Company Registration No. 04839607 (England and Wales)
SPP Pumps Limited
Annual report and
group financial statements
for the year ended 31 December 2020
SPP Pumps Limited
Company information
Chairman
Sanjay Kirloskar
Directors
Sanjay Kirloskar
Alok Kirloskar
Pratap Shirke
Owen Shevlin
Robert Tichband
(Appointed 10 March 2020)
Secretary
Amit Naniwadekar
Speafi Secretarial Limited
Company number
04839607
Registered office
SPP Pumps Limited
Crucible Close
Mushet Industrial Park
Coleford
Gloucestershire
GL16 8PS
Independent auditor
Saffery Champness LLP
Suite C, Unex House
Bourges Boulevard
Peterborough
Cambridgeshire
PE1 1NG
SPP Pumps Limited
Contents
Page
Strategic report
1 - 3
Directors' report
4 - 6
Independent auditor's report
7 - 10
Group statement of comprehensive income
11
Group statement of financial position
12 - 13
Company statement of financial position
14
Group statement of changes in equity
15
Company statement of changes in equity
16
Group statement of cash flows
17
Notes to the financial statements
18 - 44
SPP Pumps Limited
Strategic report
For the year ended 31 December 2020
Page 1
The directors present the strategic report for the year ended 31 December 2020
for SPP Pumps Limited ("the Company") and its subsidiaries ("the Group").
Fair review of the business
The Covid-19 pandemic has been the dominating event of 2020. Lockdown measures introduced in the second quarter of the year saw a substantial worsening of the business environment. This had a considerable impact on the Group: customer sites shut down meaning that equipment could not be delivered or serviced; major projects were delayed; it became increasingly difficult to obtain materials from suppliers; borders closed preventing transportation of freight between countries
In order to safeguard the business and its employees, part of the workforce was placed on furlough and many others were asked to work from home. Production was maintained across the Group's sites, albeit at reduced capacity. On the whole, disruption to customers was minimal and operational performance was sustained. Market uncertainty prompted a review and assessment of the business, resulting in an extensive restructuring process affecting all areas of SPP. Although the primary aim was to protect the business through the downturn, it also provided the opportunity to analyse the long-term structure, effectiveness, and efficiency of the organisation.
In the context of such challenging circumstances, the Group has delivered a remarkably good set of financial results, achieving sales revenues of £78.7m and a profit before tax of £3.25m for the year. Gross margin has increased from 19.8% to 22.8%. Overheads and distribution costs have been tightly controlled. The results build on the progress made in 2019 and are underpinned by strong performances from the Energy, Industrial Fire, and Engineering Services Divisions.
SPP's balance sheet has strengthened during the course of the year. The level of gearing has reduced, primarily due to the repayment of a £4m bank loan, which has been made possible by a firm focus on debtor management and collection of aged debts. Liquidity has also improved, with net current assets increasing from £12.5m to £15.3m in the year. Overall, shareholder funds stand at £18.2m at year-end.
The outlook for the Group remains very encouraging. With a more streamlined organisational structure, healthy order book, continued focus on customer service, and an end to the pandemic in sight, the Board looks forward to 2021 with optimism.
Principal risks and uncertainties
Commodity risk
The price of oil fell appreciably in early 2020 as a result of Covid-19. However, it recovered to around $50 a barrel by the end of year, and there is optimism that the more stable Oil & Gas marketplace will result in improved orders for the Group.
Currency risk
Approximately 75% of the Group's sales are from outside the UK and from where many key components are sourced, with a significant portion denominated in US Dollars. Foreign exchange movements are an ongoing risk. The Group minimises this risk by hedging foreign currency transactions through forward contracts matched to specific orders.
SPP Pumps Limited
Strategic report (continued)
For the year ended 31 December 2020
Page 2
Credit risk
The challenges in the global economy have inevitably increased the credit risk to the Group. SPP controls its credit exposures carefully and does not anticipate any material impact on its financial performance as a result. The majority of customers in the sectors in which the Group operates are financially robust and this, together with the Group's own credit risk controls, have meant that the Group has not suffered any significant issues.
Liquidity risk
With market conditions being more changeable, the Group has focussed on controlling capital expenditure and working capital. There has been sound management of cash flow throughout the year. The Group continues to be backed by first class international banks and retains the facilities required to fully support the demands of the business.
Development and performance
The Group continues to develop markets, including in Central and Eastern Europe and the Middle East region. It continues to support and strengthen its brand image and reputation for product quality through industry accreditations, adherence to quality standards as well as marketing and exhibition activities.
Health and safety remains a key priority. The Group has reacted with care and agility to the challenges posed by Covid-19.
The uncertainty surrounding the effects of “Brexit” on the Group's business relationships in the EU has been mitigated with the UK and EU reaching a deal on trade and cooperation at the end of 2020. There will still be implications for SPP, for example the requirement for import and export authorisations and additional record-keeping to comply with preference rules. New procedures have been developed to ensure the transition is handled as smoothly as practically possible.
Kirloskar Brothers Limited (“KBL”), the Group's ultimate parent company, continues to offer strong support. The Group benefits from its close association with KBL and other members within the KBL group of companies.
The Board recognises the hard work and dedication of its employees, in what has been a difficult year due to the pandemic, and would like to thank them.
SPP is strongly positioned to benefit from the recovery in market confidence as and when it arrives, and in the meantime to improve its position by sound financial management and broadening of focus within its core business.
Overview of how the Board performed its duties
The Board continues to have regard to the interests of employees and other stakeholders when making decisions that it considers most likely to promote the success of the Company and Group in the long term.
Fundamentally, SPP is a manufacturer of pumps and pump packages. Like all commercial enterprises, the goal is to achieve a consistent pattern of superior value offering to its customers and better returns for its shareholders. It is therefore important for SPP to differentiate itself in the way that it creates and delivers value.
SPP Pumps Limited
Strategic report (continued)
For the year ended 31 December 2020
Page 3
In line with SPP's Mission Statement, by giving customers superior service and value, SPP will achieve sustainable growth, profitability and ensure long term future of the Group. This is underpinned by some key fundamental relationships:
Customers
SPP works collaboratively with its customers to provide security in their supply chain through world class products and services. Adding value for customers is at the heart of everything SPP does. This is achieved through regular customer visits and asking for honest feedback, which helps SPP improve its products and services. Due to the pandemic, contact with customers has been limited to telephone and electronic media for much of 2020, but relationships remained unaffected.
Suppliers
SPP works in partnership with its suppliers, actively involving them in its business and providing a basis for mutual prosperity.
Community
SPP works as an active member of the local community to provide security through employment, either direct or indirect, as well as volunteering and other social programmes.
Environment
SPP actively pursues an environmental policy that benefits and protects both the local community and the wider public at large.
Approved by the Board on ....................and signed on its behalf by:
Amit Naniwadekar
Company Secretary
1 February 2021
SPP Pumps Limited
Directors' report
For the year ended 31 December 2020
Page 4
The directors present their annual report and financial statements for the year ended 31 December 2020.
Principal activities
The principal activity of the Group are the design, manufacture, supply and service of pumps, pump packages and associated equipment.
Directors
The directors who held office during the year and up to the date of signature of the financial statements were as follows:
Sanjay Kirloskar
Alok Kirloskar
Pratap Shirke
Owen Shevlin
Robert Tichband
(Appointed 10 March 2020)
Results and dividends
The results for the year are set out on page 11.
The directors do not recommend the payment of a dividend.
Disabled persons
Applications for employment by disabled persons are fully and fairly considered having regard to the abilities of each applicant. Efforts are made to enable any employee who becomes disabled during employment to continue their career with the Group. Training, career development and promotion of disabled persons are, as far as reasonably practicable, identical to that of other employees who are not disabled.
Employee involvement
It is Group policy that there should be effective communication with all employees who, subject to practical and commercial considerations, should be consulted on and involved in decisions that affect their current jobs and future prospects. The achievement of this policy has to be treated flexibly in accordance with the varying circumstances and needs of companies in the Group but, in all cases, the emphasis is on communication at the local level.
The Group actively encourages the promotion of safe working conditions and the procedures and the development of practices which secure and enhance the health and welfare of employees at work.
Emissions and energy consumption
During the year, the Company emitted 493 tonnes of CO2e from activities involving the combustion of gas and consumption of fuel for the purposes of transport, and 279 tonnes of CO2e from the purchase of electricity for its own use. In aggregate it consumed 3.60 million kWh of energy. Greenhouse gas emissions were calculated using the UK Government GHG Conversion Factors for Company Reporting 2020. Energy usage data was gathered from a variety of sources, including utility bills for gas and electric, and mileage expenses and fuel card data for transport. The Company's intensity ratio, expressed as tonnes of CO2e per total £m of sales revenue, is 17.0.
SPP Pumps Limited
Directors' report (continued)
For the year ended 31 December 2020
Page 5
SPP understands the importance of playing its part in reducing energy consumption and how it sources energy supply to help protect the environment from future harm. The Company has started to roll out a programme of changing old style lighting to more energy efficient LED lighting at its main manufacturing site in Coleford. It is also using electricity sourced from renewable sources for this site as well as its service centre in Scotland. Options will be reviewed in 2021 for installing solar panels and reducing gas consumption.
Overseas branches
The Company has subsidiary companies in the USA and France; and overseas sales offices in the United Arab Emirates, Czech Republic, and the Netherlands.
Auditor
The auditors, Saffery Champness LLP, have indicated their willingness to continue in office.
Statement of directors' responsibilities
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 Group and Company, and of the profit or loss of the Group 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 Group’s and Company’s transactions and disclose with reasonable accuracy at any time the financial position of the Group and 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 Group and Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
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 auditor
of the Group 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 auditor
of the Group is
aware of that information.
SPP Pumps Limited
Directors' report (continued)
For the year ended 31 December 2020
Page 6
Going Concern
The Group’s business activities, together with the factors likely to affect its future development, its financial position, financial risk management objectives, details of its financial instruments, and its exposures to price, credit, liquidity and cash flow risk are described in the Strategic Report on pages 1 - 3. The Group has considerable financial resources together with a strong order book and long-term contracts with a number of customers and suppliers across different geographic areas and industries. As a consequence, the directors believe that the Group is well placed to manage its business risks successfully despite the current uncertain economic outlook. After making enquiries, the directors have a reasonable expectation that the Company and the Group have adequate resources to continue its operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the annual report and accounts.
The ultimate parent company remains supportive and has a good expectation that the Company and its subsidiaries have adequate resources to continue their operational existence for the foreseeable future.
By order of the Board
Amit Naniwadekar
Company Secretary
1 February 2021
SPP Pumps Limited
Independent auditor's report
To the members of SPP Pumps Limited
Page 7
Opinion
We have audited the financial statements of SPP Pumps Limited (‘the Parent Company’) and its subsidiaries (‘the Group’) for the year ended 31 December 2020 which comprise the Group statement of comprehensive income, the Group Statement of financial position, the Company statement of financial position, the Group statement of changes in equity, the Company statement of changes in equity, the Group 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 affairs of the Group and of the Parent Company as at 31 December 2020 and of the Group's 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.
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 Group and Parent 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 Group or Parent 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.
SPP Pumps Limited
Independent auditor's report (continued)
To the members of SPP Pumps Limited
Page 8
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.
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.
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 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.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the Group and its environment obtained in the course of the audit, we have not identified material misstatements in the Strategic report or the Directors’ Report.
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 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 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
Group's and the Parent C
ompany’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
Group or the Parent C
ompany or to cease operations, or have no realistic alternative but to do so.
SPP Pumps Limited
Independent auditor's report (continued)
To the members of SPP Pumps Limited
Page 9
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 is detailed below.
Identifying and assessing risks related to irregularities:
We assessed the susceptibility of the Group and Parent Company's financial statements to material misstatement and how fraud might occur, including through discussions with the directors, discussions within our audit team planning meeting, updating our record of internal controls and ensuring these controls operated as intended. We evaluated possible incentives and opportunities for fraudulent manipulation of the financial statements. We identified laws and regulations that are of significance in the context of the Group and Parent Company by discussions with directors and communication with component auditors, and by updating our understanding of the sector in which the Group and Parent Company operates.
Laws and regulations of direct significance in the context of the Parent Company include The Companies Act 2006, and UK Tax legislation including as it relates to research and development as well as similar laws and regulations prevailing in each country in which we identified a significant component.
Audit response to risks identified:
We considered the extent of compliance with these laws and regulations as part of our audit procedures on the related financial statement items including a review of financial statement disclosures. We reviewed the Parent Company's records of breaches of laws and regulations, minutes of meetings and correspondence with relevant authorities to identify potential material misstatements arising. We discussed the Parent Company's policies and procedures for compliance with laws and regulations with members of management responsible for compliance including the maintenance of industry accreditations.
During the planning meeting with the audit team, the engagement partner drew attention to the key areas which might involve non-compliance with laws and regulations or fraud, including those areas with a high risk of possible management manipulation including revenue recognition for Energy contracts and stock provisioning. We enquired of management whether they were aware of any instances of non-compliance with laws and regulations or knowledge of any actual, suspected or alleged fraud. We addressed the risk of fraud through management override of controls by testing the appropriateness of journal entries, and identifying and testing any significant transactions that were unusual or outside the normal course of business. We assessed whether judgements made in making accounting estimates gave rise to a possible indication of management bias. At the completion stage of the audit, the engagement partner's review included ensuring that the team had approached their work with appropriate professional scepticism and thus the capacity to identify non-compliance with laws and regulations and fraud.
SPP Pumps Limited
Independent auditor's report (continued)
To the members of SPP Pumps Limited
Page 10
As Group auditors, our assessment of matters relating to non-compliance with laws or regulations and fraud differed at Group and component level according to their particular circumstances. Our communications with component auditors included a request to identify instances of non-compliance with laws and regulations and fraud that could give rise to a material misstatement of the Group financial statements in addition to our risk assessment.
There are inherent limitations in the audit procedures described above and the further removed non-compliance with laws and regulations is from the events and transactions reflected in the financial statements, the less likely we would become aware of it. Also, the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery or intentional misrepresentations, or through collusion.
A further description of our responsibilities is available on the Financial Reporting Council's website at: 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
C
ompany’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
C
ompany’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
C
ompany and the
C
ompany’s members as a body, for our audit work, for this report, or for the opinions we have formed.
Alistair Hunt (Senior Statutory Auditor)
for and on behalf of Saffery Champness LLP
2 February 2021
Chartered Accountants
Statutory Auditors
Suite C, Unex House
Bourges Boulevard
Peterborough
Cambridgeshire
PE1 1NG
SPP Pumps Limited
Group statement of comprehensive income
For the year ended 31 December 2020
Page 11
2020
2019
Notes
£
£
Turnover
3
78,678,749
101,143,476
Cost of sales
(60,762,349)
(81,141,855)
Gross profit
17,916,400
20,001,621
Distribution costs
(6,037,892)
(7,322,008)
Administrative expenses
(10,676,229)
(11,479,138)
Other operating income
3
2,286,714
1,033,328
Operating profit
7
3,488,993
2,233,803
Interest receivable and similar income
13,641
2,435
Interest payable and similar expenses
8
(545,343)
(670,398)
Other gains and losses
9
295,003
326,497
Profit before taxation
3,252,294
1,892,337
Tax on profit
10
(222,207)
(291,906)
Profit for the financial year
3,030,087
1,600,431
Other comprehensive income
Currency translation differences
(318,495)
(158,514)
Total comprehensive income for the year
2,711,592
1,441,917
Profit for the financial year is all attributable to the owners of the parent Company.
Total comprehensive income for the year is all attributable to the owners of the parent Company.
SPP Pumps Limited
Group statement of financial position
As at 31 December 2020
Page 12
2020
2019
Notes
£
£
£
£
Fixed assets
Goodwill
11
68,029
92,246
Other intangible assets
11
187,194
253,861
Total intangible assets
255,223
346,107
Tangible assets
12
7,953,722
8,728,175
8,208,945
9,074,282
Current assets
Stocks
15
13,685,297
12,956,079
Debtors
16
26,078,797
33,087,632
Cash at bank and in hand
3,641,506
2,579,128
43,405,600
48,622,839
Creditors: amounts falling due within one year
17
(28,118,745)
(36,092,851)
Net current assets
15,286,855
12,529,988
Total assets less current liabilities
23,495,800
21,604,270
Creditors: amounts falling due after more than one year
18
(4,539,952)
(4,733,902)
Provisions for liabilities
22
(805,478)
(1,431,590)
Net assets
18,150,370
15,438,778
Capital and reserves
Called up share capital
24
3,000,000
3,000,000
Capital redemption reserve
50,000
50,000
Profit and loss reserves
15,100,370
12,388,778
Total equity
18,150,370
15,438,778
SPP Pumps Limited
Group statement of financial position (continued)
As at 31 December 2020
Page 13
The financial statements were approved by the board of directors and authorised for issue on 1 February 2021 and are signed on its behalf by:
01 February 2021
Alok Kirloskar
Director
Company Registration No. 04839607
SPP Pumps Limited
Company statement of financial position
As at 31 December 2020
31 December 2020
Page 14
2020
2019
Notes
£
£
£
£
Fixed assets
Tangible assets
12
3,657,344
4,370,738
Investments
13
1,382,688
382,688
5,040,032
4,753,426
Current assets
Stocks
15
9,282,555
7,995,012
Debtors
16
21,569,071
27,448,944
Cash at bank and in hand
1,600,602
2,128,786
32,452,228
37,572,742
Creditors: amounts falling due within one year
17
(23,747,596)
(29,990,060)
Net current assets
8,704,632
7,582,682
Total assets less current liabilities
13,744,664
12,336,108
Provisions for liabilities
22
(572,305)
(949,291)
Net assets
13,172,359
11,386,817
Capital and reserves
Called up share capital
24
3,000,000
3,000,000
Capital redemption reserve
50,000
50,000
Profit and loss reserves
10,122,359
8,336,817
Total equity
13,172,359
11,386,817
As permitted by s408 Companies Act 2006, the
c
ompany has not presented its own profit and loss account and related notes. The
c
ompany’s profit for the year was £1,785,542 (2019 : £489,991 profit).
The financial statements were approved by the board of directors and authorised for issue on 1 February 2021 and are signed on its behalf by:
01 February 2021
Alok Kirloskar
Director
Company Registration No. 04839607
SPP Pumps Limited
Group statement of changes in equity
For the year ended 31 December 2020
Page 15
Share capital
Capital redemption reserve
Profit and loss reserves
Total
£
£
£
£
Balance at 1 January 2019
3,000,000
50,000
10,946,861
13,996,861
Year ended 31 December 2019:
Profit for the year
-
-
1,600,431
1,600,431
Other comprehensive income:
Currency translation differences on overseas subsidiaries
-
-
(158,514)
(158,514)
Total comprehensive income for the year
-
-
1,441,917
1,441,917
Balance at 31 December 2019
3,000,000
50,000
12,388,778
15,438,778
Year ended 31 December 2020:
Profit for the year
-
-
3,030,087
3,030,087
Other comprehensive income:
Currency translation differences on overseas subsidiaries
-
-
(318,495)
(318,495)
Total comprehensive income for the year
-
-
2,711,592
2,711,592
Balance at 31 December 2020
3,000,000
50,000
15,100,370
18,150,370
SPP Pumps Limited
Company statement of changes in equity
For the year ended 31 December 2020
Page 16
Share capital
Capital redemption reserve
Profit and loss reserves
Total
£
£
£
£
Balance at 1 January 2019
3,000,000
50,000
7,846,826
10,896,826
Year ended 31 December 2019:
Profit and total comprehensive income for the year
-
-
489,991
489,991
Balance at 31 December 2019
3,000,000
50,000
8,336,817
11,386,817
Year ended 31 December 2020:
Profit and total comprehensive income for the year
-
-
1,785,542
1,785,542
Balance at 31 December 2020
3,000,000
50,000
10,122,359
13,172,359
SPP Pumps Limited
Group statement of cash flows
For the year ended 31 December 2020
Page 17
2020
2019
Notes
£
£
£
£
Cash flows from operating activities
Cash generated from/(absorbed by) operations
29
9,843,763
(2,455,648)
Interest paid
(545,343)
(670,398)
Corporation tax paid
(266,209)
(239,604)
Net cash inflow/(outflow) from operating activities
9,032,211
(3,365,650)
Investing activities
Purchase of tangible fixed assets
(566,698)
(208,243)
Proceeds on disposal of tangible fixed assets
6,099
-
Interest received
13,641
2,435
Net cash used in investing activities
(546,958)
(205,808)
Financing activities
Proceeds of new bank loans
-
17,200,000
Repayment of bank loans
(5,311,177)
(9,043,237)
Payment of finance leases obligations
(6,044)
(91,360)
Net cash (used in)/generated from financing activities
(5,317,221)
8,065,403
Net increase in cash and cash equivalents
3,168,032
4,493,945
Cash and cash equivalents at beginning of year
54,655
(4,482,434)
Effect of foreign exchange rates
23,932
43,144
Cash and cash equivalents at end of year
3,246,619
54,655
Relating to:
Cash at bank and in hand
3,641,506
2,579,128
Bank overdrafts included in creditors payable within one year
(394,887)
(2,524,473)
SPP Pumps Limited
Notes to the financial statements
For the year ended 31 December 2020
Page 18
1
Accounting policies
Company information
SPP Pumps Limited
(“the Company”)
is a
private
limited company incorporated in England and Wales.
The registered office is
SPP Pumps Limited, Crucible Close, Mushet Industrial Park, Coleford, Gloucestershire, GL16 8PS.
The Group consists of SPP Pumps Limited and all of its subsidiaries, as set out in Note 14.
1.1
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
Group
.
Monetary a
mounts
in these financial statements are
rounded to the nearest £.
The financial statements have been prepared under the historical cost convention, modified to include the revaluation of freehold properties and certain financial instruments at fair value. The principal accounting policies adopted are set out below.
1.2
Basis of consolidation
The
Group
financial statements incorporate those of SPP Pumps Limited and all of its subsidiaries (i
.
e
.
entities that the
G
roup controls through its power to govern the financial and operating policies so as to obtain economic benefits).
All financial statements are made up to 31 December 2020
.
Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with those used by other members of the
G
roup.
All intra-group transactions, balances and unrealised gains on transactions between
G
roup companies are eliminated on consolidation. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.
1.3
Going concern
At the time of approving the financial statements, the directors have a reasonable expectation that the
C
ompany
and Group
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.
SPP Pumps Limited
Notes to the financial statements (continued)
For the year ended 31 December 2020
1
Accounting policies (continued)
Page 19
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.
Turnover is recognised:
-
In respect of engineered products, when the risks and rewards of ownership of the goods have passed to the buyer in line with the terms of the agreed contract;
-
In respect of standard products, on shipment of completed product to the customer; and
-
In respect of spares and service work, to the extent that the company has obtained the right to consideration through its performance.
1.5
Research and development expenditure
Research expenditure is written off against profits in the year in which it is incurred. Identifiable development expenditure is capitalised to the extent that the technical, commercial and financial feasibility can be demonstrated
.
1.6
Intangible fixed assets - goodwill
Goodwill arising on the acquisition of subsidiary undertakings and businesses, representing any excess of the fair value of the consideration given over the fair value of the identifiable assets and liabilities acquired, is capitalised and written off on a straight line basis over its expected useful economic life, which is 10 years. Provision is made for any impairment.
1.7
Intangible fixed assets other than goodwill
Intangible assets - patents and trademarks
Patents and trademarks are included at cost and depreciated in equal annual instalments over a period of 10 years which is their estimated useful economic life.
Provision is made for any impairment.
Intangible assets - research and development
Development expenditure is
capitalised
where the directors are satisfied as to the technical, commercial and financial viability of individual projects. In such cases, the identifiable expenditure is capitalised as an intangible asset and amortised over the period during which the
Group
is expected to benefit. This period is between three and five years. Provision is made for any impairment.
1.8
Tangible fixed assets
Tangible fixed assets
are initially measured at cost and subsequently measured at cost or valuation, net of depreciation and any impairment losses.
The cost of tangible assets includes directly attributable incremental costs incurred in their acquisition and installation.
SPP Pumps Limited
Notes to the financial statements (continued)
For the year ended 31 December 2020
1
Accounting policies (continued)
Page 20
Depreciation is recognised so as to write off the cost or valuation of assets less their residual values over their useful lives on the following bases:
Freehold land and buildings
4% straight line basis
Leasehold improvements
5% to 20% straight line basis
Plant and equipment
5% to 33.33% straight line basis
Tooling and patterns
20% - 25% straight line basis
Motor vehicles
25% straight line basis
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 recognised in the income statement.
1.9
Fixed asset investments
I
n the
P
arent
C
ompany financial statements, investments in subsidiaries, associates and jointly controlled entities are initially measured at cost and subsequently measured at cost less any accumulated impairment losses.
A subsidiary is an entity controlled by the
Group. Control is
the power to govern the financial and operating policies of
the
entity so as to obtain benefits from its activities.
1.10
Stocks
Stocks are valued at the lower of cost and selling price less costs to sell, which is equivalent to the net realisable value. Cost includes all costs incurred in bringing each product to its present location and condition as follows:
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.
1.11
Cash at bank and in hand
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.
SPP Pumps Limited
Notes to the financial statements (continued)
For the year ended 31 December 2020
1
Accounting policies (continued)
Page 21
1.12
Financial instruments
The
G
roup 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
G
roup's statement of financial position when the
G
roup becomes party to the contractual provisions of the instrument.
Financial assets and liabilities are offset and 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, 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, including investments in equity instruments which are not subsidiaries, associates or joint ventures, 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.
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 Group after deducting all of its liabilities.
Basic financial liabilities
Basic financial liabilities, including creditors, bank loans
and
loans from fellow group
companies
, 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. 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 are recognised initially at transaction price and subsequently measured at amortised cost using the effective interest method.
SPP Pumps Limited
Notes to the financial statements (continued)
For the year ended 31 December 2020
1
Accounting policies (continued)
Page 22
Other financial liabilities
Other financial liabilities, including debt instruments that do not meet the definition of a basic financial instrument, are measured at fair value through profit or loss.
Derivatives, including interest rate swaps and forward foreign exchange contracts,
are not basic financial instruments. Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently 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 may be designated as
being measured at
fair value though 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.
1.13
Equity instruments
Equity instruments issued by the Group 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 Group.
1.14
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 income statement 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
Group’s
liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting end date.
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. Where items recognised in other comprehensive income or equity are chargeable to or deductible for tax purposes, the resulting current or deferred tax expense or income is presented in the same component of comprehensive income or equity as the transaction or other event that resulted in the tax expense or income. Deferred tax assets and liabilities are offset when the
Group
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.
SPP Pumps Limited
Notes to the financial statements (continued)
For the year ended 31 December 2020
1
Accounting policies (continued)
Page 23
1.15
Provisions
Provisions are recognised when the
Group
has a legal or constructive present obligation as a result of a past event, it is probable that the
Group
will be required to settle that obligation and a reliable estimate can be made of the amount of the obligation.
Warranty
The Group provides for its estimated liability on the warranties given on the sale of products based on experience of past claims on the sales of products from different business units.
1.16
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.
1.17
Retirement benefits
Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due.
1.18
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 statement of financial position 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,
including
any lease incentives received, are charged to
profit or loss
on a straight line basis over the term of the relevant lease except where another more systematic basis is more representative of the time pattern in which economic benefits from the lease
d
asset are consumed.
1.19
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.
SPP Pumps Limited
Notes to the financial statements (continued)
For the year ended 31 December 2020
1
Accounting policies (continued)
Page 24
1.20
Foreign exchange
Transactions in foreign currencies are recorded at the rate of exchange at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are reported at the rates of exchange prevailing at that date
.
The results of overseas operations are translated at the average rates of exchange during the year and their balance sheets at the rates ruling at the balance sheet date. Exchange differences arising on translation of the opening net assets and results of overseas operations are reported in other comprehensive income and accumulated in equity (attributed to non-controlling interests as appropriate)
.
Other exchange differences are recognised in profit or loss in the period in which they arise except for:
-
exchange differences arising on gains or losses on non-monetary items which are recognised in other comprehensive income; and
-
in the case of the consolidated financial statements, exchange differences on monetary items receivable from or payable to a foreign operation for which settlement is neither planned nor likely to occur (therefore forming part of
the net investment in the foreign operation), which are recognised in other comprehensive income and reported under equity
.
2
Critical accounting judgements and key sources of estimation uncertainty
In the application of the Group’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.
Key sources of estimation uncertainty
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.
Deferred tax asset
The Group has recognised a deferred tax asset in its balance sheet in respect of tax losses available for use against future taxable profits. The directors have considered the budgets, pipelines and order book in estimating the corporation tax losses to be recognised in the financial statements.
SPP Pumps Limited
Notes to the financial statements (continued)
For the year ended 31 December 2020
Page 25
3
Turnover and other revenue
2020
2019
£
£
Turnover analysed by class of business
Engineered Products
19,314,119
42,970,692
Standard Products
42,210,513
41,649,674
Spares and Servicing
17,154,117
16,523,110
78,678,749
101,143,476
Grants received relating to Coronavirus Job Retention Scheme
1,040,234
-
Coronavirus Aid, Releif and Economic Security (CARES) Act US grant income
1,140,211
-
Rental Income
2,325
5,471
Royalties
56,916
81,618
Other
47,028
946,239
2,286,714
1,033,328
2020
2019
£
£
Turnover analysed by geographical market
United Kingdom
19,295,424
16,554,124
North America
23,116,776
27,281,764
South East Asia and Australia
9,600,760
13,429,102
Europe
6,274,114
9,056,954
Middle East
9,430,852
14,255,369
Rest of World
10,960,823
20,566,163
78,678,749
101,143,476
SPP Pumps Limited
Notes to the financial statements (continued)
For the year ended 31 December 2020
Page 26
4
Auditor's remuneration
2020
2019
Fees payable to the Company's auditor and associates:
£
£
For audit services
Audit of the financial statements of the Group and Company
41,810
35,000
Audit Over-runs
-
7,500
For other services
Interim assurance reviews
15,167
15,000
Taxation compliance services
10,460
9,500
Tax advisory services
8,540
3,700
Other Advisory services
12,665
4,100
Accounts preparation services
5,230
7,500
93,872
82,300
Fees payable to non associates for the audit of the financial statements of the company's subsidiaries amounted to £98,093 (2019: £98,409).
5
Employees
The average monthly number of persons (including directors) employed by the Group during the year was:
2020
2019
Number
Number
Mangement and administration
57
59
Manufacturing
240
270
Sales and distribution
89
104
386
433
SPP Pumps Limited
Notes to the financial statements (continued)
For the year ended 31 December 2020
5
Employees (continued)
Page 27
Their aggregate remuneration comprised:
2020
2019
£
£
Wages and salaries
16,220,348
17,310,319
Social security costs
1,432,722
1,528,393
Pension costs
789,572
822,672
18,442,642
19,661,384
6
Directors' remuneration
2020
2019
£
£
Remuneration for qualifying services
513,694
371,181
Company pension contributions to defined contribution schemes
26,610
8,471
540,304
379,652
The number of directors for whom retirement benefits are accruing under defined contribution schemes amounted to 2 (2019 - 1).
Remuneration disclosed above includes the following amounts paid to the highest paid director:
2020
2019
£
£
Remuneration for qualifying services
189,351
165,120
Company pension contributions to defined contribution schemes
9,060
8,471
There are no key management personnel other than the directors.
SPP Pumps Limited
Notes to the financial statements (continued)
For the year ended 31 December 2020
Page 28
7
Operating profit
2020
2019
£
£
Operating profit for the year is stated after charging:
Research and development costs
-
174,550
Depreciation of owned tangible fixed assets
1,235,148
1,102,420
Loss on disposal of tangible fixed assets
1,201
-
Amortisation of intangible assets
80,611
83,077
Operating lease charges
835,552
823,190
8
Interest payable and similar expenses
2020
2019
£
£
Interest on financial liabilities measured at amortised cost:
Interest on bank overdrafts and loans
544,061
613,193
Interest on finance leases and hire purchase contracts
-
2,195
Interest payable to group undertakings
-
39,813
Other interest on financial liabilities
1,282
15,197
545,343
670,398
SPP Pumps Limited
Notes to the financial statements (continued)
For the year ended 31 December 2020
Page 29
9
Other gains and losses
2020
2019
£
£
Fair value gains/(losses) on financial instruments
Gain on hedge item in a fair value hedge
295,003
326,497
The Company hedges all sales and purchase orders
above £10,000
denominated in US Dollars and Euros using forward contracts with expiry dates to match the expected dates of cash receipt and payment. This is an effective strategy to minimise the risk of foreign exchange movements. The Company has very little trade in other currencies.
The reported currency movement arises mainly because forward contracts are taken out when a sales order is received. For Engineered Products, there is often a significant lead time between receiving an order and the invoicing of that order, so at any point in time, there is a significant value of forward contracts for un-invoiced sales orders. At the year-end, approximately half of all forward contracts refer to orders not invoiced. However, FRS102 requires the
Group
to value all forward contract liabilities, even where the corresponding asset is not yet included in the
Group's
balance sheet, as the work is not yet invoiced.
The reported profit/loss on currency valuation is mainly a notional accounting adjustment and for individual trades the calculated profit/loss will reverse as the sales orders are invoiced and as cash is ultimately received.
The Company’s subsidiary companies do not have any significant foreign currency transactions.
SPP Pumps Limited
Notes to the financial statements (continued)
For the year ended 31 December 2020
Page 30
10
Taxation
2020
2019
£
£
Current tax
UK corporation tax on profits for the current period
188,021
24,347
Adjustments in respect of prior periods
(67,475)
(11,580)
Total UK current tax
120,546
12,767
Foreign current tax on profits for the current period
-
396,003
Adjustments in respect of prior periods
-
(146,210)
Total current tax
120,546
262,560
Deferred tax
Origination and reversal of timing differences
309,017
29,346
Changes in tax rates
(120,874)
-
Adjustment in respect of prior periods
(86,482)
-
Total deferred tax
101,661
29,346
Total tax charge
222,207
291,906
SPP Pumps Limited
Notes to the financial statements (continued)
For the year ended 31 December 2020
10
Taxation (continued)
Page 31
The actual charge for the year can be reconciled to the expected charge for the year based on the profit or loss and the standard rate of tax as follows:
2020
2019
£
£
Profit before taxation
3,252,294
1,892,337
Expected tax charge based on the standard rate of corporation tax in the UK of 19.25% (2019: 19.00%)
626,067
359,544
Tax effect of expenses that are not deductible in determining taxable profit
26,108
67,408
Adjustments in respect of prior years
(67,233)
(177,918)
Research and development tax credit
(13,669)
(17,209)
Deferred tax adjustments in respect of prior years
(86,725)
(24,459)
Effect of overseas branch exemption
10,430
24,347
Other
(175,128)
45,109
Difference in tax rates
(97,643)
15,084
Taxation charge
222,207
291,906
The Groups overseas tax rates are higher than those in the UK. The US main federal tax rate was 21% (2019: 21%).
SPP Pumps Limited
Notes to the financial statements (continued)
For the year ended 31 December 2020
Page 32
11
Intangible fixed assets
Group
Goodwill
Patents and trademarks
Total
£
£
£
Cost
At 1 January 2020
221,373
732,961
954,334
Exchange adjustments
(6,571)
(20,180)
(26,751)
At 31 December 2020
214,802
712,781
927,583
Amortisation and impairment
At 1 January 2020
129,127
479,100
608,227
Amortisation charged for the year
21,479
59,132
80,611
Exchange adjustments
(3,833)
(12,645)
(16,478)
At 31 December 2020
146,773
525,587
672,360
Carrying amount
At 31 December 2020
68,029
187,194
255,223
At 31 December 2019
92,246
253,861
346,107
The company had no intangible fixed assets at 31 December 2020 or 31 December 2019.
SPP Pumps Limited
Notes to the financial statements (continued)
For the year ended 31 December 2020
Page 33
12
Tangible fixed assets
Group
Freehold land and buildings
Leasehold improvements
Plant and equipment
Tooling and patterns
Motor vehicles
Total
£
£
£
£
£
£
Cost
At 1 January 2020
7,988,571
532,730
12,109,143
1,539,926
63,559
22,233,929
Additions
30,310
-
517,439
48,949
-
596,698
Disposals
-
-
(46,829)
-
-
(46,829)
Exchange adjustments
(131,460)
(2,645)
(70,839)
1,538
1,263
(202,143)
At 31 December 2020
7,887,421
530,085
12,508,914
1,590,413
64,822
22,581,655
Depreciation and impairment
At 1 January 2020
2,092,089
272,492
9,728,592
1,352,270
60,311
13,505,754
Depreciation charged in the year
210,690
229,284
700,888
90,850
3,436
1,235,148
Eliminated in respect of disposals
-
-
(39,529)
-
-
(39,529)
Exchange adjustments
(21,365)
(1,670)
(52,794)
1,314
1,075
(73,440)
At 31 December 2020
2,281,414
500,106
10,337,157
1,444,434
64,822
14,627,933
Carrying amount
At 31 December 2020
5,606,007
29,979
2,171,757
145,979
-
7,953,722
At 31 December 2019
5,896,482
260,238
2,380,551
187,656
3,248
8,728,175
SPP Pumps Limited
Notes to the financial statements (continued)
For the year ended 31 December 2020
12
Tangible fixed assets (continued)
Page 34
Company
Freehold land and buildings
Leasehold improvements
Plant and equipment
Tooling and patterns
Motor vehicles
Total
£
£
£
£
£
£
Cost
At 1 January 2020
3,479,559
443,597
9,654,493
1,513,229
23,380
15,114,258
Additions
-
-
135,672
48,413
-
184,085
Disposals
-
-
(7,300)
-
-
(7,300)
At 31 December 2020
3,479,559
443,597
9,782,865
1,561,642
23,380
15,291,043
Depreciation and impairment
At 1 January 2020
1,292,457
216,214
7,881,985
1,329,484
23,380
10,743,520
Depreciation charged in the year
97,678
218,284
485,375
88,842
-
890,179
At 31 December 2020
1,390,135
434,498
8,367,360
1,418,326
23,380
11,633,699
Carrying amount
At 31 December 2020
2,089,424
9,099
1,415,505
143,316
-
3,657,344
At 31 December 2019
2,187,102
227,383
1,772,508
183,745
-
4,370,738
SPP Pumps Limited
Notes to the financial statements (continued)
For the year ended 31 December 2020
Page 35
13
Fixed asset investments
Group
Company
2020
2019
2020
2019
Notes
£
£
£
£
Investments in subsidiaries
14
-
-
1,382,688
382,688
Movements in fixed asset investments
Company
Shares in group undertakings
£
Cost or valuation
At 1 January 2020
382,688
Additions
1,000,000
At 31 December 2020
1,382,688
During the year SPP Pumps Limited capitalised £1,000,000 of intecompany debt into SPP Pumps SAS France.
14
Subsidiaries
Details of the Company's subsidiaries at 31 December 2020 are as follows:
Name of undertaking
Registered
Nature of business
% Held
office
2020
2019
SPP Pumps Inc.
USA
Supply of Pumps and related equipment
100%
100%
SPP France SAS
France
Supply and servicing of pumps and related equipment
100%
100%
SPP Real Estate LLC*
USA
Real Estate
100%
100%
SyncroFlo, Inc*
USA
Supply of pumping equipment
100%
100%
*SPP Real Estate LLC and SyncroFlo, Inc are subsidiaries of SPP Pumps Inc.
SPP Pumps Inc. and its subsidiaries are based in Atlanta, Georgia. SPP France SAS has its main office in 2 rue du Chateau d'eau, 95450 US, France.
SPP Pumps Limited
Notes to the financial statements (continued)
For the year ended 31 December 2020
Page 36
15
Stocks
Group
Company
2020
2019
2020
2019
£
£
£
£
Raw materials and consumables
8,738,005
7,374,975
4,903,586
3,268,822
Work in progress
4,566,955
5,248,355
4,160,464
4,595,380
Finished goods and goods for resale
380,337
332,749
218,505
130,810
13,685,297
12,956,079
9,282,555
7,995,012
16
Debtors
Group
Company
2020
2019
2020
2019
Amounts falling due within one year:
£
£
£
£
Trade debtors
21,100,267
27,521,642
17,240,275
21,378,365
Corporation tax recoverable
58,408
-
-
-
Deferred tax asset (note 21)
-
457,893
-
128,924
Amounts owed by group undertakings
1,245,614
1,222,348
890,180
2,494,466
Derivative financial instruments
555,033
463,481
555,033
463,481
Other debtors
1,341,473
1,689,112
1,261,232
1,426,485
Prepayments and accrued income
857,343
921,374
701,692
745,441
25,158,138
32,275,850
20,648,412
26,637,162
Amounts falling due after more than one year:
Deferred tax asset (note 21)
920,659
811,782
920,659
811,782
Total debtors
26,078,797
33,087,632
21,569,071
27,448,944
SPP Pumps Limited
Notes to the financial statements (continued)
For the year ended 31 December 2020
Page 37
17
Creditors: amounts falling due within one year
Group
Company
2020
2019
2020
2019
Notes
£
£
£
£
Bank loans and overdrafts
19
4,956,093
12,185,053
4,794,887
11,557,482
Obligations under finance leases
20
6,103
-
-
-
Payments received on account
6,514,836
4,265,829
6,179,774
4,265,829
Trade creditors
10,955,149
10,679,264
7,641,889
7,438,638
Amounts owed to group undertakings
1,418,530
3,113,649
1,596,286
2,627,157
Corporation tax payable
1,130
85,563
1,130
11,338
Other taxation and social security
88,293
74,276
-
-
Other creditors
119,144
94,848
101,718
91,896
Accruals and deferred income
4,059,467
5,594,369
3,431,912
3,997,720
28,118,745
36,092,851
23,747,596
29,990,060
18
Creditors: amounts falling due after more than one year
Group
Company
2020
2019
2020
2019
Notes
£
£
£
£
Bank loans and overdrafts
19
4,522,099
4,733,902
-
-
Obligations under finance leases
20
17,853
-
-
-
4,539,952
4,733,902
-
-
19
Loans and overdrafts
Group
Company
2020
2019
2020
2019
£
£
£
£
Bank loans
9,083,305
14,394,482
4,400,000
9,500,000
Bank overdrafts
394,887
2,524,473
394,887
2,057,482
9,478,192
16,918,955
4,794,887
11,557,482
Payable within one year
4,956,093
12,185,053
4,794,887
11,557,482
Payable after one year
4,522,099
4,733,902
-
-
SPP Pumps Limited
Notes to the financial statements (continued)
For the year ended 31 December 2020
19
Loans and overdrafts (continued)
Page 38
Bank loans:
SPP Pumps Limited and its subsidiaries have term loans to finance working capital and the purchase of land, buildings and equipment:
Term Loan Secured by
Interest rate
Due date
2020
2019
£
£
A
Fixed and moveable assets - Second Charge (ICICI)
3.1%
21 Jan 21
4,400,000
5,500,000
B
Corporate Guarantee from the ultimate parent company
4.89%
29 May 20
-
4,000,000
C
Building
3.85%
01 Dec 29
4,683,305
4,894,482
9,083,305
14,394,482
Bank overdrafts:
SPP Pumps Limited has an overdraft facility of £2.0 million from Barclays Bank Plc to finance working capital requirements. This is secured by a first charge over the Company's assets. In January 2021 an additional £3m bank overdraft facility was agreed with AXIS Bank.
Similarly, the Company has a short term loan facility of £9.5 million, and a long term facility of £1.0m for capital expenditure from ICICI Bank Plc, of which £4.4 million was utilised as at 31 December 2020. Loans are secured by a second charge on the company's fixed and moveable assets and also covered by a corporate guarantee from Kirloskar Brothers Limited, the ultimate parent company.
SPP Pumps Inc. and subsidiaries have lines of credit totalling $4.0million to finance working capital requirements. The lines of credit and term loans are collateralised by substantially all of SPP Pumps Inc. assets.
20
Finance lease obligations
Group
Company
2020
2019
2020
2019
£
£
£
£
Future minimum lease payments due under finance leases:
Within one year
6,103
-
-
-
In two to five years
5,070
-
-
-
In over five years
12,783
-
-
-
23,956
-
-
-
SPP Pumps Limited
Notes to the financial statements (continued)
For the year ended 31 December 2020
Page 39
21
Deferred taxation
The following are the major deferred tax liabilities and assets recognised by the Group and Company, and movements thereon:
Liabilities
Liabilities
Assets
Assets
2020
2019
2020
2019
Group
£
£
£
£
Accelerated capital allowances
437,243
408,186
276,346
180,935
Tax losses
(168,961)
(192,612)
611,498
724,482
Aquired intangible assets
35,416
-
-
-
Other timing differences
(282,737)
-
-
-
Short term timing differences
-
55,564
32,815
364,258
20,961
271,138
920,659
1,269,675
Liabilities
Liabilities
Assets
Assets
2020
2019
2020
2019
Company
£
£
£
£
Accelerated capital allowances
-
-
276,346
180,935
Tax losses
-
-
611,498
724,482
Short term timing differences
-
-
32,815
35,289
-
-
920,659
940,706
Deferred tax assets have been recognised at the substantively enacted rates at the date of the balance
sheet, in the UK this is 1
9
%, and in the US this is 21%.
SPP Pumps Limited
Notes to the financial statements (continued)
For the year ended 31 December 2020
Page 40
22
Provisions for liabilities
Group
Company
2020
2019
2020
2019
Notes
£
£
£
£
Warranties
784,517
1,160,452
572,305
949,291
784,517
1,160,452
572,305
949,291
Deferred tax liabilities
21
20,961
271,138
-
-
805,478
1,431,590
572,305
949,291
Movements on provisions apart from deferred tax liabilities:
Warranties
Group
£
At 1 January 2020
1,160,452
Release of provision in the year
(239,106)
Utilisation of provision
(130,131)
Exchange difference
(6,698)
At 31 December 2020
784,517
Warranties
Company
£
At 1 January 2020
949,291
Release of provision in the year
(376,986)
At 31 December 2020
572,305
Warranties
The provision for warranties relates to expected warranty claims on products sold in the last three years. It is expected that the majority of this expenditure will be incurred in the next financial year and that all will be incurred within three years of the balance sheet date.
SPP Pumps Limited
Notes to the financial statements (continued)
For the year ended 31 December 2020
22
Provisions for liabilities (continued)
Page 41
Deferred tax
Deferred tax assets and liabilities are offset only where the Group has a legally enforceable right to do so and where the assets and liabilities relate to income taxed levied by the same taxation authority on the same taxable entity or another entity within the Group.
Forward contract valuation
In accordance with FRS 102, the Group's forward exchange contracts have been valued at the year end using Mark-to-Market valuations provided by the forward contract providers. These contracts are used to hedge against currency exchange fluctuations for debtor and creditor balances denominated in overseas currencies and are typically held for a period of 6-9 months.
Forward contracts are held at fair value in the balance sheet within debtors or provisions as appropriate. Movements in fair value are charged or credited to the profit and loss account.
23
Retirement benefit schemes
2020
2019
Defined contribution schemes
£
£
Charge to profit or loss in respect of defined contribution schemes
789,572
822,672
A
defined contribution pension scheme
is operated
for all qualifying employees.
The assets of the scheme are held separately from those of the Group in an independently administered fund. The amount outstanding at the end of the year was £84,428 (2019: £97,229).
24
Share capital
Group and company
2020
2019
Ordinary share capital
£
£
Issued and fully paid
50,000 A ordinary shares of £1 each
50,000
50,000
2,950,000 C ordinay shares of £1 each
2,950,000
2,950,000
3,000,000
3,000,000
SPP Pumps Limited
Notes to the financial statements (continued)
For the year ended 31 December 2020
24
Share capital (continued)
Page 42
The share classes rank pari passu in all respects other than in the event of liquidation any surplus will be applied first to repayment of amounts paid in respect of class C ordinary shares, thereafter equally for all shares.
The profit and loss reserve represents cumulative profits or losses, net of dividends paid and other adjustments.
The capital redemption reserve of £50,000 arose from the Company's purchase of own shares on 25 August 2009 when B ordinary shares were redeemed for £123,100.
25
Financial commitments, guarantees and contingent liabilities
Performance bonds and guarantees remain outstanding at 31 December 2020. These arose in the normal course of business and amount to £10,442,642 (2019: 10,561,758).
26
Operating lease commitments
Lessee
At the reporting end date the Group had outstanding commitments for future minimum lease payments under non-cancellable operating leases, which fall due as follows:
Group
Company
2020
2019
2020
2019
£
£
£
£
Within one year
368,806
355,383
368,806
355,383
Between two and five years
326,141
750,171
326,141
750,171
694,947
1,105,554
694,947
1,105,554
27
Related party transactions
The Company has taken advantage of the exemption available under FRS 102, section 33.1A not to disclose transactions with other wholly-owned members of the Kirloskar Brothers Limited Group.
SPP Pumps Limited
Notes to the financial statements (continued)
For the year ended 31 December 2020
Page 43
28
Controlling party
The ultimate parent company of SPP Pumps Limited is Kirloskar Brothers Limited, whose registered office is
“Yamuna”, Survey No. 98 /(3 to7), Plot No. 3, Baner, Pune 411 045, State Maharashtra, India.
The intermediate parent company of SPP Pumps Limited is Kirloskar Brothers International BV, a company incorporated in the Netherlands. Kirloskar Brothers Limited is the controlling party of the smallest and largest group for which SPP Pumps Limited is a member and is the ultimate parent company of the smallest and largest group for which the consolidated accounts are prepared which include SPP Pumps Limited. Kirloskar Brothers Limited is a publically listed company incorporated in India. Copies of these financial statements can be obtained from the company's registered office at
“Yamuna”, Survey No. 98 /(3 to7), Plot No. 3, Baner, Pune 411 045, State Maharashtra, India
, or online at www.kirloskarpumps.com.
29
Cash generated from group operations
2020
2019
£
£
Profit for the year after tax
3,030,087
1,600,431
Adjustments for:
Taxation charged
222,207
291,906
Finance costs
545,343
670,398
Investment income
(13,641)
(2,435)
Loss on disposal of tangible fixed assets
1,201
-
Amortisation and impairment of intangible assets
80,611
83,077
Depreciation and impairment of tangible fixed assets
1,235,148
1,102,420
Foreign exchange gains on cash equivalents
-
(1,098)
Other gains and losses
(295,003)
(1,073,003)
(Decrease)/increase in provisions
(375,935)
137,611
Movements in working capital:
(Increase)/decrease in stocks
(729,218)
10,391,651
Decrease/(increase) in debtors
6,809,779
(4,144,852)
(Decrease) in creditors
(666,816)
(11,511,754)
Cash generated from/(absorbed by) operations
9,843,763
(2,455,648)
SPP Pumps Limited
Notes to the financial statements (continued)
For the year ended 31 December 2020
Page 44
30
Analysis of changes in net debt - group
1 January 2020
Cash flows
Other non-cash changes
Exchange rate movements
31 December 2020
£
£
£
£
£
Cash at bank and in hand
2,579,128
1,038,446
-
23,932
3,641,506
Bank overdrafts
(2,524,473)
2,129,586
-
-
(394,887)
54,655
3,168,032
-
23,932
3,246,619
Borrowings excluding overdrafts
(14,394,482)
5,311,177
-
-
(9,083,305)
Obligations under finance leases
-
6,044
(30,000)
-
(23,956)
(14,339,827)
8,485,253
(30,000)
23,932
(5,860,642)
2020-12-31
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