Company registration number 894340 (England and Wales)
MERGON UK LIMITED
ANNUAL REPORT AND FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 MARCH 2022
MERGON UK LIMITED
COMPANY INFORMATION
Directors
Mr P Wareing
Mr P Beirne
(Appointed 2 March 2022)
Mr T Mullen
(Appointed 2 March 2022)
Ms A Beirne
(Appointed 2 March 2022)
Mr S O'Keeffe
(Appointed 2 March 2022)
Company number
894340
Registered office
Centurion Way, Roman Road Industrial Estate
Roman Road
Blackburn
BB1 2LD
Auditor
MHA Moore and Smalley
Richard House
9 Winckley Square
Preston
PR1 3HP
MERGON UK LIMITED
CONTENTS
Page
Strategic report
1 - 2
Directors' report
3
Directors' responsibilities statement
4
Independent auditor's report
5 - 7
Profit and loss account
8
Statement of comprehensive income
9
Balance sheet
10
Statement of changes in equity
11
Statement of cash flows
12
Notes to the financial statements
13 - 25
MERGON UK LIMITED
STRATEGIC REPORT
FOR THE PERIOD ENDED 31 MARCH 2022
- 1 -
The directors present the strategic report for the period ended 31 March 2022.
Fair review of the business
The business continues a strategy of customer and product diversification to mitigate the risks associated with significant customer dependence. The main risks to achieving the business strategy are continually assessed by the directors and actions taken to mitigate wherever necessary.
Principal risks and uncertainties
The period has seen the continuation of Covid-19 issues, the ongoing impacts of Brexit, the global disruption to the supply chain and the labour market and most latterly and most significantly the escalation of power prices brought on by increased global demand and the Russian invasion of Ukraine.
These remain significant risks to the business as does the inherent risk of price escalation and availability of material supplies which at the start of the new period is once again becoming evident.
The new period also starts with the onset of unprecedented general inflationary pressures on all business costs and in particular power, labour and material costs showing significant upwards movement.
The business will mitigate these risks by increased customer pricing as appropriate with the understanding that this in itself is a risk to the continuation of current customer activity levels.
Development and performance
The improved position which the business has worked towards in the immediate past has enabled the business to withstand the unprecedented pressures placed on it during the period without until recently recourse to customers. Pricing adjustments in the final months of the period have adjusted imbalances and will enable the business to continue to withstand external pressures.
On 2
nd
March 2022, as a result of the aquisition of the whole of the share capital of the business by Westcastle Topco Limited, the company became part of the Mergon Group of Companies a global leader in plastics manufacturing with operations in Ireland, USA, The Czechia and Mexico. This will further enhance Weltonhurst’s capabilities and provide additional support to enable the busines to meet its objectives.
Key performance indicators
·
Turnover:
this has increased by 45% to £19.1m (2020: £13.1m) due to an extension of the period from 12 months to 15 months and increased customer pricing in the final part of the period.
·
Gross Margin
: this has decreased to 12.3% (2020: 19.1%). Unprecedented increases in power costs during the period were not passed onto customers.
·
Operating profit after interest:
of £103k (2020: £1,143k). The decrease in operating profits reflects the impact of power pricing and property rental costs incurred for the first time this period.
·
Cash at bank:
£722k (2020: £705k). Ongoing attention to working capital management has enabled cash resources to be maintained at previous levels.
Faced with the ongoing current global pressures the business seeks to continue to strengthen its position and to build on previous improvements to maintain profitability in the coming year and the Directors continue to be confident that this can be achieved.
Other performance indicators
The continued welfare and safety of all employees is of major importance to the business. The Company achieved the Health and Safety standard ISO 18000 a number of years ago. This has been a significant influence in the setting of internal processes and controls targeted at annual reductions in the occurrence of employee accidents or injury.
MERGON UK LIMITED
STRATEGIC REPORT (CONTINUED)
FOR THE PERIOD ENDED 31 MARCH 2022
- 2 -
Mr P Wareing
Director
19 December 2022
MERGON UK LIMITED
DIRECTORS' REPORT
FOR THE PERIOD ENDED 31 MARCH 2022
- 3 -
The directors present their annual report and financial statements for the period ended 31 March 2022.
Principal activities
The principal activity of the company continued to be the manufacture and supply of blow moulded plastic items.
Results and dividends
The results for the period are set out on page 8.
Ordinary dividends were paid amounting to £668,447. The directors do not recommend payment of a further dividend.
Directors
The directors who held office during the period and up to the date of signature of the financial statements were as follows:
Mr P Wareing
Mr H A Cann
(Resigned 2 March 2022)
Mr A Hutchinson
(Resigned 2 March 2022)
Mr R S Watts
(Resigned 2 March 2022)
Mr P Beirne
(Appointed 2 March 2022)
Mr T Mullen
(Appointed 2 March 2022)
Ms A Beirne
(Appointed 2 March 2022)
Mr S O'Keeffe
(Appointed 2 March 2022)
Auditor
The auditor, MHA Moore and Smalley, is deemed to be reappointed under section 487(2) of the Companies Act 2006.
Strategic report
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 risk management objectives and policies, and future developments.
Statement of disclosure to auditor
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.
On behalf of the board
Mr P Wareing
Mr S O'Keeffe
Director
Director
19 December 2022
MERGON UK LIMITED
DIRECTORS' RESPONSIBILITIES STATEMENT
FOR THE PERIOD ENDED 31 MARCH 2022
- 4 -
The directors are responsible for preparing the annual report and the financial statements in accordance with applicable law and regulations.
Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the company and of the profit or loss of the company for that period. In preparing these financial statements, the directors are required to:
-
select suitable accounting policies and then apply them consistently;
-
make judgements and accounting estimates that are reasonable and prudent;
-
prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business.
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the company’s transactions and disclose with reasonable accuracy at any time the financial position of the company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
MERGON UK LIMITED
INDEPENDENT AUDITOR'S REPORT
TO THE MEMBERS OF MERGON UK LIMITED
- 5 -
Opinion
We have audited the financial statements of Mergon UK Limited (the 'company') for the period ended 31 March 2022 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 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 March 2022 and of its profit for the period 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.
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
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.
The other information comprises the information included in the annual report other than the financial statements and our auditor's report thereon. The directors are responsible for the other information contained within the annual report. 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. 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 course of 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.
MERGON UK LIMITED
INDEPENDENT AUDITOR'S REPORT (CONTINUED)
TO THE MEMBERS OF MERGON UK LIMITED
- 6 -
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'
r
eport for the financial period 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.
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 identifie
d
material misstatements in the strategic report or the directors'
r
eport
. We have nothing to report in respect of the following matters in relation to which 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
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 directors'
r
esponsibilities
s
tatement, 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.
Auditor's 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 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
.
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The specific procedures for this engagement and the extent to which these are capable of detecting irregularities, including fraud, are detailed below:
MERGON UK LIMITED
INDEPENDENT AUDITOR'S REPORT (CONTINUED)
TO THE MEMBERS OF MERGON UK LIMITED
- 7 -
Because of the field in which the client operates we identified that employment law, health and safety legislation and compliance with the UK Companies Act are the area
s
most likely to have a material impact on the financial statements.
Owing to the inherent limitations of an audit, there is an unavoidable risk that some material misstatements in the financial statements may not be detected, even though the audit is properly planned and performed in accordance with the ISAs (UK). For instance, the further removed non-compliance is from the events and transactions reflected in the financial statements, the less likely the auditor is to become aware of it or to recognise the non-compliance.
A further description of our responsibilities is available on the Financial Reporting Council’s website at: https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's 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.
Paul Locker (Senior Statutory Auditor)
For and on behalf of MHA Moore and Smalley
Chartered Accountants
Statutory Auditor
Richard House
9 Winckley Square
Preston
PR1 3HP
20 December 2022
MERGON UK LIMITED
PROFIT AND LOSS ACCOUNT
FOR THE PERIOD ENDED 31 MARCH 2022
- 8 -
Period
Year
ended
ended
31 March
31 December
2022
2020
Notes
£
£
Turnover
3
19,107,187
13,143,218
Cost of sales
(16,761,067)
(10,636,402)
Gross profit
2,346,120
2,506,816
Distribution costs
(281,876)
(195,798)
Administrative expenses
(1,973,471)
(1,296,375)
Other operating income
44,812
164,319
Operating profit
4
135,585
1,178,962
Interest payable and similar expenses
7
(32,291)
(36,164)
Operating profit after interest
103,294
1,142,798
Profit before taxation
103,294
1,142,798
Tax on profit
8
(75,018)
(176,520)
Profit for the financial period
28,276
966,278
The profit and loss account has been prepared on the basis that all operations are continuing operations.
MERGON UK LIMITED
STATEMENT OF COMPREHENSIVE INCOME
FOR THE PERIOD ENDED 31 MARCH 2022
- 9 -
Period
Year
ended
ended
31 March
31 December
2022
2020
£
£
Profit for the period
28,276
966,278
Other comprehensive income
-
-
Total comprehensive income for the period
28,276
966,278
MERGON UK LIMITED
BALANCE SHEET
AS AT
31 MARCH 2022
31 March 2022
- 10 -
2022
2020
Notes
£
£
£
£
Fixed assets
Tangible assets
10
2,668,494
2,733,990
Current assets
Stocks
11
1,799,535
1,448,737
Debtors
12
3,664,425
3,172,906
Cash at bank and in hand
721,669
705,480
6,185,629
5,327,123
Creditors: amounts falling due within one year
13
(4,442,250)
(3,065,251)
Net current assets
1,743,379
2,261,872
Total assets less current liabilities
4,411,873
4,995,862
Creditors: amounts falling due after more than one year
14
(11,463)
(44,299)
Provisions for liabilities
Deferred tax liability
16
251,538
176,520
(251,538)
(176,520)
Net assets
4,148,872
4,775,043
Capital and reserves
Called up share capital
18
1,371,250
1,357,250
Share premium account
2,965
2,965
Profit and loss reserves
2,774,657
3,414,828
Total equity
4,148,872
4,775,043
The financial statements were approved by the board of directors and authorised for issue on 19 December 2022 and are signed on its behalf by:
Mr P Wareing
Mr S O'Keeffe
Director
Director
Company Registration No. 894340
MERGON UK LIMITED
STATEMENT OF CHANGES IN EQUITY
FOR THE PERIOD ENDED 31 MARCH 2022
- 11 -
Share capital
Share premium account
Profit and loss reserves
Total
Notes
£
£
£
£
Balance at 1 January 2020
1,357,250
2,965
2,448,550
3,808,765
Period ended 31 December 2020:
Profit and total comprehensive income for the period
-
-
966,278
966,278
Balance at 31 December 2020
1,357,250
2,965
3,414,828
4,775,043
Period ended 31 March 2022:
Profit and total comprehensive income for the period
-
-
28,276
28,276
Issue of share capital
18
14,000
-
14,000
Dividends
9
-
-
(668,447)
(668,447)
Balance at 31 March 2022
1,371,250
2,965
2,774,657
4,148,872
MERGON UK LIMITED
STATEMENT OF CASH FLOWS
FOR THE PERIOD ENDED 31 MARCH 2022
- 12 -
2022
2020
Notes
£
£
£
£
Cash flows from operating activities
Cash generated from operations
23
290,877
146,919
Interest paid
(32,291)
(36,164)
Net cash inflow from operating activities
258,586
110,755
Investing activities
Purchase of tangible fixed assets
(218,365)
(377,981)
Proceeds on disposal of tangible fixed assets
12,940
Receipts arising from loans made
1,700
Net cash used in investing activities
(218,365)
(363,341)
Financing activities
Proceeds from issue of shares
14,000
Repayment of bank loans
(33,688)
Payment of finance leases obligations
(38,032)
(55,015)
Net cash used in financing activities
(24,032)
(88,703)
Net increase/(decrease) in cash and cash equivalents
16,189
(341,289)
Cash and cash equivalents at beginning of period
705,480
1,046,769
Cash and cash equivalents at end of period
721,669
705,480
MERGON UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 MARCH 2022
- 13 -
1
Accounting policies
Company information
Mergon UK Limited is a
private
company
limited by shares
incorporated in
England and Wales
.
The registered office is
Centurion Way, Roman Road Industrial Estate, Roman Road, Blackburn, BB1 2LD.
1.1
Reporting period
The financial statements for the current period covers the 15 month period from 1 January 2021 to 31 March 2022. The previous financial period covered the 12 month period from 1 January 2020 to 31 December 2020. As such, the two periods are not comparable. The accounting period end was amended for administrative reasons.
1.2
Accounting convention
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 a
mounts
in these financial statements are
rounded to the nearest £.
The financial statements have been prepared under the historical cost convention. The principal accounting policies adopted are set out below.
1.3
Going concern
The Company, as is the world economy, is faced with the challenges of significant inflation and in particular the uncertainties within the global power market, the potential impacts on the business of which the Directors have assessed against available cash, significant unused borrowing facilities and a strengthened balance sheet.
true
At the time of approving the financial statements, the Directors have a reasonable expectation that the company has adequate resources to continue for the foreseeable future and as a result continue to adopt the going concern basis of accounting in preparing the financial statements.
1.4
Turnover
Turnover is recognised at the fair value of the consideration received or receivable for goods and services provided in the normal course of business
, and
is shown net of VAT and other sales related taxes
.
The fair value of consideration takes into account trade discounts, settlement discounts and volume rebates.
Revenue from the sale of goods is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer
(usually on dispatch of the goods)
, the amount of revenue can be measured reliably, it is probable that the economic benefits associated with the transaction will flow to the entity and the costs incurred or to be incurred in respect of the transaction can be measured reliably.
1.5
Tangible fixed assets
Tangible fixed assets
are initially measured at cost and subsequently measured at cost, net of depreciation and any impairment losses.
MERGON UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE PERIOD ENDED 31 MARCH 2022
1
Accounting policies
(Continued)
- 14 -
Depreciation is recognised so as to write off the cost of assets less their residual values over their useful lives on the following bases:
Plant and machinery
5 - 25 years straight line
Fixtures, fittings, tools and equipment
4 - 12 years straight line
Motor vehicles
4 years straight line
Moulds
12 years straight line
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
.
1.6
Impairment of fixed assets
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.
1.7
Stocks
Stocks are stated at the lower of cost and estimated selling price less costs to complete and sell. Cost comprises direct materials and, where applicable, direct labour costs and those overheads that have been incurred in bringing the stocks to their present location and condition.
Stocks held for distribution at no or nominal consideration are measured at the lower of cost and replacement cost, adjusted where applicable for any loss of service potential.
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.
MERGON UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE PERIOD ENDED 31 MARCH 2022
1
Accounting policies
(Continued)
- 15 -
1.8
Cash and cash equivalents
Cash and cash equivalents
are basic financial assets
and
include cash in hand, deposits held at call with banks, other short-term liquid investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities.
1.9
Financial instruments
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
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.
Other financial assets
Other financial assets
are initially measured at fair value, which is normally the transaction price. Such assets are subsequently carried at fair value and the changes in fair value are recognised in
profit
or
loss
, except that investments in equity instruments that are not publicly traded and whose fair values cannot be measured reliably are measured at cost less impairment.
Impairment of financial assets
Financial assets, other than those
held
at
fair value through profit and loss
, are assessed for indicators of impairment at each reporting end date.
Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows have been affected.
If an asset is impaired, the impairment loss is the difference between the carrying amount and the present value of the estimated cash flows discounted at the asset’s original effective interest rate. The impairment loss is recognised in profit or loss.
If there is a decrease in the impairment loss arising from an event occurring after the impairment was recognised, the impairment is reversed. The reversal is such that the current carrying amount does not exceed what the carrying amount would have been, had the impairment not previously been recognised. The impairment reversal is recognised in profit or loss.
Derecognition of financial assets
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.
MERGON UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE PERIOD ENDED 31 MARCH 2022
1
Accounting policies
(Continued)
- 16 -
Classification of financial liabilities
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
Basic financial liabilities, including
creditors and
bank loans
,
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
paymen
ts 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. A
m
ounts payable are classified as
current liabilities if payment is due within one year or less. If not, they are presented
as non-current liabilities.
Trade creditors
are recognised initially at transaction price
and subsequently measured at amortised cost using the effective interest method.
Other financial liabilities
Derivatives
are not basic financial instruments. Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are
s
ubsequently re-measured at their fair value. Changes in the fair value of derivatives are recognised in
profit
or
loss
in finance costs or finance income as appropriate, unless hedge accounting is applied and the hedge is a cash flow hedge.
Debt instruments that do not meet the conditions in FRS 102 paragraph 11.9 are subsequently measured at fair value through profit or loss. Debt instruments may be designated as
being measured at
fair value th
r
ough profit or loss to eliminate or reduce an accounting mismatch or if the instruments are measured and their performance evaluated on a fair value basis in accordance with a documented risk management or investment strategy.
Derecognition of financial liabilities
Financial liabilities are derecognised when the company’s contractual obligations
expire or are discharged or cancelled.
1.10
Equity instruments
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.
1.11
Taxation
The tax expense represents the sum of the tax currently payable and deferred tax.
Current 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.
MERGON UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE PERIOD ENDED 31 MARCH 2022
1
Accounting policies
(Continued)
- 17 -
Deferred tax
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.
1.12
Employee benefits
The costs of short-term employee benefits are recognised as a liability and an expense, unless those costs are required to be recognised as part of the cost of stock or
fixed assets
.
The cost of any unused holiday entitlement is recognised in the period in which the employee’s services are received.
Termination benefits are recognised immediately as an expense when the company is demonstrably committed to terminate the employment of an employee or to provide termination benefits.
1.13
Retirement benefits
Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due.
1.14
Leases
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.
1.15
Government grants
Government grants are recognised at the fair value of the asset receive
d
or receivable when there is reasonable assurance that the grant conditions will be met and the grants will be received.
A grant that specifies performance conditions is recognised in income when the performance conditions are met
. Where a
grant does not specify performance conditions
it
is recognised in income when the proceeds are received or receivable
. A grant received before the recognition criteria are satisfied is recognised as a liability.
MERGON UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE PERIOD ENDED 31 MARCH 2022
1
Accounting policies
(Continued)
- 18 -
1.16
Foreign exchange
Transactions in currencies other than
pounds sterling
are recorded at the rates of exchange prevailing at the dates of the transactions. At each reporting end date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the reporting end date. Gains and losses arising on translation
in the period
are included in profit or loss.
2
Judgements and key sources of estimation uncertainty
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.
Critical judgements
The following judgements (apart from those involving estimates) have had the most significant
effect on amounts recognised in the financial statements.
Provision for slow moving and obsolete stock
The provision is calculated on an individual stock line basis, with due regard to previous and expected stock movements. The provision is reviewed and updated at each reporting date.
Useful economic life of tangible fixed assets
The useful economic life of tangible fixed assets is judged at the point of purchase and reviewed at each balance sheet date. Further details are provided within note 1.
5
to the financial statements.
Provision for irrecoverable trade debtors
At each balance sheet date, management undertake a review of the outstanding trade debtor 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 compared to approved credit terms and the status/progress of any ongoing communications with them.
MERGON UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE PERIOD ENDED 31 MARCH 2022
- 19 -
3
Turnover and other revenue
2022
2020
£
£
Other operating income
Grants received
44,812
164,319
2022
2020
£
£
Turnover analysed by geographical market
United Kingdom
18,839,414
12,917,425
Export
267,773
225,793
19,107,187
13,143,218
4
Operating profit
2022
2020
Operating profit for the period is stated after charging/(crediting):
£
£
Government grants
(44,812)
(164,319)
Fees payable to the company's auditor for the audit of the company's financial statements
18,820
11,200
Depreciation of owned tangible fixed assets
266,603
227,673
Depreciation of tangible fixed assets held under finance leases
17,258
21,762
5
Employees
The average monthly number of persons (including directors) employed by the company during the period was:
2022
2020
Number
Number
Production
105
100
Selling, distribution and administration
16
16
Total
121
116
Their aggregate remuneration comprised:
2022
2020
£
£
Wages and salaries
4,236,096
3,164,819
Social security costs
391,838
279,535
Pension costs
165,278
126,380
4,793,212
3,570,734
MERGON UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE PERIOD ENDED 31 MARCH 2022
- 20 -
6
Directors' remuneration
2022
2020
£
£
Remuneration for qualifying services
153,463
99,325
Company pension contributions to defined contribution schemes
9,746
7,588
163,209
106,913
The number of directors for whom retirement benefits are accruing under defined contribution schemes amounted to 1 (2020 - 1).
7
Interest payable and similar expenses
2022
2020
£
£
Interest on financial liabilities measured at amortised cost:
Interest on bank overdrafts and loans
32,291
36,164
8
Taxation
2022
2020
£
£
Deferred tax
Origination and reversal of timing differences
14,649
176,520
Changes in tax rates
60,369
Total deferred tax
75,018
176,520
The actual charge for the period can be reconciled to the expected charge for the period based on the profit or loss and the standard rate of tax as follows:
2022
2020
£
£
Profit before taxation
103,294
1,142,798
Expected tax charge based on the standard rate of corporation tax in the UK of 19.00% (2020: 19.00%)
19,626
217,132
Tax effect of expenses that are not deductible in determining taxable profit
2,532
7
Tax effect of utilisation of tax losses not previously recognised
(40,619)
Effect of change in corporation tax rate
60,369
Super deduction
(7,509)
Taxation charge for the period
75,018
176,520
MERGON UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE PERIOD ENDED 31 MARCH 2022
- 21 -
9
Dividends
2022
2020
£
£
Final paid
668,447
10
Tangible fixed assets
Plant and machinery
Fixtures, fittings, tools and equipment
Motor vehicles
Moulds
Total
£
£
£
£
£
Cost
At 1 January 2021
10,373,588
655,078
18,049
572,114
11,618,829
Additions
215,210
3,155
218,365
At 31 March 2022
10,588,798
658,233
18,049
572,114
11,837,194
Depreciation and impairment
At 1 January 2021
7,756,775
604,997
18,049
505,018
8,884,839
Depreciation charged in the period
261,431
15,410
7,020
283,861
At 31 March 2022
8,018,206
620,407
18,049
512,038
9,168,700
Carrying amount
At 31 March 2022
2,570,592
37,826
60,076
2,668,494
At 31 December 2020
2,616,813
50,081
67,096
2,733,990
The net carrying value of tangible fixed assets includes the following in respect of assets held under finance leases or hire purchase contracts.
2022
2020
£
£
Plant and machinery
87,440
217,583
11
Stocks
2022
2020
£
£
Raw materials and consumables
1,208,423
1,038,798
Finished goods and goods for resale
591,112
409,939
1,799,535
1,448,737
MERGON UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE PERIOD ENDED 31 MARCH 2022
- 22 -
12
Debtors
2022
2020
Amounts falling due within one year:
£
£
Trade debtors
3,398,962
3,031,292
Other debtors
1,700
Prepayments and accrued income
265,463
139,914
3,664,425
3,172,906
13
Creditors: amounts falling due within one year
2022
2020
Notes
£
£
Obligations under finance leases
15
26,401
31,597
Trade creditors
1,887,314
1,880,831
Amounts owed to group undertakings
668,447
Taxation and social security
318,850
626,164
Other creditors
613,668
53,319
Accruals and deferred income
927,570
473,340
4,442,250
3,065,251
Included within other creditors are amounts advanced under invoice discounting arrangements of £590,525 (2020: £nil). The facility within other creditors
is
secured by a charge over the
c
ompany’s book debts.
The
bank has a fixed and floating charge over the assets of the company.
Interest
rates
charged on bank loan
s are
at 3% above 3 month
LIBOR and 3.5% above base rate.
14
Creditors: amounts falling due after more than one year
2022
2020
Notes
£
£
Obligations under finance leases
15
11,463
44,299
MERGON UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE PERIOD ENDED 31 MARCH 2022
- 23 -
15
Finance lease obligations
2022
2020
Future minimum lease payments due under finance leases:
£
£
Within one year
27,417
31,597
In two to five years
11,574
44,299
38,991
75,896
Less: future finance charges
(1,127)
37,864
75,896
Finance lease payments represent rentals payable by the company for certain items of plant and machinery. Leases include purchase options at the end of the lease period, and no restrictions are placed on the use of the assets. All leases are on a fixed repayment basis and no arrangements have been entered into for contingent rental payments.
16
Deferred taxation
The following are the major deferred tax liabilities and assets recognised by the company and movements thereon:
Liabilities
Liabilities
2022
2020
Balances:
£
£
Accelerated capital allowances
437,995
297,172
Tax losses
(180,750)
(112,953)
Other short term timing differences
(5,707)
(7,699)
251,538
176,520
2022
Movements in the period:
£
Liability at 1 January 2021
176,520
Charge to profit or loss
75,018
Liability at 31 March 2022
251,538
MERGON UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE PERIOD ENDED 31 MARCH 2022
- 24 -
17
Retirement benefit schemes
2022
2020
Defined contribution schemes
£
£
Charge to profit or loss in respect of defined contribution schemes
165,278
126,380
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.
At the reporting date £21,076 (2020: £24,582) is included in other creditors.
18
Share capital
2022
2020
2022
2020
Ordinary share capital
Number
Number
£
£
Issued and fully paid
Ordinary of £1 each
1,371,250
1,357,250
1,371,250
1,357,250
On 11 February 2022 the company issued £14,000 Ordinary £1 Shares at par.
19
Operating lease commitments
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:
2022
2020
£
£
Within one year
397,864
50,538
Between two and five years
1,606,819
52,827
In over five years
296,250
2,300,933
103,365
20
Related party transactions
Remuneration of key management personnel
The remuneration of key management personnel is as follows.
2022
2020
£
£
Aggregate compensation
180,572
125,744
MERGON UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE PERIOD ENDED 31 MARCH 2022
20
Related party transactions
(Continued)
- 25 -
Other information
As a wholly owned subsidiary of Westcastle Topco Limited the directors have taken advantage of the exemption in FRS 102, Section 33 and have not disclosed related party transactions with other wholly-owned group undertakings.
21
Directors' transactions
During the period, a director was issued 10,000 Ordinary £1 Shares at par.
During the period a director's loan of £1,700 was repaid. The maximum outstanding balance was £1,700. The balance had £nil interest charged.
22
Ultimate controlling party
On 2 March 2022 the company was purchased by Westcastle Topco Limited, the parent company is considered to be Westcastle Topco Limited, a company incorporated in Jersey (registration number 130255). Its registered address is 22 Grenville Street, St Helier, Jersey, Channel Islands, JE4 8PX.
23
Cash generated from operations
2022
2020
£
£
Profit for the period after tax
28,276
966,278
Adjustments for:
Taxation charged
75,018
176,520
Finance costs
32,291
36,164
Depreciation and impairment of tangible fixed assets
283,861
249,435
Movements in working capital:
(Increase)/decrease in stocks
(350,798)
247,875
Increase in debtors
(491,519)
(118,228)
Increase/(decrease) in creditors
713,748
(1,411,125)
Cash generated from operations
290,877
146,919
24
Analysis of changes in net funds
1 January 2021
Cash flows
31 March 2022
£
£
£
Cash at bank and in hand
705,480
16,189
721,669
Obligations under finance leases
(75,896)
38,032
(37,864)
629,584
54,221
683,805
2022-03-31
2021-01-01
false
CCH Software
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Mr P Wareing
Mr H A Cann
Mr A Hutchinson
Mr R S Watts
Mr P Beirne
Mr T Mullen
Ms A Beirne
Mr S O'Keeffe
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