Valspar Automotive (UK) Corporation Ltd - Limited company accounts 18.2

REGISTERED NUMBER: 03287388 (England and Wales)

STRATEGIC REPORT, REPORT OF THE DIRECTORS AND

FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2018

FOR

VALSPAR AUTOMOTIVE (UK) CORPORATION

LIMITED

Page

Company Information

1

Strategic Report

2

Report of the Directors

3

Report of the Independent Auditors

5

Income Statement

7

Statement of Comprehensive (Loss) / Income

8

Statement of Financial Position

9

Statement of Changes in Equity

10

Notes to the Financial Statements

11

DIRECTORS:

J J Miklich

J M Donchess

D H Karnstein

REGISTERED OFFICE:

Avenue One

Station Lane

Witney

Oxfordshire

OX28 4XR

REGISTERED NUMBER:

03287388 (England and Wales)

AUDITORS:

Bradshaw Johnson

Chartered Accountants

Statutory Auditor

Croft Chambers

11 Bancroft

Hitchin

Hertfordshire

SG5 1JQ

The directors present their strategic report for the year ended 31 December 2018.

The comparative period was a 15 month period from 1 October 2016 to 31 December 2017.

REVIEW OF THE BUSINESS

Turnover has decreased by 22% to £15,106,538 when compared to the prior period mainly due to the prior period being

a 15 month period.

The gross profit percentage has remained consistent at 30% in value terms but gross profit has decreased by £1,231,995

to £4,592,326.

Administrative expenses have decreased from £7,020,511 to £4,566,589.

The operating loss has decreased from £1,196,190 to a profit in 2018 of £25,737.

The main objectives for future trading are to continue to expand the turnover and increase profitability by improving the

gross margin and reducing overheads.

PRINCIPAL RISKS AND UNCERTAINTIES

The principal risks and uncertainties facing the company are competitive, financial and legislative. In the UK the

principal competitive risk relates to the percentage of our products sourced from non-UK manufacturing plants. Within

the UK we invoice in local currency but the majority of our product is sourced in Euros. In addition to risks relating to

foreign exchange, financial risks are principally credit and liquidity risks. There is a risk of customers being unable to

pay their obligations to the company. The paint we distribute is subject to standards which are continuously open to

revision. Any new directive may have a material impact on the ability of the company to market and distribute at a profit.

In addition, compliance imposes costs and failure to comply with these standards would have an adverse impact on the

ability of the company to operate.

The company monitors and manages these risks as follows:

Financial risks - the risk of foreign exchange exposure is managed at a corporate level by Sherwin Williams. In terms of

credit and liquidity risks we perform regular reviews of our customer accounts and credit limits at a local level.

Competitive risks - we manage our competitive risk by focusing on the quality of our product and maintaining good

relations with our customers and suppliers. We monitor our supply chain to ensure that we benefit from the best

available lead times.

Legislative risks - our product managers and our regulatory managers review legislation changes to ensure that we

comply with all regulatory matters.

ANALYSIS OF KEY PERFORMANCE INDICATORS

The Company measures its performance on a number of key performance indicators, including;

- increasing revenue and controlling costs - monthly review of results carried out by management;

- accurate monthly accounts closed by day of month end and balance sheet accounts reconciled by end of the following

month - monitored by corporate;

- statutory accounts filed on time and no penalties incurred - evidenced by filing date;

- tax returns filed on time and no penalties incurred - evidenced by filing date and;

- clean audit reports, both internal and external as evidenced by no material misstatements or audit qualifications -

evidenced by no misstatement.

ON BEHALF OF THE BOARD:

J J Miklich - Director

15 July 2019

The directors present their report with the financial statements of the company for the year ended 31 December 2018.

DIVIDENDS

No dividends were paid or declared during the year ended 31 December 2018 (2017 - £nil).

FUTURE DEVELOPMENTS

Future developments in the twelve months up to 31 December 2019 are focused on delivering sales, profitability and

growth whilst building strong customer relationships.

POST BALANCE SHEET EVENTS

There have not been any significant matters subsequent to the balance sheet date.

DIRECTORS

J J Miklich has held office during the whole of the period from 1 January 2018 to the date of this report.

Other changes in directors holding office are as follows:

J M Donchess and D H Karnstein were appointed as directors after 31 December 2018 but prior to the date of this report.

E N G Braggio and A J Mistysyn ceased to be directors after 31 December 2018 but prior to the date of this report.

DIRECTORS' LIABILITIES

The Company has granted an indemnity to one or more of its directors against liability in respect of proceedings brought

by third parties, subject to the conditions set out in section 234 of the Companies Act 2006. Such qualifying third party

indemnity provision remains in force as at the date of approving the directors' report.

GOING CONCERN

The company operates in a low growth market environment which is set to continue in 2019. The company continues to

manage its risk by developing innovation in its product range, and maintaining a very strong brand presence through

advertising and promotional literature spend. The company is financially sound and continues to have a strong customer

retention from its customer base who place a value on continuity of supply.

In assessing the appropriateness of the application of the going concern basis, the directors have considered the

uncertainties around the general economic environment, the current and future trading performance of the company and

the available cash. The directors have a reasonable expectation that the Company has adequate resources to continue in

operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in

preparing the financial statements.

The company is part of the Sherwin Williams Company, a company incorporated in the United States of America. The

company is a listed fortune 500 company and provides comfort in respect of the provision of financial support to this

company to assist in meeting liabilities as and when they fall due to the extent that money is not otherwise available to

meet such liabilities.

STATEMENT OF DIRECTORS' RESPONSIBILITIES

The directors are responsible for preparing the Strategic Report, the Report of the Directors and the financial statements

in accordance with applicable law and regulations.

Company law requires the directors to prepare financial statements for each financial year. Under that law the directors

have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting

Practice (United Kingdom Accounting Standards and applicable law), including Financial Reporting Standard 102 'The

Financial Reporting Standard applicable in the UK and Republic of Ireland'. Under company law the directors must not

approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the

company and of the profit or loss of the company for that period. In preparing these financial statements, the directors

are required to:

-	select suitable accounting policies and then apply them consistently;

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

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

The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the

company's transactions and disclose with reasonable accuracy at any time the financial position of the company and

enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for

safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud

and other irregularities.

STATEMENT AS TO DISCLOSURE OF INFORMATION TO AUDITORS

So far as the directors are aware, there is no relevant audit information (as defined by Section 418 of the Companies Act

2006) of which the company's auditors are unaware, and each director has taken all the steps that he ought to have taken

as a director in order to make himself aware of any relevant audit information and to establish that the company's

auditors are aware of that information.

AUDITORS

The auditors, Bradshaw Johnson, will be proposed for re-appointment at the forthcoming Annual General Meeting.

ON BEHALF OF THE BOARD:

J J Miklich - Director

15 July 2019

Opinion

We have audited the financial statements of Valspar Automotive (UK) Corporation Limited (the 'company') for the year

ended 31 December 2018 which comprise the Income Statement, Statement of Comprehensive (Loss) / 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 company's affairs as at 31 December 2018 and of its profit for the year then ended;

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

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

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law.

Our responsibilities under those standards are further described in the Auditors' responsibilities for the audit of the

financial statements section of our report. We are independent of the company in accordance with the ethical

requirements that are relevant to our audit of the financial statements in the UK, including the FRC's Ethical Standard,

and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit

evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Conclusions relating to going concern

We have nothing to report in respect of the following matters in relation to which the ISAs (UK) require us to report to

you where:

-	the directors' use of the going concern basis of accounting in the preparation of the financial statements is not appropriate; or

-

the directors have not disclosed in the financial statements any identified material uncertainties that may cast significant doubt about the company's ability to continue to adopt the going concern basis of accounting for a period of at least twelve months from the date when the financial statements are authorised for issue.

Other information

The directors are responsible for the other information. The other information comprises the information in the Strategic

Report and the Report of the Directors, but does not include the financial statements and our Report of the Auditors

thereon.

Our opinion on the financial statements does not cover the other information and, except to the extent otherwise

explicitly stated in our report, we do not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing

so, consider whether the other information is materially inconsistent with the financial statements or our knowledge

obtained in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or

apparent material misstatements, we are required to determine whether there is a material misstatement in the financial

statements or a material misstatement of the other information. If, based on the work we have performed, we conclude

that there is a material misstatement of this other information, we are required to report that fact. We have nothing to

report in this regard.

Opinions on other matters prescribed by the Companies Act 2006

In our opinion, based on the work undertaken in the course of the audit:

-	the information given in the Strategic Report and the Report of the Directors for the financial year for which the financial statements are prepared is consistent with the financial statements; and

-	the Strategic Report and the Report of the Directors have been prepared in accordance with applicable legal requirements.

Matters on which we are required to report by exception

In the light of the knowledge and understanding of the company and its environment obtained in the course of the audit,

we have not identified material misstatements in the Strategic Report or the Report of the Directors.

We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you

if, in our opinion:

-	adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us; or

-	the financial statements are not in agreement with the accounting records and returns; or

-	certain disclosures of directors' remuneration specified by law are not made; or

-	we have not received all the information and explanations we require for our audit.

Responsibilities of directors

As explained more fully in the Statement of Directors' Responsibilities set out on page 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.

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.

Neil Harding (Senior Statutory Auditor)

for and on behalf of Bradshaw Johnson

Chartered Accountants

Statutory Auditor

Croft Chambers

11 Bancroft

Hitchin

Hertfordshire

SG5 1JQ

19 July 2019

TURNOVER

3

15,106,538

19,355,978

Cost of sales

10,514,212

13,531,657

GROSS PROFIT

4,592,326

5,824,321

Distribution costs

15,470

7,865

Administrative expenses

4,551,119

7,012,646

4,566,589

7,020,511

OPERATING PROFIT/(LOSS)

6

25,737

(1,196,190

)

Interest receivable and similar income

7

22

-

25,759

(1,196,190

)

Interest payable and similar expenses

8

9,559

-

PROFIT/(LOSS) BEFORE TAXATION

16,200

(1,196,190

)

Tax on profit/(loss)

9

-

247,433

PROFIT/(LOSS) FOR THE FINANCIAL YEAR

16,200

(1,443,623

)

PROFIT/(LOSS) FOR THE YEAR

16,200

(1,443,623

)

OTHER COMPREHENSIVE INCOME

-

-

TOTAL COMPREHENSIVE INCOME/(LOSS) FOR THE YEAR

16,200

(1,443,623

)

FIXED ASSETS

Intangible assets

10

5,315,644

7,373,312

Tangible assets

11

610,820

553,851

5,926,464

7,927,163

CURRENT ASSETS

Stocks

12

2,207,403

2,311,379

Debtors

13

5,309,777

2,837,704

Cash at bank

51,760

11,334

7,568,940

5,160,417

CREDITORS

Amounts falling due within one year

14

2,564,145

2,172,521

NET CURRENT ASSETS

5,004,795

2,987,896

TOTAL ASSETS LESS CURRENT LIABILITIES

10,931,259

10,915,059

CAPITAL AND RESERVES

Called up share capital

16

601,801

601,801

Share premium

7,599,999

7,599,999

Retained earnings

2,729,459

2,713,259

SHAREHOLDERS' FUNDS

10,931,259

10,915,059

The financial statements were approved by the Board of Directors on 15 July 2019 and were signed on its behalf by:

J J Miklich - Director

Called up

share

Retained

Share

Total

capital

earnings

premium

equity

£

£

£

£

Balance at 1 October 2016

601,801

4,156,882

7,599,999

12,358,682

Changes in equity

Total comprehensive loss

-

(1,443,623

)

-

(1,443,623

)

Balance at 31 December 2017

601,801

2,713,259

7,599,999

10,915,059

Changes in equity

Total comprehensive income

-

16,200

-

16,200

Balance at 31 December 2018

601,801

2,729,459

7,599,999

10,931,259

1.	STATEMENT OF COMPLIANCE

Valspar Automotive (UK) Corporation Limited is a limited company incorporated in England. The registered

office is:

Avenue One

Station Lane

Witney

Oxfordshire

OX28 4XR

The Company's financial statements have been prepared in compliance with FRS 102 as it applies to the financial

statements for the year ended 31 December 2018.

2.	ACCOUNTING POLICIES

Basis of preparing the financial statements

The financial statements have been prepared in accordance with applicable accounting standards. The financial

statements are prepared in sterling.

Going concern

The financial statements have been prepared on a going concern basis as Sherwin-Williams, the ultimate parent

undertaking, has agreed to provide adequate support to enable the Company to meets its liabilities as they fall

due for a period of at least 12 months from the date of approval of these financial statements.

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 Section 33 Related Party Disclosures paragraph 33.7.

Significant judgements and estimates

The preparation of the financial statements requires management to make judgements, estimates and assumptions

that affect the amounts reported for assets and liabilities as at the statement of financial position date and the

amounts reported for revenues and expenses during the year. However, the nature of estimation means that actual

outcomes could differ from those estimates. The following judgements (apart from those involving estimates)

have had the most significant effect on amounts recognised in the financial statements.

Operating lease commitments

The Company, as a lessee, obtains use of property, plant and equipment. The classification of such leases as

operating or finance leases requires the Company to determine, based on an evaluation of the terms and

conditions of the arrangements, whether it retains or acquires the significant risks and rewards of ownership of

these assets and accordingly whether the lease requires an asset and liability to be recognised in the statement of

financial position.

Revenue recognition

Revenue is recognised to the extent that the Company obtains the right to consideration in exchange for its

performance. Revenue is measured at the fair value of the consideration received, excluding discounts, rebates,

VAT and other sales taxes or duty.

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.

Intangible assets

Intangible assets are measured at cost less accumulated amortisation.

Amortisation is charged so as to allocate the cost of intangibles over their estimated useful lives, using

straight-line method. The intangible assets are amortised over the following useful life:

Intellectual Property - 5 years

The carrying values of intangible fixed assets are reviewed for impairment when events or changes in

circumstances indicate the carrying value may not be recoverable.

Property, plant and equipment

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

Plant and machinery

-

33% on cost

Fixtures and fittings

-

33% on cost and 10% on cost

The carrying values of tangible fixed assets are reviewed for impairment when events or changes in

circumstances indicate the carrying value may not be recoverable.

Stocks

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

moving items.

Taxation

Taxation for the year comprises current 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 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 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 assessment 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 period 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 probate that they

will be recovered against the reversal of deferred tax liabilities or other future taxable profits.

Foreign currencies

Transactions in foreign currencies are initially recorded in the entity's functional currency by applying the spot

exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign

currencies are retranslated at the rate of exchange ruling at the statement of financial position date. All

differences are taken to the profit and loss account.

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.

Current taxation

Current tax is based on the taxable profit for the period and is provided at amounts expected to be paid (or

recovered) using the tax rates and laws that have been enacted or substantially enacted at the balance sheet date.

No consideration is receivable or payable in respect of losses surrendered or claimed by way of group relief.

Operating lease commitments

Rentals under operating leases are charged to the profit and loss account on a straight line basis over the lease

term. Lease incentives are recognised over the shorter of the lease term and the date of the next rent review.

Cash and cash equivalents

Cash and cash equivalents in the statement of financial position comprise cash at banks and in hand and short

term deposits with an original maturity date of three months or less.

Short-term debtors and creditors

Debtors and creditors with no stated interest rate and receivable or payable within one year are recorded at

transaction price. Any losses arising from impairment are recognised in the income statement in other operating

expense.

3.

TURNOVER

The turnover and profit (2017 - loss) before taxation are attributable to the one principal activity of the company.

An analysis of turnover by geographical market is given below:

Period

1.10.16

Year Ended

to

31.12.18

31.12.17

£

£

United Kingdom

13,954,724

16,879,963

Outside of the UK

1,151,814

2,476,015

15,106,538

19,355,978

4.	EMPLOYEES AND DIRECTORS

Year ended 31.12.18

Period 1.10.16 to 31.12.17

£

£

Wages and salaries

903,582

1,510,125

Social security costs

79,670

65,070

Other pension costs

45,551

48,683

1,028,803

1,623,878

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

Year ended 31.12.18

Period 1.10.16 to 31.12.17

Office administration

13

13

5.	DIRECTORS REMUNERATION

Directors' remuneration for the year ended 31 December 2018 and period ended 31 December 2017 have been

borne by the ultimate parent. The directors of the Company are also directors or officers of other companies

within the Sherwin-Williams group. The directors' services to the Company do not occupy a significant amount

of their time. As such, the directors do not consider that they have received any remuneration for their incidental

services to the Company for the year ended 31 December 2018 and period ended 31 December 2017. All

directors have retirement benefits accruing to them under pension schemes with Sherwin-Williams.

Share options in the ultimate parent undertaking are granted to the directors. During the year no directors

exercised share options (2017: nil).

6.	OPERATING PROFIT/(LOSS)

Year Ended 31.12.18

Period 1.10.16 to 31.12.17

£

£

Operating lease rentals

46,490

60,989

Depreciation - owned assets

395,156

414,220

Intellectual Property amortisation

2,057,668

2,572,085

Auditors' remuneration

20,142

16,640

Professional services

1,593

9,864

Foreign exchange differences

65,104

(167,851

)

7.

INTEREST RECEIVABLE AND SIMILAR INCOME

Period

1.10.16

Year Ended

to

31.12.18

31.12.17

£

£

Receivable on bank deposits

22

-

8.

INTEREST PAYABLE AND SIMILAR EXPENSES

Period

1.10.16

Year Ended

to

31.12.18

31.12.17

£

£

Bank interest

9,559

-

9.

TAXATION

Analysis of the tax charge

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

Period

1.10.16

Year Ended

to

31.12.18

31.12.17

£

£

Deferred tax

-

247,433

Tax on profit/(loss)

-

247,433

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:

Period

1.10.16

Year Ended

to

31.12.18

31.12.17

£

£

Profit/(loss) before tax

16,200

(1,196,190

)

Profit/(loss) multiplied by the standard rate of corporation tax in the UK of 19% (2017 - 19.400%)

3,078

(232,061

)

Effects of:

Expenses not deductible for tax purposes

-

6,684

Depreciation in excess of capital allowances

466,037

579,362

Group relief claimed for nil payment - current year

(469,115

)

(353,985

)

timing differences

Write off of deferred tax asset

-

247,433

Total tax charge

-

247,433

In his budget of 8 July 2015, the Chancellor announced reductions in the UK corporation tax rate to 18% with

effect from 1 April 2020.

A decision has been made across the group that deferred tax is not considered to be recoverable. The Company

has no unused tax losses or unused tax credits with an expiry date.

10.	INTANGIBLE FIXED ASSETS

Intellectual

Property

£

COST

At 1 January 2018

and 31 December 2018

10,288,341

AMORTISATION

At 1 January 2018

2,915,029

Amortisation for year

2,057,668

At 31 December 2018

4,972,697

NET BOOK VALUE

At 31 December 2018

5,315,644

At 31 December 2017

7,373,312

11.	TANGIBLE FIXED ASSETS

Fixtures

Plant and

and

machinery

fittings

Totals

£

£

£

COST

At 1 January 2018

2,844,857

132,008

2,976,865

Additions

452,125

-

452,125

At 31 December 2018

3,296,982

132,008

3,428,990

DEPRECIATION

At 1 January 2018

2,291,006

132,008

2,423,014

Charge for year

395,156

-

395,156

At 31 December 2018

2,686,162

132,008

2,818,170

NET BOOK VALUE

At 31 December 2018

610,820

-

610,820

At 31 December 2017

553,851

-

553,851

12.

STOCKS

31.12.18

31.12.17

£

£

Finished goods and goods

for resale

2,207,403

2,311,379

Inventories write downs recognised as an expense in the period amounts to £73,675 (2017 - £52,970).