Melling Commercial Limited - Limited company accounts 20.1

REGISTERED NUMBER: 05751934 (England and Wales)

STRATEGIC REPORT, REPORT OF THE DIRECTORS AND

FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 JULY 2021

FOR

MELLING COMMERCIAL LIMITED

Page

Company Information

1

Strategic Report

2

Report of the Directors

4

Report of the Independent Auditors

5

Income Statement

9

Other Comprehensive Income

10

Statement of Financial Position

11

Statement of Changes in Equity

12

Notes to the Financial Statements

13

DIRECTORS:

C Melling

L Edwards

SECRETARY:

S J Melling

REGISTERED OFFICE:

Westwood Motor Group

Manchester Road

Ince

Wigan

Lancashire

WN2 2EA

REGISTERED NUMBER:

05751934 (England and Wales)

AUDITORS:

Fairhurst

Statutory Auditor

Chartered Accountants

Douglas Bank House

Wigan Lane

Wigan

Lancashire

WN1 2TB

BANKERS:

Lloyds TSB

3rd Floor

53 King Street

Manchester

M60 2LE

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

REVIEW OF BUSINESS

The company, trading as Westwood Motor Group, has seen record sales and margins achieved in 2020/21, despite the effects of Covid-19 and government imposed restrictions on the business, our customers and our staff.

The challenges faced during 2020 and into 2021 have tested our procedures, systems and employees, and it is a testament to the hard work and dedication of all our team and business partners that the company has remained successful, during these uncertain times.

The impact of Brexit,along with semi conductor supply issues has caused significant issues with delays in supply of vehicle delivery times and increased vehicle costs. However due to the solid financial base management have been able to continue to offer our customers quality vehicles and services at competitive prices, whilst improving our margins.

We remain optimistic about the future, with growing numbers of customers and we remain committed to continually developing and improving our processes for our customers, suppliers, employees and funding partners.The impact of vehicle supply issues and ongoing uncertainty surrounding Covid-19 will continue in 2021/22 but we have a strong financial position to be able to cope with these challenges.

Management results continue to be profitable and we remain committed to providing a comprehensive, contemporary range of products and services, whilst continuing to monitor pricing and cost structures.

Key Performance Indicators

KPI's include sales, margins, wages and overheads and cash flow which are regularly monitored by senior management.

2021

2020

£'000

£'000

Turnover

18,365

11,699

Gross profit

6,627

3,088

Gross margin (%)

36.1%

26.4%

EBITDA

5,519

2,293

The company generated £865k cash from it's operating activities in 2020/21, which has been used to finance further growth in 2021/22, including the opening of a new rental outlet in Bolton.

Senior management also monitor performance by reference to certain non financial KPI's, including customer, supplier and employee satisfaction, supply lead times and technology advancements.

PRINCIPAL RISKS AND UNCERTAINTIES

The UK automotive industry and Rental Sector is highly competitive and management are mindful of the need for regular review of market pricing, contract profitability and competitor activity within the sector.

The company uses various financial instruments, which include cash and asset financing arrangements together with other items such as trade debtors and trade creditors that arise directly from its operations.

The existence of these financial instruments exposes the company to a number of financial risks. These include supply and stock holding issues and liquidity and credit risks. The directors review and agree policies for managing each of these risks and they are summarised below.

Supply and stock holdings

Constraints on lead times and delivery schedules, both commercial and contractual are putting a strain on supply of vehicles to our customers, and this is being managed with regular management meetings and dialogue with key suppliers.

Liquidity risk

Liquidity risk is the risk that the company will encounter difficulty in meeting obligations associated with financial liabilities. The directors manage liquidity risk by maximising cash generation from its operations and short-term flexibility is achieved through the company's asset finance arrangements.

Credit risk

The company's main assets are it's hire fleet, stocks and debtors. The company's trade debtors relate to amounts owed by individuals, SME's and large national corporates. Given the current economic uncertainty, the directors and management carefully monitor any default credit risk on an ongoing basis.

We would like to thank, once again, our dedicated team members, suppliers, manufacturers and funding partners for their ongoing support.

ON BEHALF OF THE BOARD:

C Melling - Director

23 November 2021

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

PRINCIPAL ACTIVITY

The principal activity of the company in the year under review was that of the sale and lease of motor vehicles, including contract hire and rentals.

DIVIDENDS

The total distribution of dividends for the year ended 31 July 2021 will be £ 239,000 .

DIRECTORS

The directors shown below have held office during the whole of the period from 1 August 2020 to the date of this report.

C Melling

L Edwards

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.

ON BEHALF OF THE BOARD:

C Melling - Director

23 November 2021

Opinion

We have audited the financial statements of Melling Commercial Limited (the 'company') for the year ended 31 July 2021 which comprise the Income Statement, Other Comprehensive Income, Statement of Financial Position, 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 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 July 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 four, 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.

Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below:

- we identified the laws and regulations applicable to the company through discussions with directors and other management, focusing on those that had a direct effect on the financial statements or that had a fundamental effect on it's operations. Key laws and regulations that we identified included the UK Companies Act, tax legislation, employment legislation and Health and Safety regulations.

- we enquired of the directors and reviewed correspondence with HMRC for evidence of non-compliance with laws and regulations. We also reviewed controls the directors have in place to ensure compliance.

We assessed the susceptibility of the company's financial statements to material misstatement, including obtaining an understanding of how fraud might occur, by:

- making enquiries of management as to where they considered there was susceptibility to fraud, their knowledge of actual, suspected and alleged fraud; and

- considering the internal controls in place to mitigate risks of fraud and non-compliance with laws and regulations.

- performed analytical procedures to identify any unusual or unexpected relationships;

- tested journal entries to identify unusual transactions;

- assessed whether judgements and assumptions made in determining the accounting estimates were indicative of potential bias.

- we reviewed financial statements disclosures and tested to supporting documentation to assess compliance with relevant laws and regulations discussed above;

- we enquired of the directors about actual and potential litigation and claims.

Due to inherent limitations of an audit, there is an unavoidable risk that we may not have detected some material misstatements in the financial statements, even though we have properly planned and performed our audit in accordance with auditing standards. For example, as with any audit, there remained a higher risk of non-detection of irregularities, as these may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal controls. We are not responsible for preventing fraud or non-compliance with laws and regulations and cannot be expected to detect all fraud and non-compliance with laws and regulations.

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 B S Fairhurst BA (Hons) FCA (Senior Statutory Auditor)

for and on behalf of Fairhurst

Statutory Auditor

Chartered Accountants

Douglas Bank House

Wigan Lane

Wigan

Lancashire

WN1 2TB

23 November 2021

TURNOVER

18,364,556

11,699,162

Cost of sales

11,737,253

8,611,453

GROSS PROFIT

6,627,303

3,087,709

Administrative expenses

4,031,266

2,230,359

2,596,037

857,350

Other operating income

50,818

92,949

OPERATING PROFIT

4

2,646,855

950,299

Interest payable and similar expenses

5

581,113

257,304

PROFIT BEFORE TAXATION

2,065,742

692,995

Tax on profit

6

505,445

322,000

PROFIT FOR THE FINANCIAL YEAR

1,560,297

370,995

PROFIT FOR THE YEAR

1,560,297

370,995

OTHER COMPREHENSIVE INCOME

-

-

TOTAL COMPREHENSIVE INCOME FOR THE YEAR

1,560,297

370,995

FIXED ASSETS

Intangible assets

8

-

-

Tangible assets

9

15,055,668

8,280,248

15,055,668

8,280,248

CURRENT ASSETS

Stocks

10

59,456

57,675

Debtors

11

2,221,717

1,341,534

Cash at bank and in hand

1,833,619

968,718

4,114,792

2,367,927

CREDITORS

Amounts falling due within one year

12

10,952,105

5,739,082

NET CURRENT LIABILITIES

(6,837,313

)

(3,371,155

)

TOTAL ASSETS LESS CURRENT LIABILITIES

8,218,355

4,909,093

CREDITORS

Amounts falling due after more than one year

13

(4,231,440

)

(2,748,920

)

PROVISIONS FOR LIABILITIES

17

(1,217,445

)

(712,000

)

NET ASSETS

2,769,470

1,448,173

CAPITAL AND RESERVES

Called up share capital

18

100

100

Retained earnings

19

2,769,370

1,448,073

SHAREHOLDERS' FUNDS

2,769,470

1,448,173

The financial statements were approved by the Board of Directors and authorised for issue on 23 November 2021 and were signed on its behalf by:

C Melling - Director

Called up

share

Retained

Total

capital

earnings

equity

£

£

£

Balance at 1 August 2019

100

1,314,078

1,314,178

Changes in equity

Dividends

-

(237,000

)

(237,000

)

Total comprehensive income

-

370,995

370,995

Balance at 31 July 2020

100

1,448,073

1,448,173

Changes in equity

Dividends

-

(239,000

)

(239,000

)

Total comprehensive income

-

1,560,297

1,560,297

Balance at 31 July 2021

100

2,769,370

2,769,470

1.	STATUTORY INFORMATION

Melling Commercial Limited 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.

Financial Reporting Standard 102 - reduced disclosure exemptions

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

•

the requirements of Section 7 Statement of Cash Flows;

•

the requirement of paragraph 33.7.

Significant judgements and estimates

Preparation of the financial statements requires management to make significant judgements and estimates. The items in the financial statements where these judgements are estimates have been made include:

a) Useful economic lives

The useful economic lives of Vehicles on Rental are assessed as being in line with the underlying lease agreement. The useful economic lives of remaining fixed assets are assessed on an annual basis based on the latest available information. Management believe that the useful economic lives being used are still appropriate.

Turnover

Turnover represents the fair value of income received from the sale and rental of motor vehicles, excluding discounts and value added tax.

The company recognises revenue from the sales of stock items when the vehicles have been delivered and the title has passed.

The company recognises revenue from vehicle rentals on a straight line basis over the hire term.

Goodwill

Goodwill, being the amount paid in connection with the acquisition of the business in 2006, has been fully written down.

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 or, if held under a finance lease, over the lease term, whichever is the shorter.

Plant and machinery

-

20% on reducing balance

Fixtures and fittings

-

15% on reducing balance

Vehicles on rental

-

33% on cost and over the remaining term of the lease

Computer equipment

-

20% on reducing balance

Tangible fixed assets are stated at cost or valuation, less depreciation and impairment.

Impairment of assets

At each reporting date assets are reviewed to determine whether there is any indication that those assets have suffered an impairment loss. If there is an indication of possible impairment, the recoverable amount of any affected asset is estimated and compared with its carrying amount. If the estimated recoverable amount is lower, the carrying amount is reduced to its estimated recoverable amount, and an impairment loss is recognised immediately in the profit and loss.

Where an impairment loss subsequently reverses, the carrying amount of each asset is increased to the revised estimate of its recoverable amount, to the extent that the increased carrying amount does not exceed the carrying amount that would have been determined (net of depreciation) had no impairment loss been recognised for the asset in prior years. A reversal of an impairment loss is recognised as income immediately.

Government income

Government income relate to amounts receivable under the government furlough scheme and other COVID-19 awards.

Stocks

Stocks of motor vehicles for sale are valued at the lower of cost and estimated selling price less costs to sell.

Financial instruments

Trade and other debtors are initially recognised at the transaction price and thereafter stated at amortised cost using effective interest method, less impairment losses for bad and doubtful debts except where the effect of discounting would be immaterial. In such cases, the receivables are stated at cost less impairment losses for bad and doubtful debts.

Short term trade creditors are measured at transaction price. Financial liabilities that have no stated interest rate and are payable within one year shall be measured at the undiscounted amount due.

Related party loans have no stated interest rate, are payable on demand and are measured at the undiscounted amount due.

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 statement of financial position date.

Deferred tax

Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the statement of financial position 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.

Leasing commitments

Assets obtained under hire purchase contracts or finance leases are capitalised in the balance sheet. Those held under hire purchase contracts are depreciated over their estimated useful lives. Those held under finance leases are depreciated over their estimated useful lives or the lease term, whichever is the shorter.

The interest element of these obligations is charged to profit or loss over the relevant period. The capital element of the future payments is treated as a liability.

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

Short term employee benefits

Short-term employee benefits are recognised as an expense in the period in which they are incurred.

3.	EMPLOYEES AND DIRECTORS

2021

2020

£

£

Wages and salaries

669,719

479,290

Social security costs

4,003

5,714

673,722

485,004

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

2021

2020

Administration

21

18

2021

2020

£

£

Directors' remuneration

74,347

58,871

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

Money purchase schemes

1

1

4.	OPERATING PROFIT

The operating profit is stated after charging:

2021

2020

£

£

Depreciation - owned assets

272,283

17,506

Depreciation - assets on hire purchase contracts

2,599,988

1,325,555

Auditors' remuneration

9,750

9,500

5.

INTEREST PAYABLE AND SIMILAR EXPENSES

2021

2020

£

£

Hire purchase and other loans

581,113

257,304

6.

TAXATION

Analysis of the tax charge

The tax charge on the profit for the year was as follows:

2021

2020

£

£

Deferred tax:

Deferred tax

689,764

322,000

Underprovision of prior year

(184,319

)

-

Total deferred tax

505,445

322,000

Tax on profit

505,445

322,000

Reconciliation of total tax charge 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:

2021

2020

£

£

Profit before tax

2,065,742

692,995

Profit multiplied by the standard rate of corporation tax in the UK of 19% (2020 - 19%)

392,491

131,669

Effects of:

Expenses not deductible for tax purposes

297,980

266,556

Capital allowances in excess of depreciation

(690,471

)

(398,225

)

Deferred tax - prior year

(184,319

)

-

Deferred tax - current year

689,764

322,000

Total tax charge

505,445

322,000

7.

DIVIDENDS

2021

2020

£

£

Interim

239,000

237,000

8.	INTANGIBLE FIXED ASSETS

Goodwill

£

COST

At 1 August 2020

and 31 July 2021

50,000

AMORTISATION

At 1 August 2020

and 31 July 2021

50,000

NET BOOK VALUE

At 31 July 2021

-

At 31 July 2020

-

9.	TANGIBLE FIXED ASSETS

Fixtures

Plant and

and

Vehicles

Computer

machinery

fittings

on rental

equipment

Totals

£

£

£

£

£

COST

At 1 August 2020

37,218

151,256

9,002,904

47,036

9,238,414

Additions

979

22,550

17,190,676

11,901

17,226,106

Disposals

-

-

(9,207,061

)

-

(9,207,061

)

At 31 July 2021

38,197

173,806

16,986,519

58,937

17,257,459

DEPRECIATION

At 1 August 2020

20,457

72,652

837,580

27,477

958,166

Charge for year

1,801

12,850

2,852,516

5,104

2,872,271

Eliminated on disposal

-

-

(1,628,646

)

-

(1,628,646

)

At 31 July 2021

22,258

85,502

2,061,450

32,581

2,201,791

NET BOOK VALUE

At 31 July 2021

15,939

88,304

14,925,069

26,356

15,055,668

At 31 July 2020

16,761

78,604

8,165,324

19,559

8,280,248

The net book value of tangible fixed assets includes £ 13,117,786 (2020 - £ 8,165,324 ) in respect of assets held under hire purchase contracts.

10.

STOCKS

2021

2020

£

£

Stocks

59,456

57,675

11.

DEBTORS: AMOUNTS FALLING DUE WITHIN ONE YEAR

2021

2020

£

£

Trade debtors

1,076,407

952,355

Amounts owed by group undertakings

873,350

291,516

Other debtors

251,248

70,688

Prepayments

20,712

26,975

2,221,717

1,341,534

12.

CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR

2021

2020

£

£

Other loans (see note 14)

1,038,315

-

Hire purchase contracts (see note 15)

8,999,116

5,151,803

Trade creditors

270,412

244,166

Social security and other taxes

12,110

38,268

Other creditors

570,983

287,523

Directors' current accounts

901

105

Accrued expenses

60,268

17,217

10,952,105

5,739,082

13.

CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR

2021

2020

£

£

Other loans (see note 14)

580,067

-

Hire purchase contracts (see note 15)

3,651,373

2,748,920

4,231,440

2,748,920

14.

LOANS

An analysis of the maturity of loans is given below:

2021

2020

£

£

Amounts falling due within one year or on demand:

Other loans

1,038,315

-

Amounts falling due between one and two years:

Other loans

580,067

-