The Guitar, Amp & Keyboard Centre Ltd - Limited company accounts 20.1

REGISTERED NUMBER: 05663326 (England and Wales)

STRATEGIC REPORT, REPORT OF THE DIRECTORS AND

FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 SEPTEMBER 2020

FOR

THE GUITAR, AMP & KEYBOARD CENTRE LTD

Page

Company Information

1

Strategic Report

2

Report of the Directors

3

Report of the Independent Auditors

5

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:

G Marshall

M McKellar

I P Stephens

REGISTERED OFFICE:

30-34 North Street

Hailsham

East Sussex

BN27 1DW

REGISTERED NUMBER:

05663326 (England and Wales)

AUDITORS:

Watson Associates (Audit Services) Ltd

Statutory Auditor

30 - 34 North Street

Hailsham

East Sussex

BN27 1DW

The directors present their strategic report for the year ended 30 September 2020.

REVIEW OF BUSINESS

We are satisfied with the performance during the year, which has seen an increase in sales of 23.30% on the prior year. The gross profit margin however has dropped slightly from 12.74% in the previous period to 12.56% in the current period. The net profit has increased in the current period due to the increase in turnover but maintained cost of Admin Expenditure.

PRINCIPAL RISKS AND UNCERTAINTIES

As with any business the company faces risks such as competition from other online retailers and the risk associated with an potential economic downturn. However, the company is well positioned to deal with any of these potential risks.

DEVELOPMENT AND PERFORMANCE

The company has continued trading well after the year end with turnover increasing and the net profit margin staying relatively consistent. Due to the uncertainties surrounding the COVID-19 pandemic, the Directors have taken many internal actions and have sought assistance in line with that offered by the Government to mitigate the impact on the business and ensure the ongoing liquidity.

FURTHER BUSINESS REVIEW AND RISKS

In March 2020, the company saw a reduction in operations as a result of the global COVID-19 pandemic. This has a significant impact on the company's turnover, margins and profitability.

This continues to be an unprecedented situation that has caused a significant amount of uncertainty for the company and the wider economy. The principle risks and uncertainties the company continues to face as a result of COVID-19 are liquidity risk, credit risk and strategic risk.

The Directors have considered the potential implications of COVID-19 and have taken the following actions to mitigate the principle risks and uncertainties list above. All measures taken by the company have taken into account the effect of the extent and duration of social distancing measures announced by the government in March 2020 and as revised in April 2020, as well as the impact on the economy and asset prices generally:

- Utilised the government's job retention scheme

- Deferral of VAT and PAYE payments in accordance with government guidelines

- Deferral of rent and service charge payments for one quarter

- Deferral of rates payments for two months

- Requested payment holidays where possible from financing facilities.

Further measures are being reviewed on an ongoing basis.

The liquidity of the company remains stable and additional financing measures are not considered necessary at this time. The balance sheet remains positive despite the value of assets falling as a result of the pandemic. The above measures will maintain this position to ensure that the company remains solvent and can continue to trade as a going concern.

The company has a good order pipeline and will be in a strong position to maintain market share.

ON BEHALF OF THE BOARD:

G Marshall - Director

25 June 2021

The directors present their report with the financial statements of the company for the year ended 30 September 2020.

DIVIDENDS

The total distribution of dividends for the year ended 30 September 2020 will be £261,000.

DIRECTORS

The directors shown below have held office during the whole of the period from 1 October 2019 to the date of this report.

G Marshall

M McKellar

I P Stephens

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), including Financial Reporting Standard 102 'The Financial Reporting Standard applicable in the UK and Republic of Ireland'. 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 ought to have taken as a director in order to make himself aware of any relevant audit information and to establish that the company's auditors are aware of that information.

AUDITORS

The auditors, Watson Associates (Audit Services) Ltd, will be proposed for re-appointment at the forthcoming Annual General Meeting.

ON BEHALF OF THE BOARD:

G Marshall - Director

25 June 2021

Opinion

We have audited the financial statements of The Guitar, Amp & Keyboard Centre Ltd (the 'company') for the year ended 30 September 2020 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 30 September 2020 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

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.

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 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 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.

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.

Stephen James Moore (Senior Statutory Auditor)

for and on behalf of Watson Associates (Audit Services) Ltd

Statutory Auditor

30 - 34 North Street

Hailsham

East Sussex

BN27 1DW

25 June 2021

TURNOVER

26,538,219

21,523,802

Cost of sales

(23,205,668

)

(18,782,368

)

GROSS PROFIT

3,332,551

2,741,434

Administrative expenses

(2,955,181

)

(2,739,394

)

377,370

2,040

Other operating income

45,304

30,816

OPERATING PROFIT

4

422,674

32,856

Interest receivable and similar income

810

587

423,484

33,443

Interest payable and similar expenses

5

(4,302

)

(5,490

)

PROFIT BEFORE TAXATION

419,182

27,953

Tax on profit

6

(112,218

)

24,882

PROFIT FOR THE FINANCIAL YEAR

306,964

52,835

PROFIT FOR THE YEAR

306,964

52,835

OTHER COMPREHENSIVE INCOME

-

-

TOTAL COMPREHENSIVE INCOME FOR THE YEAR

306,964

52,835

FIXED ASSETS

Intangible assets

8

-

-

Tangible assets

9

55,930

73,252

55,930

73,252

CURRENT ASSETS

Stocks

10

4,979,548

5,202,100

Debtors

11

513,113

560,640

Cash at bank and in hand

601,273

675,395

6,093,934

6,438,135

CREDITORS

Amounts falling due within one year

12

(4,138,008

)

(4,546,276

)

NET CURRENT ASSETS

1,955,926

1,891,859

TOTAL ASSETS LESS CURRENT LIABILITIES

2,011,856

1,965,111

CREDITORS

Amounts falling due after more than one year

13

(95,043

)

(104,241

)

PROVISIONS FOR LIABILITIES

17

(9,979

)

-

NET ASSETS

1,906,834

1,860,870

CAPITAL AND RESERVES

Called up share capital

18

100

100

Retained earnings

19

1,906,734

1,860,770

SHAREHOLDERS' FUNDS

1,906,834

1,860,870

The financial statements were approved by the Board of Directors and authorised for issue on 25 June 2021 and were signed on its behalf by:

G Marshall - Director

Called up

share

Retained

Total

capital

earnings

equity

£

£

£

Balance at 1 October 2018

100

1,965,295

1,965,395

Changes in equity

Dividends

-

(157,360

)

(157,360

)

Total comprehensive income

-

52,835

52,835

Balance at 30 September 2019

100

1,860,770

1,860,870

Changes in equity

Dividends

-

(261,000

)

(261,000

)

Total comprehensive income

-

306,964

306,964

Balance at 30 September 2020

100

1,906,734

1,906,834

Cash flows from operating activities

Cash generated from operations

1

651,928

(601,998

)

Interest paid

(4,302

)

(5,490

)

Net cash from operating activities

647,626

(607,488

)

Cash flows from investing activities

Purchase of tangible fixed assets

-

(11,403

)

Interest received

810

587

Net cash from investing activities

810

(10,816

)

Cash flows from financing activities

Loan repayments in year

(9,198

)

(20,977

)

Amount introduced by directors

-

100,000

Amount withdrawn by directors

(1,620

)

(204,486

)

Amount transferred from group companies

(404,822

)

1,508,363

Government Grants Received

41,019

-

Equity dividends paid

(261,000

)

(157,360

)

Net cash from financing activities

(635,621

)

1,225,540

Increase in cash and cash equivalents

12,815

607,236

Cash and cash equivalents at beginning of year

2

434,859

(172,377

)

Cash and cash equivalents at end of year

2

447,674

434,859

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

2020

2019

£

£

Profit before taxation

419,182

27,953

Depreciation charges

17,322

20,177

Government grants

(41,019

)

-

Finance costs

4,302

5,490

Finance income

(810

)

(587

)

398,977

53,033

Decrease/(increase) in stocks

222,552

(1,121,816

)

Decrease/(increase) in trade and other debtors

98,161

(208,980

)

(Decrease)/increase in trade and other creditors

(67,762

)

675,765

Cash generated from operations

651,928

(601,998

)

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 30 September 2020

30.9.20

1.10.19

£

£

Cash and cash equivalents

601,273

675,395

Bank overdrafts

(153,599

)

(240,536

)

447,674

434,859

Year ended 30 September 2019

30.9.19

1.10.18

£

£

Cash and cash equivalents

675,395

119,323

Bank overdrafts

(240,536

)

(291,700

)

434,859

(172,377

)

3.	ANALYSIS OF CHANGES IN NET FUNDS

At 1.10.19

Cash flow

At 30.9.20

£

£

£

Net cash

Cash at bank and in hand

675,395

(74,122

)

601,273

Bank overdrafts

(240,536

)

86,937

(153,599

)

434,859

12,815

447,674

Debt

Debts falling due within 1 year

(18,396

)

-

(18,396

)

Debts falling due after 1 year

(104,241

)

9,198

(95,043

)

(122,637

)

9,198

(113,439

)

Total

312,222

22,013

334,235

1.	STATUTORY INFORMATION

The Guitar, Amp & Keyboard Centre Ltd is a private company, limited by shares , registered in England and Wales. 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.

Critical accounting judgements and key sources of estimation uncertainty

No significant judgements have had to be made by management in preparing these financial statements.

There were no key assumptions made concerning the future, and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year.

Turnover

Turnover is measured at the fair value of the consideration received or receivable, excluding discounts, rebates, value added tax and other sales taxes.

The company recognises revenue when the significant risks and rewards of ownership have been transferred to the buyer; the company retains no continuing involvement or control over the goods; the amount of revenue can be measured reliably; and when it is probable that future economic benefits will flow to the entity.

In respect of construction contracts and the rendering of services, turnover represents revenue measured by reference to the stage of completion of the contract activity or of the service transaction at the end of the reporting period.

Goodwill

Goodwill, being the amount paid in connection with the acquisition of a business in 2005, is being amortised evenly over its estimated useful life of ten years.

Intangible assets

Intangible assets are stated at cost less accumulated depreciation and any accumulated impairment losses. They are amortised over there estimated life of 10 years using the straight-line method.

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

Tangible fixed assets

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

Short leasehold

-

over term of lease

Fixtures and fittings

-

33% on cost and 25% on reducing balance

Government grants

Grants are accounted 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.

Stocks

Stocks are valued at the lower of cost and net realisable value, after making due allowance for obsolete and slow moving items.

Cost is calculated on a first in, first out basis and includes all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition. In respect of work in progress and finished goods, cost includes a relevant proportion of overheads according to the stage of manufacture/completion.

Net realisable value is based on estimated selling price less costs to complete and sell.

At the end of each reporting period stocks and work in progress are assessed for impairment. If any stock or work in progress is impaired, it is reduced to its net realisable value and an impairment charge is recognised in the income statement. Where a reversal of the impairment is required the impairment charge is reversed, up to the original impairment loss, and is recognised as a credit in the income statement.

Financial instruments

The company only enters into basic financial instruments transactions that result in the recognition of financial assets and liabilities like trade and other accounts receivable and payable, loans from banks and other third parties, and loans to related parties.

Debt instruments that are payable or receivable within one year, are measured, initially and subsequently, at the undiscounted amount of the cash or other consideration expected to be paid or received; other debt instruments are initially measured at present value of the future payments and subsequently at amortised cost using the effective interest method.

Financial assets that are measured at cost and amortised cost are assessed at the end of each reporting period for objective evidence of impairment. If objective evidence of impairment is found, an impairment loss is recognised in profit or loss.

Financial assets and liabilities are offset and the net amount reported in the balance sheet only when there is an enforceable right to set off the recognised amounts and there is an intention to settle on a net basis or to realise the asset and settle the liability simultaneously.

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.

Foreign currencies

Assets and liabilities in foreign currencies are translated into sterling at the rates of exchange ruling at the balance sheet date. Transactions in foreign currencies are translated into sterling at the rate of exchange ruling at the date of transaction. Exchange differences are taken into account in arriving at the operating result.

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.

3.	EMPLOYEES AND DIRECTORS

2020

2019

£

£

Wages and salaries

1,539,535

1,472,566

Social security costs

18,335

17,662

Other pension costs

26,303

22,601

1,584,173

1,512,829

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

2020

2019

Sales, office and admin

59

59

2020

2019

£

£

Directors' remuneration

150,998

145,252

4.	OPERATING PROFIT

The operating profit is stated after charging:

2020

2019

£

£

Hire of plant and machinery

327

9,512

Other operating leases

194,050

186,550

Depreciation - owned assets

17,322

20,177

Audit fees

16,240

15,750

5.

INTEREST PAYABLE AND SIMILAR EXPENSES

2020

2019

£

£

Bank interest

4,302

5,490

6.

TAXATION

Analysis of the tax charge/(credit)

The tax charge/(credit) on the profit for the year was as follows:

2020

2019

£

£

Current tax:

UK corporation tax

102,239

-

Prior year tax

-

(24,882

)

Total current tax

102,239

(24,882

)

Deferred tax

9,979

-

Tax on profit

112,218

(24,882

)

Reconciliation of total tax charge/(credit) included in profit and loss

The tax assessed for the year is higher than the standard rate of corporation tax in the UK. The difference is explained below:

2020

2019

£

£

Profit before tax

419,182

27,953

Profit multiplied by the standard rate of corporation tax in the UK of 19% (2019 - 19%)

79,645

5,311

Effects of:

Expenses not deductible for tax purposes

19,303

-

Depreciation in excess of capital allowances

3,291

1,667

Adjustments to tax charge in respect of previous periods

-

(24,882

)

Group relief

-

(6,978

)

Provision for Deferred Tax

9,979

-

Total tax charge/(credit)

112,218

(24,882

)

7.

DIVIDENDS

2020

2019

£

£

Ordinary shares of £1 each

Interim

261,000

157,360

8.	INTANGIBLE FIXED ASSETS

Goodwill

£

COST

At 1 October 2019

and 30 September 2020

750,000

AMORTISATION

At 1 October 2019

and 30 September 2020

750,000

NET BOOK VALUE

At 30 September 2020

-

At 30 September 2019

-

9.	TANGIBLE FIXED ASSETS

Fixtures

Short

and

leasehold

fittings

Totals

£

£

£

COST

At 1 October 2019

and 30 September 2020

14,013

114,767

128,780

DEPRECIATION

At 1 October 2019

8,902

46,626

55,528

Charge for year

1,704

15,618

17,322

At 30 September 2020

10,606

62,244

72,850

NET BOOK VALUE

At 30 September 2020

3,407

52,523

55,930

At 30 September 2019

5,111

68,141

73,252

10.

STOCKS

2020

2019

£

£

Stocks

4,979,548

5,202,100