipped and invoiced orders costs are apportioned based on expected/ known gross profit percentages.

Taxation

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

Current or deferred taxation assets and liabilities are not discounted.

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

Deferred tax

Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the balance sheet date.

Timing differences arise from the inclusion of income and expenses in tax assessments in periods different from those in which they are recognised in financial statements. Deferred tax is measured using tax rates and laws that have been enacted or substantively enacted by the year end and that are expected to apply to the reversal of the timing difference.

Unrelieved tax losses and other deferred tax assets are recognised only to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits.

Hire purchase and leasing commitments

Rentals paid under operating leases are charged to profit or loss on a straight line basis over the period of the lease.

Pension costs and other post-retirement benefits

The company operates a defined contribution pension scheme. Contributions payable to the company's pension scheme are charged to profit or loss in the period to which they relate.

Debtors

Short term debtors are measured at transaction price, less any impairment. Loans receivable are measured initially at fair value, net of transaction costs, and are measured subsequently at amortised cost using the effective interest method, less any impairment.

Creditors

Short term creditors are measured at the transaction price. Other financial liabilities, including bank loans, are measured initially at fair value, net of transaction costs, and are measured subsequently at amortised cost using the effective interest method.

3.	EMPLOYEES AND DIRECTORS

31/12/21

31/12/20

£

£

Wages and salaries

3,134,756

4,214,057

Social security costs

332,748

407,528

Other pension costs

174,001

221,999

3,641,505

4,843,584

The average number of employees during the year was as follows:

31/12/21

31/12/20

Management & administration

48

60

Manufacturing

42

60

90

120

31/12/21

31/12/20

£

£

Directors' remuneration

229,020

291,465

Directors' pension contributions to money purchase schemes

20,623

20,623

The number of directors to whom retirement benefits were accruing was as follows:

Money purchase schemes

2

2

Information regarding the highest paid director is as follows:

31/12/21

31/12/20

£

£

Emoluments etc

81,520

117,958

Pension contributions to money purchase schemes

-

11,747

4.	OPERATING PROFIT

The operating profit is stated after charging/(crediting):

31/12/21

31/12/20

£

£

Hire of plant and machinery

17,293

17,557

Depreciation - owned assets

783,858

726,378

Loss on disposal of fixed assets

700

-

Auditors' remuneration

11,500

11,500

Auditors' remuneration for non audit work

16,020

28,633

Foreign exchange differences

(62,808

)

(43,887

)

5.

INTEREST PAYABLE AND SIMILAR EXPENSES

31/12/21

31/12/20

£

£

Bank loan interest

58,816

25,835

Hire purchase

35,779

22,528

Leasing

22,829

37,707

117,424

86,070

6.

TAXATION

Analysis of the tax charge

No liability to UK corporation tax arose for the year ended 31 December 2021 nor for the year ended 31 December 2020.

7.	PROPERTY, PLANT AND EQUIPMENT

Improvements

Freehold

to

Plant and

property

property

machinery

£

£

£

COST

At 1 January 2021

2,694,464

940,471

21,974,310

Additions

-

180,929

127,070

Disposals

-

-

-

At 31 December 2021

2,694,464

1,121,400

22,101,380

DEPRECIATION

At 1 January 2021

964,832

20,760

17,844,183

Charge for year

52,716

33,410

625,526

Eliminated on disposal

-

-

-

At 31 December 2021

1,017,548

54,170

18,469,709

NET BOOK VALUE

At 31 December 2021

1,676,916

1,067,230

3,631,671

At 31 December 2020

1,729,632

919,711

4,130,127

Office

and

computer

Motor

equipment

vehicles

Totals

£

£

£

COST

At 1 January 2021

3,174,419

23,280

28,806,944

Additions

8,713

-

316,712

Disposals

-

(23,280

)

(23,280

)

At 31 December 2021

3,183,132

-

29,100,376

DEPRECIATION

At 1 January 2021

2,938,405

22,361

21,790,541

Charge for year

72,187

19

783,858

Eliminated on disposal

-

(22,380

)

(22,380

)

At 31 December 2021

3,010,592

-

22,552,019

NET BOOK VALUE

At 31 December 2021

172,540

-

6,548,357

At 31 December 2020

236,014

919

7,016,403

Included in plant and machinery are assets costing £3,591,901 and depreciation of £1,440,381 which are subject to hire purchase agreements.

8.	INVENTORIES

31/12/21

31/12/20

£

£

Work-in-progress

4,112,089

6,223,397