SILCOMS_LIMITED - Accounts

The directors present the strategic report for the year ended 31 March 2019.

The principal activities of the company in the year under review were those of the manufacture of high complexity components and assemblies for the aero-engine industry and, chain and conveyor systems used in the bakery, cereal and food processing, chemical and general processing industries.

Review of business

The directors aim to present a balanced and comprehensive review of the development and performance of the business during the year under review and its position at the year end.

In the period under review the company continued its main activities of manufacturing precision components and assemblies for the aerospace industry, and the manufacture, supply and maintenance of conveyor chains. The turnover of the two divisions was as follows:-

Aerospace experienced a reduction in sales as a result of scheduled orders being deferred by its major customer.

Chain and conveyor systems increased sales by 5%.

The gross profit margin reduced slightly to 12.2% (2018: 13.0%).

Distribution and administration costs were 1.9% (2018: 2.6%) and 9.4% (2018: 8.1%) of turnover respectively.

Administration costs include a non-recurring charge of £286k in respect of the equalisation of Guaranteed Minimum Pension (GMP) benefits which has been included in the profit and loss account as a past service charge.

Finance costs reduced by £55k and were 1.8% of turnover (2018: 1.8%).

Profit before tax and before the GMP equalisation charge was £151k (2018: £74k).

Cash flow

Cash and working capital management remain a priority for management and the current cash position is communicated daily to the directors. Management prepare rolling 13 week cash-flow forecasts to ensure that facilities are adequate to meet requirements.

During the year the company invested in additional capacity by acquiring a 5-axis machining centre to supply a new component to its major customer.

The company is a member of the North-West Aerospace Alliance and became a participant in the SC21 Competitiveness for Growth initiative which will increase costs in the short term but is expected to produce longer term benefits.

Operating risks

The directors review the performance of the business on a monthly basis with comprehensive management accounts and written reports from divisional directors and managers. The accounts and reports cover, amongst other things, customer activity, cash position and the financial performance of each division against budgets.

Financial risks

The company’s activities expose it to a number of financial risks including foreign currency risk, credit risk and liquidity risk.

Foreign currency risk

The company has both receipts and payments in $US, and payments in Euros. Fluctuations in the US$ exchange rate are partially hedged by matching the US$ assets and liabilities. The company purchases Euros at spot rates when required.

Credit risk

The company’s principal financial assets are bank balances, trade and other receivables. The credit risk is attributable to trade receivables which are hedged by the use of trade credit insurance. The company may, for relatively small amounts, extend trade credit to non-insured customers after appropriate credit checks have been made.

Liquidity risk

The company has an invoice discounting facility which provides access to funds for working capital. The cash position and availability of funds are monitored daily. A short-term 13 week cash flow forecast is regularly reviewed to ensure that the company has adequate funds available to meet future requirements.

Commercial risk

Some of the company’s long term agreements with its customers contain clauses that allow the customer to levy liquidated damages in the event of late delivery. The potential effect of this is mitigated by the inclusion of a cap on the amount of liquidated damages that could be levied, and by measuring delivery performance against customer requirements as part of the company’s management information system.

Pension scheme

The company sponsors a defined benefit pension scheme which was closed to future accrual on the 31st March 2006. Details of the funding position on the FRS102 basis are shown in the notes to the accounts. The funding position of the scheme can be significantly affected by movements in interest rates, investment returns and changes in actuarial assumptions.

The company does not engage specifically in research activity but does, through its engineering resource, continually review and develop its manufacturing processes to reduce waste and improve the quality of its products.

The company will continue to pursue its objective of being a centre of excellence for the production of complex aero-engine rings and invest in the manufacturing technology required to achieve that objective.

On behalf of the board

The directors present their annual report and financial statements for the year ended 31 March 2019.

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 9.

No ordinary dividends were paid. The directors do not recommend payment of a final dividend.

No preference dividends were paid.

The auditor, MHA Moore and Smalley, is deemed to be reappointed under section 487(2) of the Companies Act 2006.

The company has chosen in accordance with Companies Act 2006, s. 414C(11) to set out in the company's strategic report information required by Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008, Sch. 7 to be contained in the directors' report. It has done so in respect of financial instruments and future developments.

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.

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;

•     state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements;

•     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.

We have audited the financial statements of Silcoms Limited (the 'company') for the year ended 31 March 2019 which comprise the profit and loss account, the statement of comprehensive income, the balance sheet, the statement of changes in equity, the statement of cash flows 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 March 2019 and of its loss 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 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 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 members, as a body, for our audit work, for this report, or for the opinions we have formed.

The Profit And Loss Account has been prepared on the basis that all operations are continuing operations.

Silcoms Limited is a private company limited by shares incorporated in England and Wales. The registered office is Victoria Mill, Piggott Street, Farnworth, Bolton, BL4 9QN.

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 pound.

The financial statements have been prepared on the historical cost convention, including the exemption to use the fair value of the freehold land and buildings at the date of transition to FRS 102 as deemed cost, but modified to include the defined benefit pension liability which is stated as detailed in accounting policy 1.12. The principal accounting policies adopted are set out below.

Atruet the time of approving the financial statements, the directors have a reasonable expectation that the company has adequate resources to continue in operational existence for the foreseeable future. Thus the directors continue to adopt the going concern basis of accounting in preparing the financial statements.

Turnover is recognised at the fair value of the consideration received or receivable for goods 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.

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

Depreciation is recognised so as to write off the cost, deemed 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.

At the date of transition to FRS 102, the freehold land and buildings had a fair value of £960,000 based upon an external third party valuation. The group has taken the exemption to use the fair value of the freehold land and buildings at the date of transition as deemed cost under FRS 102 section 35.10(c).

At each reporting period end date, the company reviews the carrying amounts of its tangible 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.

Stock and work in progress are valued at the lower of cost and net realisable value, cost being defined as materials plus direct labour with an addition for production overheads where appropriate. Net realisable value is based on the estimated selling price after allowing for all future costs of disposal.

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 at bank and in hand 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.

The company does not have any non basic financial instruments.

Financial assets 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 and loans from fellow group 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 receipts 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 classified as payable in greater than one year are recognised initially at transaction price and subsequently measured at amortised cost using the effective interest method.

The company does not have any non-basic financial instruments.

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.

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 expenses when the company is demonstrably committed to terminate the employment of an employee or to provide termination benefits.

The company operates a defined benefit scheme which was closed to future benefits accrual on 31 March 2006. Contributions are made to fund ongoing administration costs, the Pension Protection Fund Levy, and to reduce the deficit. As the scheme is closed to benefits accruals there was no current service cost charged to the profit and loss account in the year, in respect of the defined benefit scheme.

The net interest is determined by multiplying the net defined benefit liability by the discount rate, taking into account any changes in the net defined benefit liability during the period as a result of contribution and benefit payments. The net interest is recognised in profit or loss as other finance revenue or cost.

Remeasurement changes comprise actuarial gains and losses, the effect of the asset ceiling and the return on the net defined benefit liability excluding amounts included in net interest. These are recognised immediately in other comprehensive income in the period in which they occur and are not reclassified to profit and loss in subsequent periods.

The defined net benefit pension asset or liability in the balance sheet comprises the present value of the defined benefit obligation (using a discount rate based on high quality corporate bonds), less the fair value of plan assets out of which the obligations are to be settled directly. Fair value is based on market price information, and in the case of quoted securities is the published bid price. The value of a net pension benefit asset is limited to the amount that may be recovered either through reduced contributions or agreed refunds from the scheme.

A contributory group stakeholder scheme was introduced on 1 April 2006. The company contributes to the stakeholder scheme are charged to the profit and loss account in the period in which they are incurred.

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 are charged on a straight line basis over the lease term.

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 are included in the profit and loss account for the period.

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 company's freehold land and buildings are wholly used in the normal course of business.

At the date of transition to FRS 102, the freehold land and buildings were measured at their fair value at 1 April 2014, which upon transition, had been interpreted as deemed cost. Subsequent additions of land and buildings are initially measured at cost.

The useful economic life of tangible fixed assets is judged at the point of purchase and is then re-assessed at each reporting date.

As standard, a useful economic life of 3 years is applied to motor vehicles, 5 years to computer equipment and capital tooling, 10 years for plant and machinery and 50 years for freehold buildings. Freehold land is not depreciated.

At each balance sheet date, management undertake an assessment of the carrying amounts of its tangible fixed assets based upon their knowledge of the assets to determine whether there is any indication that the assets have suffered an impairment loss. Where necessary, an impairment is recorded as an impairment loss.

The preference shares have been classified as equity within the accounts as they are redeemable by the company and not the shareholder.

At the inception of each lease, management undertake an assessment of the terms of the lease including the payments to be made over the life of the lease, the fair value of the asset subject to the lease, the length of the lease and whether the terms of the lease transfer substantially all of the risks and rewards of ownership.

Based on this assessment, management will determine whether the lease should be classified as a finance or operating lease.

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:

At each balance sheet date, management undertake a review of the outstanding debtors balances and estimate the balance that should either be impaired or provided against.

This calculation is based on the financial position of the customers, the historical speed of payment and any ongoing discussions.

In order to adhere to the criteria of FRS 102, Section 28 'Employee benefits', the company uses the services of an independent external actuary to deliver the calculation of the defined benefit scheme deficit as at the reporting date.

The valuation is dependant upon, and highly sensitive to, a number of key actuarial assumptions including the life expectancy, discount rate, price inflation rate, and deferred pension increase rate. Further details of the actuarial assumptions used in respect of the 2019 valuation are provided in note 21.

On 26 October 2018, a Lloyds Bank Court Judgment took place regarding how to take account of Guaranteed Minimum Pensions (“GMPs”) inequalities between men and women accrued between 1990 and 1997, which may result in higher payments due. The judgement indicated that there would be several methods to address removing the inequalities in the schemes affected and so each method at present comes with a certain amount of uncertainty.

According to our actuary’s assessment, the overall estimated impact is expected to be £286,000. This has been recognised as a past service cost in the profit and loss account for the current year.

There are a wide range of features that can impact on the cost of GMP equalisation and the model used by the actuary does not attempt to consider a number of possible complications. For example, the model relies on grouping members who have similar characteristics together and applying typical uplifts to the group as a whole.

At each balance sheet date, management undertake an assessment of the value at which stock items are held within the accounts.

Using the costs incurred against the stock items and the orders outstanding, an estimation is made by management as to whether the value of the stock is impaired and if a provision is required.

Recoverability of amounts due from group companies

The debtor balance due from group companies will most likely be settled through the declaring of a dividend by Silcoms Limited to its parent company. The directors have assessed that the company is likely to be able pay future dividends to be able to settle these debts. However the level of distributable reserves is dependent upon fluctuations in the actuarial valuation in the defined benefit pension scheme, over which there is a significant element of uncertainty involved.

An analysis of the company's turnover is as follows:

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 4 (2018 - 5).

The Finance Act 2016 announced a reduction in the rate of UK corporation tax to 17% from 1 April 2020. As at the balance sheet date, the reduction in the rate of corporation tax had been substantively enacted and therefore deferred tax has been provided at this rate.

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

In addition to the amount (credited)/charged to the profit and loss account, the following amounts relating to tax have been recognised directly in other comprehensive income:

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

At the date of transition to FRS 102, the freehold property had a fair value of £960,000 based upon an external third party valuation. The company took the exemption to use the fair value of the freehold property at the date of transition as deemed cost under FRS 102 section 35.10(c).

The carrying value of freehold land and buildings comprises land with a deemed cost of £480,000.

If revalued assets were stated on an historical cost basis rather than a fair value basis, the total amounts included would have been as follows:

Freehold land and buildings with a carrying amount of £912,000 have been pledged to secure borrowings of the company.

Included within the above bank borrowings is an invoice discounting facility and a bank loan.

The invoice discounting loan is secured by a fixed and floating charge over the assets of the company.

The bank loan is secured by a first legal charge over the property. The bank loan is repayable in variable monthly instalments.

The finance lease creditor is secured by the underlying assets to which it relates.

Deferred tax assets and liabilities are offset where the company has a legally enforceable right to do so. The following is the analysis of the deferred tax balances (after offset) for financial reporting purposes:

It is impractical to estimate the movement of the deferred tax asset relating to retirement obligations in the twelve months following the balance sheet date, due to the estimation uncertainty over the related obligations, which can only be assessed following the next balance sheet date. Furthermore as at the signing date of these financial statements, as the company has not finalised its capital expenditure programme for the coming year, an assessment as to the likely movement of other related timing differences cannot be made.

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:

The preference shares in issue are redeemable at the company's option and they do not have a redemption date.

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.

The company operates a defined benefit scheme for qualifying employees. The scheme was closed to future accrual of benefits with no linking of future benefits to future salary from 31 March 2006.

The pension scheme is currently showing a funding deficit. Due to this deficit, the company has put in place funding arrangements to restore solvency on the minimum funding requirements. During the year ended 31 March 2019 the company paid deficit contributions of £175,000. Deficit contributions of £322,000 are payable in the year ended 31 March 2020.

An actuarial valuation of the defined benefit scheme was last carried out by Mercer, independent qualified actuaries, as at 31 March 2014.

Assumed life expectations on retirement at age 65:

Amounts recognised in the profit and loss account

Amounts taken to other comprehensive income

The amounts included in the balance sheet arising from the company's obligations in respect of defined benefit plans are as follows:

Movements in the present value of defined benefit obligations

The defined benefit obligations arise from plans funded as follows:

Movements in the fair value of plan assets

The actual return on plan assets was £882,000 (2018 - £535,000).

Fair value of plan assets at the reporting period end

The directors of the company are considered to be the only key management personnel. Their remuneration, including employer's national insurance, is as follows:

During the year the company entered into the following transactions with related parties:

The company has taken advantage of the exemption permitted under Section 33 'Related Party Disclosures' paragraph 33.1A from disclosing transactions with the parent and ultimate parent companies.

The ultimate parent company is Bolton Engineering (Holdings) Limited, incorporated in England and Wales. It's registered office is Piggott Street, Farnworth, Bolton, Lancashire, BL4 9QN.

The smallest and largest group into which the company is consolidated is that of Bolton Engineering (Holdings) Limited. Copies of the consolidated accounts for this group are available and can be obtained from Companies House, Cardiff.