Midland Bearings Limited - Limited company accounts 23.2

REGISTERED NUMBER: 02839330 (England and Wales)

STRATEGIC REPORT, REPORT OF THE DIRECTORS AND

FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 JULY 2023

FOR

MIDLAND BEARINGS LIMITED

Page

Company Information

1

Strategic Report

2

Report of the Directors

4

Report of the Independent Auditors

5

Income Statement

8

Other Comprehensive Income

9

Balance Sheet

10

Statement of Changes in Equity

11

Cash Flow Statement

12

Notes to the Cash Flow Statement

13

Notes to the Financial Statements

14

DIRECTORS:

Mr P M Chesworth

Mrs C L Chesworth

SECRETARY:

Mr P M Chesworth

REGISTERED OFFICE:

Building 33

Second Avenue

Pensnett Trading Estate

Kingswinford

West Midlands

DY6 7UG

REGISTERED NUMBER:

02839330 (England and Wales)

AUDITORS:

Crombies Accountants Limited

34 Waterloo Road

Wolverhampton

WV1 4DG

The directors present their strategic report for the year ended 31 July 2023.

REVIEW OF BUSINESS

We aim to present a balanced and comprehensive review of the development and performance of the business during the year and its position at the year end. Our review is consistent with the size and non-complex nature of the business and is written in the context of the risks and uncertainties we face.

As for many businesses of our size, the business environment in which we operate continues to be challenging. We face competition from the UK and the import market.

Given the geographical coverage of the business, the directors have not experienced significant down-side implications resulting from the exit from the European Union and do not expect this to significantly impact the 2023 results.

PRINCIPAL RISKS AND UNCERTAINTIES

The board has overall responsibility for ensuring that risk is effectively managed. The risk management process is designed to identify, evaluate and manage the significant risks that the company faces.

Principal Risks

The principal risks and uncertainties facing the company are the turbulence in the financial markets, competition from the UK and abroad and changes in macro-economic conditions. Global market and economic conditions have been challenging, with tighter credit conditions and slower growth in most major economies during the last few years. Although signs of recovery exist, there are continued concerns about government austerity measures, bank debts, the availability and cost of credit and geographical issue that all contribute to increased market volatility.

With these risks and uncertainties in mind, we are aware that any plans for the future development of the business may be subject to unforeseen future events outside of our control.

Mitigation

The barriers for new entrants who specialise in the similar products continues to be very high. Despite this, the company continues to penetrate new territories and increase its product range with an increasing customer base. The directors are taking a cautious and steady approach to expansion into overseas markets. The directors see the expansion into new markets as a reduction in the risk of relying heavily on the UK market.

The company continues to be one of the largest importer and wholesaler of bearings in the UK.

KEY PERFORMANCE INDICATORS

We consider that our key performance indicators are those that communicate the financial performance and strength of the company, these being turnover, gross margin and profitability.

Turnover for the year has decreased by 17.2% compared with the previous year. Gross margin has also been squeezed from 47.5% to 45.9%.which is due in most part to increased prices of stock and wages and has also been impacted by the strength of the US dollar against Stirling.

The overall order book remains healthy, and the board believes that the continued investment in stock will strengthen the company's ability to increase market share.

FUTURE DEVELOPMENTS

The company has in recent years adopted a strategy to reduce risk by expanding into new overseas markets and investing in stock and capacity without the need for high levels of borrowing. This strategy continues to keep the company in a strong position during the pandemic as it is able to adjust capacity without the pressure to meet finance payments.

We anticipate the business environment will remain competitive and believe that the company is in a good financial position and that the risks that have been identified and are being well managed. With careful focus on new markets and new products, as well as continuing review of the state of the market and the activities of competitors, we are confident in the company's ability to maintain and build on the current position.

ON BEHALF OF THE BOARD:

Mr P M Chesworth - Director

2 April 2024

The directors present their report with the financial statements of the company for the year ended 31 July 2023.

DIVIDENDS

No dividends will be distributed for the year ended 31 July 2023.

DIRECTORS

The directors shown below have held office during the whole of the period from 1 August 2022 to the date of this report.

Mr P M Chesworth

Mrs C L Chesworth

STATEMENT OF DIRECTORS' RESPONSIBILITIES

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

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

-	select suitable accounting policies and then apply them consistently;

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

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

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

STATEMENT AS TO DISCLOSURE OF INFORMATION TO AUDITORS

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

AUDITORS

The auditors, Crombies Accountants Limited, will be proposed for re-appointment at the forthcoming Annual General Meeting.

ON BEHALF OF THE BOARD:

Mr P M Chesworth - Director

2 April 2024

Opinion

We have audited the financial statements of Midland Bearings Limited (the 'company') for the year ended 31 July 2023 which comprise the Income Statement, Other Comprehensive Income, Balance Sheet, Statement of Changes in Equity, Cash Flow Statement and Notes to the Cash Flow Statement, Notes to the Financial Statements, including a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 102 'The Financial Reporting Standard applicable in the UK and Republic of Ireland' (United Kingdom Generally Accepted Accounting Practice).

In our opinion the financial statements:

-	give a true and fair view of the state of the company's affairs as at 31 July 2023 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.

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

-the engagement partner ensured that the engagement team collectively had the appropriate competence, capabilities and skills to identify or recognise non-compliance with applicable laws and regulations;

-we identified the laws and regulations applicable to the company through discussions with directors and other management

-we focused on specific laws and regulations which we considered may have a direct material effect on the financial statements or the operations of the company, including the Companies Act 2006, taxation legislation and data protection, anti-bribery, employment, environmental (including Waste Electrical and Electronic Equipment recycling (WEE Regulations 2013) and health and safety legislation;

-we assessed the extent of compliance with the laws and regulations identified above through making enquiries of management and inspecting legal correspondence; and

-identified laws and regulations were communicated within the audit team regularly and the team remained alert to instances of non-compliance throughout the audit.

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.

To address the risk of fraud through management bias and override of controls, we:

-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; and

-investigated the rationale behind significant or unusual transactions.

In response to the risk of irregularities and non-compliance with laws and regulations, we designed procedures which included, but were not limited to:

-agreeing financial statement disclosures to underlying supporting documentation;

-enquiring of management as to actual and potential litigation and claims; and

-reviewing correspondence with HMRC, relevant regulators including the Health and Safety Executive, and the company's legal advisors.

There are inherent limitations in our audit procedures described above. The more removed that laws and regulations are from financial transactions, the less likely it is that we would become aware of non-compliance. Auditing standards also limit the audit procedures required to identify non-compliance with laws and regulations to enquiry of the directors and other management and the inspection of regulatory and legal correspondence, if any.

Material misstatements that arise due to fraud can be harder to detect than those that arise from error as they may involve deliberate concealment or collusion.

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.

Mark Fletcher (Senior Statutory Auditor)

for and on behalf of Crombies Accountants Limited

34 Waterloo Road

Wolverhampton

WV1 4DG

2 April 2024

TURNOVER

3

9,901,542

11,952,798

Cost of sales

5,353,978

6,279,234

GROSS PROFIT

4,547,564

5,673,564

Administrative expenses

385,398

3,519,973

4,162,166

2,153,591

Other operating income

-

7,789

OPERATING PROFIT

5

4,162,166

2,161,380

Interest receivable and similar income

5,583

16,658

4,167,749

2,178,038

Interest payable and similar expenses

6

149,691

398,442

PROFIT BEFORE TAXATION

4,018,058

1,779,596

Tax on profit

7

645,830

1,290,107

PROFIT FOR THE FINANCIAL YEAR

3,372,228

489,489

PROFIT FOR THE YEAR

3,372,228

489,489

OTHER COMPREHENSIVE INCOME

-

-

TOTAL COMPREHENSIVE INCOME FOR THE YEAR

3,372,228

Prior year adjustment

7,372,729

TOTAL COMPREHENSIVE INCOME SINCE LAST ANNUAL REPORT

7,862,218

FIXED ASSETS

Tangible assets

8

517,598

302,065

CURRENT ASSETS

Stocks

9

14,277,336

12,429,366

Debtors: amounts falling due within one year

10

3,433,184

2,900,754

Debtors: amounts falling due after more than one year

10

5,674,567

8,255,426

Investments

11

500,000

72,924

Cash at bank

804,526

923,691

24,689,613

24,582,161

CREDITORS

Amounts falling due within one year

12

1,399,358

4,508,371

NET CURRENT ASSETS

23,290,255

20,073,790

TOTAL ASSETS LESS CURRENT LIABILITIES

23,807,853

20,375,855

PROVISIONS FOR LIABILITIES

14

107,687

47,917

NET ASSETS

23,700,166

20,327,938

CAPITAL AND RESERVES

Called up share capital

15

88

88

Capital redemption reserve

16

12

12

Retained earnings

16

23,700,066

20,327,838

SHAREHOLDERS' FUNDS

23,700,166

20,327,938

The financial statements were approved by the Board of Directors and authorised for issue on 2 April 2024 and were signed on its behalf by:

Mr P M Chesworth - Director

Called up

Capital

share

Retained

redemption

Total

capital

earnings

reserve

equity

£

£

£

£

Balance at 1 August 2021

88

12,465,620

12

12,465,720

Prior year adjustment

-

7,372,729

-

7,372,729

As restated

88

19,838,349

12

19,838,449

Changes in equity

Profit for the year

-

489,489

-

489,489

Total comprehensive income

-

489,489

-

489,489

Balance at 31 July 2022

88

20,327,838

12

20,327,938

Changes in equity

Profit for the year

-

3,372,228

-

3,372,228

Total comprehensive income

-

3,372,228

-

3,372,228

Balance at 31 July 2023

88

23,700,066

12

23,700,166

Cash flows from operating activities

Cash generated from operations

1

4,271,822

(964,257

)

Interest paid

(149,691

)

(398,442

)

Tax paid

(3,990,822

)

(1,556,484

)

Net cash from operating activities

131,309

(2,919,183

)

Cash flows from investing activities

Purchase of tangible fixed assets

(331,783

)

(70,130

)

Sale of tangible fixed assets

6,999

-

Interest received

5,583

16,658

Net cash from investing activities

(319,201

)

(53,472

)

Cash flows from financing activities

Income from current asset investment

72,924

68,974

Film Investment

(500,000

)

-

Amount introduced by directors

495,803

811,109

Net cash from financing activities

68,727

880,083

Decrease in cash and cash equivalents

(119,165

)

(2,092,572

)

Cash and cash equivalents at beginning of year

2

923,691

3,016,263

Cash and cash equivalents at end of year

2

804,526

923,691

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

2023

2022

£

£

Profit before taxation

4,018,058

1,779,596

Depreciation charges

107,421

92,209

Loss on disposal of fixed assets

1,830

-

Finance costs

149,691

398,442

Finance income

(5,583

)

(16,658

)

4,271,417

2,253,589

Increase in stocks

(1,847,970

)

(2,973,052

)

Decrease in trade and other debtors

1,826,772

748,053

Increase/(decrease) in trade and other creditors

21,603

(992,847

)

Cash generated from operations

4,271,822

(964,257

)

2.	CASH AND CASH EQUIVALENTS

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

Year ended 31 July 2023

31.7.23

1.8.22

£

£

Cash and cash equivalents

804,526

923,691

Year ended 31 July 2022

31.7.22

1.8.21

£

£

Cash and cash equivalents

923,691

3,016,263

3.	ANALYSIS OF CHANGES IN NET FUNDS

At 1.8.22

Cash flow

At 31.7.23

£

£

£

Net cash

Cash at bank

923,691

(119,165

)

804,526

923,691

(119,165

)

804,526

Liquid resources

Current asset investments

72,924

427,076

500,000

72,924

427,076

500,000

Total

996,615

307,911

1,304,526

1.	STATUTORY INFORMATION

Midland Bearings 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.

Significant judgements and estimates

In the application of the company's accounting policies, the directors are required to make judgements, estimates and assumptions about he 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.

Revenue

Turnover

Turnover is recognised to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured. Turnover is measured as the fair value of the consideration received or receivable, excluding discounts, value added tax and other sales taxes.

Interest income

Interest income is recognised in the Income Statement using the effective interest method.

Tangible fixed assets

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

Fixtures and fittings

-

20% on reducing balance

Motor vehicles

-

25% on reducing balance

Computer equipment

-

33% on reducing balance

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 using the first-in, first-out method and includes all purchases, transport, and handling costs in bringing stocks to their present location and condition.

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.

TURNOVER

The turnover and profit before taxation are attributable to the one principal activity of the company.

An analysis of turnover by geographical market is given below:

2023

2022

£

£

United Kingdom

6,597,977

7,283,173

Europe

3,020,413

4,202,050

Rest of the World

283,152

467,575

9,901,542

11,952,798

4.	EMPLOYEES AND DIRECTORS

2023

2022

£

£

Wages and salaries

1,159,037

1,032,973

Social security costs

52,883

19,870

Other pension costs

48,378

126,088

1,260,298

1,178,931

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

2023

2022

Production and administration

30

29

2023

2022

£

£

Directors' remuneration

222,611

161,260

Directors' pension contributions to money purchase schemes

28,800

108,800

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

Money purchase schemes

2

2

Information regarding the highest paid director for the year ended 31 July 2023 is as follows:

2023

£

Emoluments etc

124,765

Pension contributions to money purchase schemes

14,400

5.	OPERATING PROFIT

The operating profit is stated after charging:

2023

2022

£

£

Hire of plant and machinery

3,709

3,736

Depreciation - owned assets

107,421

92,209

Loss on disposal of fixed assets

1,830

-

Auditors' remuneration

5,000

5,000

6.

INTEREST PAYABLE AND SIMILAR EXPENSES

2023

2022

£

£

Other interest

149,691

398,442

7.

TAXATION

Analysis of the tax charge

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

2023

2022

£

£

Current tax:

UK corporation tax

586,060

788,978

Under/over provision in

earlier years

-

526,752

Total current tax

586,060

1,315,730

Deferred tax

59,770

(25,623

)

Tax on profit

645,830

1,290,107

Reconciliation of total tax charge included in profit and loss

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

2023

2022

£

£

Profit before tax

4,018,058

1,779,596

Profit multiplied by the standard rate of corporation tax in the UK of 25% (2022 - 19%)

1,004,515

338,123

Effects of:

Expenses not deductible for tax purposes

3,063

190,492

Capital allowances in excess of depreciation

(52,889

)

-

Depreciation in excess of capital allowances

-

7,906

Adjustments to tax charge in respect of previous periods

-

526,752

Deferred tax charge

59,770

(25,623

)

Marginal relief

(111,449

)

-

Non-trading loan provision

(257,180

)

252,457

Total tax charge

645,830

1,290,107