LLOYD_&_JONES_ENGINEERS_L - Accounts

The directors present the strategic report for the year ended 31 October 2020.

The company’s principal activity during the year was that of merchants of engineers supplies, manufacturer of abrasive products, and supplier of specialist cutting tools and welding products. The company is wholly owned by its parent company, Lloyd & Jones Engineers (Holdings) Limited. 

The company is headquartered in Liverpool and traded 19 branches in the early part of the year, this reduced however to 16 covering the North West, North Wales, Midland, South West and North East of England. Post year end a further branch has been added to the portfolio of sites strengthening our presence in Merseyside.

The market in which the company operates has, like others, been affected by economic uncertainty surrounding the UK decision to leave the European Union. In that context, the relative stability of the trading results has been welcome. The key for the business is having the right products available at the right price, delivered to our customers through the expertise and knowledge of our staff. The implementation of this strategy is essential to ensure the continued success of the company.

Key risks have been monitored by the board throughout the year to identify changes and respond as required. 

The most significant principal risk throughout the year and post year-end has been business strategy. If the wrong strategy is adopted or the strategy is not implemented effectively then the business may be negatively impacted. The sector continues to evolve, and the marketplace includes both large national and local competitors. Products and prices are carefully monitored to ensure that the business maintains market share, and the board have taken the decision to expand the branch network as well as developing our online offering to diversify the risk of competitive forces so far as possible. 

The impact of the difficulties from the pandemic  throughout the year on both suppliers and customers continues to affect the company and its ability to generate increased revenues and manage costs. The risk has been carefully managed by regularly reviewing our pricing propositions. External cost pressures such as rising fuel costs, business rates and wage inflation have affected the company during the year, but we have always attempted to mitigate the impact of these cost pressures on our customers and on overall profitability through cost saving measures wherever we can. 

The company employed, on average, 215 staff during the year who were critical to the success of our branch network and invaluable in the help and support that we provide to our customers. Attracting and maintaining good relations with staff is essential to maximising branch performance so throughout the year our employment policies and salary packages were reviewed so as to be competitive with other employers. 

With a large array of available stock lines to support customer needs, it is important that stock levels are reviewed and carefully managed so as to minimise the risk to the business of obsolete stock. The board regularly reviews overall stock levels and stock holding periods to ensure that stock lines are continually moving, and that obsolete stock is identified and dealt with at the appropriate time. A supplier and stock reduction program continue to optimise performance in this critical area.

Following the departure of the UK from the European Union (“Brexit”) effective 1 January 2021, the board continues to assess the threats and opportunities that this creates for the company. There has certainly been an element of supplier price inflation which is not easily reflected in our pricing structure so that may have an impact on future gross margins. The other factor which has negatively impacted the company has been delays in importing goods into the UK. It is vital that the goods are available in the branch network to service customer requirements so this is closely monitored and certain workarounds may be required to manage this risk.

The financial results and balance sheet position are set out on pages 7 and 8 of the financial statements. 

Turnover from operations has decreased  by 3.6% from £27.9 million to £26.9 million for the year under review. Gross margin has increased slightly from 29.4% to 31.6% which is due to the cost increases outlined above managed better with our suppliers. The operating profit for the year is £0.5 million and the profit before tax for the year is £0.6 million. 

The balance sheet net assets as at 31 October 2020 total £4.97 million which is an increase on the prior year from £4.68 million as a result of retained profits for the year of £0.28 million .  Bank borrowings have increased in the year to fund acquisition activity, although all borrowing is secured over available company and group assets, and the company has committed available facilities for the foreseeable future. 

Overall, the company has significant net assets and net current assets and is in a strong position to look forward to future periods with continued confidence. 

On behalf of the board

The directors present their annual report and financial statements for the year ended 31 October 2020.

The principal activity of the company during the year was that of merchants of engineering supplies, manufacturer of abrasive products, and supplier of specialist cutting tools and welding products.

The directors who held office during the year and up to the date of signature of the financial statements were as follows:

The results for the year are set out on page 7.

Dividends totalling £150,000 (2019: £300,000) were paid in the year. The directors do not recommend payment of a further dividend.

The directors minimise financial risk by ensuring there are sufficient internal controls in place to reduce the risk of fraud and error occurring.

A fully integrated stock and accounting system is maintained which reduces some of the financial risk, and all new accounts are credit checked to reduce potential bad debt risks.

The directors manage the financing requirements of the business in conjunction with our funds provider.

The risks of the impact of Covid-19 are continually assessed, the financial impact is not easily forecasted given the inherent uncertainty in the nature of the situation. However, trading activity has continued relatively uninterrupted and the directors are of the opinion that given the financial position of the company sufficient headroom exists to enable the company to continue to operate for the foreseeable future. The directors continue to monitor the risks and take appropriate action on a timely basis. Further information is provided in accounting policy note 1.2 to the financial statements.

Any further risks are managed as required.

The company changed banks post year end and now banks with Barclays.

Details of other post reporting date events are detailed in note 30 to the financial statements.

Future developments of the company will in the short term be affected by the ongoing economic uncertainty created by the Covid-19 pandemic. There is a recent history of acquisitions of similar types of businesses and this trend will continue should the right business at the right price be identified by the directors.

DSG were appointed as auditor to the company and in accordance with section 485 of the Companies Act 2006, a resolution proposing that they be re-appointed will be put at a General Meeting.

The directors are responsible for preparing the annual report and the financial statements in accordance with applicable law and regulations.

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

•     select suitable accounting policies and then apply them consistently;

•     make judgements and accounting estimates that are reasonable and prudent;

•     prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business.

The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the company’s transactions and disclose with reasonable accuracy at any time the financial position of the company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

So far as each person who was a director at the date of approving this report is aware, there is no relevant audit information of which the company’s auditor is unaware. Additionally, the directors individually have taken all the necessary steps that they ought to have taken as directors in order to make themselves aware of all relevant audit information and to establish that the company’s auditor is aware of that information.

We have audited the financial statements of Lloyd & Jones Engineers Limited (the 'company') for the year ended 31 October 2020 which comprise the statement of comprehensive income, the balance sheet, the statement of changes in equity and notes to the financial statements, including a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (United Kingdom Generally Accepted Accounting Practice).

In our opinion the financial statements:

•     give a true and fair view of the state of the company's affairs as at 31 October 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 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.

Other information

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

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 and the directors' report.

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.

As explained more fully in the directors' responsibilities statement, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, the directors are responsible for assessing the company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the company or to cease operations, or have no realistic alternative but to do so.

Our 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.

A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s website at: http://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.

Use of our report

This report is made solely to the company's member 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 member 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 member for our audit work, for this report, or for the opinions we have formed.

There was no other comprehensive income for either the current or prior year.

Lloyd & Jones Engineers Limited is a private company limited by shares incorporated in England and Wales. The registered office is Langton House, 74 Regent Road, Liverpool, L20 1BL.

These financial statements have been prepared in accordance with FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland” (“FRS 102”) and the requirements of the Companies Act 2006.

The financial statements are prepared in sterling, which is the functional currency of the company. Monetary amounts in these financial statements are rounded to the nearest £.

The financial statements have been prepared under the historical cost convention. The principal accounting policies adopted are set out below.

This company is a qualifying entity for the purposes of FRS 102, being a member of a group where the parent of that group prepares publicly available consolidated financial statements, including this company, which are intended to give a true and fair view of the assets, liabilities, financial position and profit or loss of the group. The company has therefore taken advantage of exemptions from the following disclosure requirements:

• Section 7 ‘Statement of Cash Flows’: Presentation of a statement of cash flow and related notes and disclosures;

• Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instrument Issues’: Interest income/expense and net gains/losses for each category of financial instrument; basis of determining fair values; details of collateral, loan defaults or breaches, details of hedges, hedging fair value changes recognised in profit or loss and in other comprehensive income;

• Section 26 ‘Share based Payment’: Share-based payment expense charged to profit or loss, reconciliation of opening and closing number and weighted average exercise price of share options, how the fair value of options granted was measured, measurement and carrying amount of liabilities for cash-settled share-based payments, explanation of modifications to arrangements;

• Section 33 ‘Related Party Disclosures’: Compensation for key management personnel.

The financial statements of the company are consolidated in the financial statements of Lloyd & Jones Engineers (Holdings) Limited. These consolidated financial statements are available from the Registrar of Companies.

The company has taken advantage of the exemption under section 400 of the Companies Act 2006 not to prepare consolidated accounts. The financial statements present information about the company as an individual entity and not about its group.

The financial statements have been prepared on a going concern basis. At 31 October 2020, the company had net assets of £4.96 million and net current assets of £3.5 million, together with a cash reserves of £0.2 million and committed bank facilities with its bankers through to a period of at least 12 months from the date of signing the financial statements.true

Management have prepared forecasts of financial performance to cover a period of 12 months from the date of signing the financial statements. The directors are confident that the company can meet these forecasts under normal operating conditions. The risks associated with the ongoing Covid-19 pandemic have been assessed by the directors as referred to in the Directors’ Report. This unprecedented event is likely to have a continued short to medium term impact on the company’s financial performance, although given the unpredictable nature of the virus this is not easily forecasted. To date the company has not experienced any significant impact on its financial performance or available cash reserves, although the forecasts assume that the company’s revenue and margins may be restricted to some extent leading to reduced profitability of the business overall.

The directors will take all available steps to efficiently manage cashflow, reduce costs wherever possible, and plan appropriate commercial actions to take in response to the pandemic. The directors have made use of sources of government support during the year, such as the job retention scheme for furloughed employees, and have welcomed the support provided to businesses through this uncertain period. A number of these state resources are to be withdrawn shortly and are not built into the forecasts as a source of assistance or alternative funding.

The key risk over the period of the forecasts is that of a significant decline in revenue generating activity over and above that anticipated, but given the profile of the customer base and the continued flow of work to date, the directors consider the forecast to be a robust assessment of likely activity. Based on the above assessment, the directors believe that it remains appropriate to prepare the financial statements on a going concern basis.

Turnover is recognised at the fair value of the consideration received or receivable for goods and services provided in the normal course of business, and is shown net of VAT and other sales related taxes. The fair value of consideration takes into account trade discounts, settlement discounts and volume rebates.

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 dispatch of the goods), the amount of revenue can be measured reliably, it is probable that the economic benefits associated with the transaction will flow to the entity and the costs incurred or to be incurred in respect of the transaction can be measured reliably.

Goodwill represents the excess of the cost of acquisition of businesses over the fair value of net assets acquired. It is initially recognised as an asset at cost and is subsequently measured at cost less accumulated amortisation and accumulated impairment losses. Goodwill is considered to have a finite useful life and is amortised on a systematic basis over its expected life, which is 5 years.

For the purposes of impairment testing, goodwill is allocated to the cash-generating units expected to benefit from the acquisition. Cash-generating units to which goodwill has been allocated are tested for impairment at least annually, or more frequently when there is an indication that the unit may be impaired. If the recoverable amount of the cash-generating unit is less than the carrying amount of the unit, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro-rata on the basis of the carrying amount of each asset in the unit.

Intangible assets acquired separately from a business are recognised at cost and are subsequently measured at cost less accumulated amortisation and accumulated impairment losses.

Intangible assets acquired on business combinations are recognised separately from goodwill at the acquisition date where it is probable that the expected future economic benefits that are attributable to the asset will flow to the entity and the fair value of the asset can be measured reliably; the intangible asset arises from contractual or other legal rights; and the intangible asset is separable from the entity.

Amortisation is recognised so as to write off the cost or valuation of assets less their residual values over their useful lives on the following bases:

Tangible fixed assets are initially measured at cost and subsequently measured at cost or valuation, net of depreciation and any impairment losses.

Depreciation is recognised so as to write off the cost or valuation of assets less their residual values over their useful lives on the following bases:

The gain or loss arising on the disposal of an asset is determined as the difference between the sale proceeds and the carrying value of the asset, and is credited or charged to profit or loss.

Interests in subsidiaries are initially measured at cost and subsequently measured at cost less any accumulated impairment losses. The investments are assessed for impairment at each reporting date and any impairment losses or reversals of impairment losses are recognised immediately in profit or loss.

A subsidiary is an entity controlled by the company. Control is the power to govern the financial and operating policies of the entity so as to obtain benefits from its activities.

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

Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.

Recognised impairment losses are reversed if, and only if, the reasons for the impairment loss have ceased to apply. Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.

Stocks are stated at the lower of cost and estimated selling price less costs to complete and sell. Cost comprises direct materials and, where applicable, direct labour costs and those overheads that have been incurred in bringing the stocks to their present location and condition.

At each reporting date, an assessment is made for impairment. Any excess of the carrying amount of stocks over its estimated selling price less costs to complete and sell is recognised as an impairment loss in profit or loss. Reversals of impairment losses are also recognised in profit or loss.

Cash and cash equivalents are basic financial assets and include cash in hand, deposits held at call with banks, other short-term liquid investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities.

The company has elected to apply the provisions of Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instruments Issues’ of FRS 102 to all of its financial instruments.

Financial instruments are recognised in the company's balance sheet when the company becomes party to the contractual provisions of the instrument.

Financial assets and liabilities are offset, with the net amounts presented in the financial statements, when there is a legally 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.

Basic financial assets, which include debtors and cash and bank balances, are initially measured at transaction price including transaction costs and are subsequently carried at amortised cost using the effective interest method unless the arrangement constitutes a financing transaction, where the transaction is measured at the present value of the future receipts discounted at a market rate of interest. Financial assets classified as receivable within one year are not amortised.

Financial assets, other than those held at fair value through profit and loss, are assessed for indicators of impairment at each reporting end date.

Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows have been affected. If an asset is impaired, the impairment loss is the difference between the carrying amount and the present value of the estimated cash flows discounted at the asset’s original effective interest rate. The impairment loss is recognised in profit or loss.

If there is a decrease in the impairment loss arising from an event occurring after the impairment was recognised, the impairment is reversed. The reversal is such that the current carrying amount does not exceed what the carrying amount would have been, had the impairment not previously been recognised. The impairment reversal is recognised in profit or loss.

Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire or are settled, or when the company transfers the financial asset and substantially all the risks and rewards of ownership to another entity, or if some significant risks and rewards of ownership are retained but control of the asset has transferred to another party that is able to sell the asset in its entirety to an unrelated third party.

Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the company after deducting all of its liabilities.

Basic financial liabilities, including creditors, bank loans, loans from fellow group companies and preference shares that are classified as debt, are initially recognised at transaction price unless the arrangement constitutes a financing transaction, where the debt instrument is measured at the present value of the future payments discounted at a market rate of interest. Financial liabilities classified as payable within one year are not amortised.

Debt instruments are subsequently carried at amortised cost, using the effective interest rate method.

Trade creditors are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Amounts payable are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities. Trade creditors are recognised initially at transaction price and subsequently measured at amortised cost using the effective interest method.

Financial liabilities are derecognised when the company’s contractual obligations expire or are discharged or cancelled.

Equity instruments issued by the company are recorded at the proceeds received, net of transaction costs. Dividends payable on equity instruments are recognised as liabilities once they are no longer at the discretion of the company.

The tax expense represents the sum of the tax currently payable and deferred tax.

The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the profit and loss account because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The company’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting end date.

Deferred tax liabilities are generally recognised for all timing differences and deferred tax assets are recognised to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits. Such assets and liabilities are not recognised if the timing difference arises from goodwill or from the initial recognition of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit.

The carrying amount of deferred tax assets is reviewed at each reporting end date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited in the profit and loss account, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax assets and liabilities are offset when the company has a legally enforceable right to offset current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority.

Provisions are recognised when the company has a legal or constructive present obligation as a result of a past event, it is probable that the company will be required to settle that obligation and a reliable estimate can be made of the amount of the obligation.

The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the reporting end date, taking into account the risks and uncertainties surrounding the obligation. Where the effect of the time value of money is material, the amount expected to be required to settle the obligation is recognised at present value. When a provision is measured at present value, the unwinding of the discount is recognised as a finance cost in profit or loss in the period in which it arises.

The costs of short-term employee benefits are recognised as a liability and an expense, unless those costs are required to be recognised as part of the cost of stock or fixed assets.

The cost of any unused holiday entitlement is recognised in the period in which the employee’s services are received.

Termination benefits are recognised immediately as an expense when the company is demonstrably committed to terminate the employment of an employee or to provide termination benefits.

Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due.

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessees. All other leases are classified as operating leases.

Assets held under finance leases are recognised as assets at the lower of the assets fair value at the date of inception and the present value of the minimum lease payments. The related liability is included in the balance sheet as a finance lease obligation. Lease payments are treated as consisting of capital and interest elements. The interest is charged to profit or loss so as to produce a constant periodic rate of interest on the remaining balance of the liability.

Rentals payable under operating leases, including any lease incentives received, are charged to profit or loss on a straight line basis over the term of the relevant lease except where another more systematic basis is more representative of the time pattern in which economic benefits from the leases asset are consumed.

Government grants are recognised at the fair value of the asset received or receivable when there is reasonable assurance that the grant conditions will be met and the grants will be received.

A grant that specifies performance conditions is recognised in income when the performance conditions are met. Where a grant does not specify performance conditions it is recognised in income when the proceeds are received or receivable. A grant received before the recognition criteria are satisfied is recognised as a liability.

Transactions in currencies other than pounds sterling are recorded at the rates of exchange prevailing at the dates of the transactions. At each reporting end date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the reporting end date. Gains and losses arising on translation in the period are included in profit or loss.

Borrowing costs

All borrowing costs are recognised in profit or loss in the period in which they are incurred.

Exceptional items

Exceptional items are transactions that fall within the ordinary operating activities of the company but are presented separately due to their size or incidence.

In the application of the company’s accounting policies, the directors are required to make judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised where the revision affects only that period, or in the period of the revision and future periods where the revision affects both current and future periods.

The following judgements (apart from those involving estimates) have had the most significant effect on amounts recognised in the financial statements.

The directors have determined whether there are indicators of impairment of the company's investments, tangible assets, and intangible assets including goodwill. Factors taken into consideration in reaching such a decision include the economic viability and expected future financial performance of the asset and where it is a component of a larger cash generating unit, the viability and expected future performance of that unit.

The estimates and assumptions which have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities are as follows.

Where an indication of impairment exists, the directors will carry out an impairment review to determine the recoverable amount which is the higher of fair value less costs to sell and value in use. The value in use calculation requires the directors to estimate the future cash flows expected to arise from the asset or the cash generating unit, and a suitable discount rate in order to calculate present value.

The company establishes a provision for receivables that are estimated to not be recoverable. When assessing recoverability the directors consider factors such as the ageing of receivables, past experience of recoverability, and the credit profile of individual or groups of customers.

The company provides for obsolete and slow moving stock. Management undertake an assessment of which stocks are no longer economically feasible based on consumer performance, before allocating the necessary provisions to bring the stock valuation in line with the accounting policy stated above.

Tangible fixed assets are depreciated over their useful lives taking into account residual values, where appropriate. The actual lives of the assets and residual values are assessed annually and may vary depending on a number of factors. In re-assessing asset lives, factors such as technological innovation, product life cycles, and maintenance programmes are taken into account. Residual value assessments consider issues such as future market conditions, the remaining life of the asset and projected disposal values.

The whole of the turnover is attributable to the principal activity of the company.

See notes 14 and 16 to the financial statements for further detail.

The Government grant relates to money received under the Coronavirus Job Retention Scheme (CJRS) which covers a proportion of salary costs, national insurance and pension contributions for staff placed on furlough.

The company has taken advantage of the exemption not to disclose amounts paid for non-audit services as these are disclosed in the group financial statements of the parent company.

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

Their aggregate remuneration comprised:

The number of directors for whom retirement benefits are accruing under defined contribution schemes amounted to 3 (2019 - 3).

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

Factors affecting future tax charges

Finance Act 2021 includes provisions to increase the corporation tax rate from 19% to 25% with effect from 1 April 2023. This was substantively enacted on 24 May 2021, after the balance sheet date, and as such deferred tax balances have been calculated based on timing differences reversing at the 19% rate.

The directors have taken the decision to fully impair goodwill arising on one of the business combinations in prior years. Based on the underlying performance of the cash generating unit, the directors' assessment is that the recoverable value and value in use is £nil.

The net carrying value of tangible fixed assets includes the following in respect of assets held under finance leases or hire purchase contracts.

Further detail on the the transactions in the year is provided in the following note to the financial statements.

Details of the company's subsidiaries at 31 October 2020 are as follows:

The registered address of all subsidiaries above is PO Box 29, c/o Lloyd & Jones Engineers Ltd, Regent Road, Bootle, L20 1BL, UK.

Central Polishing Supply Co. Limited (registration number: 01685316), European Welding Supplies Limited (registration number: 09210918) and North Valley Supplies Limited (registration number: 09054129) are exempt from the requirement for audit of their individual financial statements under section 479A of the Companies Act 2006. Tooltek Supplies Limited (registration number: 02401883) is a dormant company.

On 31 July 2019, the company acquired the entire issued share capital of European Welding Supplies Limited. On 1 November 2019, the trade and net assets of European Welding Supplies Limited were sold to Lloyd & Jones Engineers Limited. The consideration was equal to the fair value of the net assets at that date with no value attributed to the goodwill acquired. In accordance with the provisions of UK accounting standards, a transfer of £247,527 has been made from the cost of investment to goodwill, the amount transferred equivalent to the goodwill arising at the date of acquisition. On 1 November 2019, European Welding Supplies Limited paid a dividend to Lloyd & Jones Engineers Limited of £201,937, this comprised the net assets of European Welding Supplies Limited with the exception of £100. European Welding Supplies Limited has been dormant since that date, so accordingly an investment impairment charge of £52,373 has been recognised in the financial statements.

On 18 March 2020, the company acquired the entire issued share capital of North Valley Supplies Limited. The fair value of the net assets acquired, goodwill arising, and detail of how the acquisition cost was satisfied is set out in the parent company consolidated financial statements of Lloyd & Jones Engineers (Holdings) Limited. On 31 May 2020, the trade and net liabilities of North Valley Supplies Limited were sold to Lloyd & Jones Engineers Limited. The consideration was equal to the fair value of the net liabilities at that date with no value attributed to the goodwill acquired. This resulted in a debt of £56,554 owed to the company by North Valley Supplies Limited which has been waived and accounted for as capital contribution which is included in the cost of investment. In accordance with the provisions of UK accounting standards, a transfer of £76,454 has been made from the cost of investment to goodwill, the amount transferred equivalent to the goodwill arising at the date of acquisition. North Valley Supplies Limited has been dormant since that date.

The remaining investments carried forward represent the nominal values of the issued share capital of Central Polishing Supply Co. Limited, Tooltek Supplies Limited, European Welding Supplies Limited and North Valley Supplies Limited.

Included within stock is £483,024 (2019: £518,190) of stock on consignment at customer's premises. As Lloyd & Jones Engineers Limited bear the risk associated with this stock, it remains their property until used by the customer.

Impairment losses of £77,719 (2019: £62,772) for slow moving and obsolete stock have been recognised in cost of sales during the ye

The invoice financing facility is secured by way of a fixed charge over eligible trade debtors.

Other borrowings comprise an invoice discounting facility of £1,716,080 (2019: £3,221,697) and a short term funding loan transferred from North Valley Supplies Limited (see note 17) of £22,221 (2019: £nil). The loan is repayable in monthly instalments of £898 and carries a fixed interest rate of 7.6% applied to the loan principal at the outset to calculate the interest due at each repayment date.

Svenska Handelsbanken AB hold a debenture including a fixed and floating charge over all present freehold and leasehold properties and all other assets and undertakings, both present and future, dated 18 September 2014 to secure invoice financing facilities.

Finance lease payments represent rentals payable by the group for certain items of plant and machinery. Finance leases are secured over the assets concerned. All leases are on a fixed repayment basis and no arrangements have been entered into for contingent rental payments.

The following are the deferred tax liabilities recognised by the company and movements thereon:

No reversal of the deferred tax liability is expected over the next 12 months.

The company operates a defined contribution pension scheme for all qualifying employees. The assets of the scheme are held separately from those of the company in an independently administered fund. Contributions totalling £22,759 (2019: £21,196) were payable to the fund at the balance sheet date.

The company has one class of ordinary shares which carry voting rights but no right to fixed income.

At the reporting end date the company had outstanding commitments for future minimum lease payments under non-cancellable operating leases, which fall due as follows:

Amounts contracted for but not provided in the financial statements:

On 2 March 2021 Lloyd & Jones Engineers Limited bought the shares in Mersey Equipment Company Limited for the sum of £650,000.

The company has taken advantage of the exemptions under FRS 102 which permit subsidiaries not to disclose transactions with other group companies which are wholly owned by the group.

Included in other creditors at the year-end date is a director's loan account balance of £104,442 (2019: £102,973) owed to Mr J Birch. The loan account accrues interest at a rate of 5% per annum.

Mr J Birch is a shareholder of Target Tools Limited. Included in other debtors at the year-end date is a loan balance of £900,000 (2019: £900,000) due from Target Tools Limited. During the year, the company made sales of £64,916 (2019: £77,872) to Target Tools Limited and was owed £11,669 (2019: £45,714) at the year-end date. During the year, the company made purchases from Target Tools Limited of £7,750 (2019: £4,037) and owed £3,932 (2019: £1,200) at the year-end date.

During the year, the company rented premises owned by the Lloyd & Jones Engineers Limited Retirement & Death Benefit Pension Scheme. The company paid rent of £295,200 (2019: £262,250) in respect of these premises and owed £57,250 (2019: £148,762) at the year-end date which is included in trade creditors. Included in other debtors at the year-end date is a balance of £87,565 (2019: £87,565) due from Lloyd & Jones Engineers Limited Retirement & Death Benefit Pension Scheme.

There are no other transactions that are required to be disclosed under FRS 102.

The immediate and ultimate parent company is Lloyd & Jones Engineers (Holdings) Limited, a company incorporated in the United Kingdom and registered in England and Wales. Its registered office address is Langton House, 74 Regent Road, Liverpool, L20 1BL.

Lloyd & Jones Engineers (Holdings) Limited is the largest group of companies into which the company's results are consolidated and these financial statements are publicly available. Copies of the financial statements of Lloyd & Jones Engineers (Holdings) Limited can be obtained from the Registrar of Companies, Crown Way, Cardiff, CF14 3UZ.

Mr J Birch is the ultimate controlling party of the parent company.