Company Registration No. SC007479 (Scotland)
AXALTA COATING SYSTEMS HUTHWAITE UK LIMITED
ANNUAL REPORT AND FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
AXALTA COATING SYSTEMS HUTHWAITE UK LIMITED
COMPANY INFORMATION
Directors
J I Blenkinsopp
R Joyce
F Dolan
Company number
SC007479
Registered office
6 York Street
Aberdeen
AB11 5DD
Auditor
Johnston Carmichael LLP
Bishop's Court
29 Albyn Place
Aberdeen
AB10 1YL
AXALTA COATING SYSTEMS HUTHWAITE 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
Balance sheet
9
Statement of changes in equity
10
Notes to the financial statements
11 - 22
AXALTA COATING SYSTEMS HUTHWAITE UK LIMITED
STRATEGIC REPORT
FOR THE YEAR ENDED 31 DECEMBER 2022
- 1 -
The directors present their Strategic Report and financial statements of Axalta Coating Systems Huthwaite UK Limited ("the company") for the year ended 31 December 2022.
Fair review of the business
The company manufactures general industrial, heavy duty and architectural coatings which are sold throughout the UK, Ireland and internationally. The company's business model is to consolidate its position within the UK and overseas with a focus of expanding its customer base and ultimately returning value to its shareholders.
The results for the company show turnover for the 12 month period of £16.2m (2021: £12.5m), with gross margin of 9.7% (2021: 20.9%) and loss before tax of £2.8m (2021: £0.8m). Earnings Before Interest, Tax, Depreciation and Amortisation ("EBITDA") for the current period was a loss of £2.0m (2021: £0.4m). The company's net asset position for the period end was £6.4m (2021: £9.2m).
The turnover year on year increased by 30%. The main driver for this was the transfer of production from the sister facility Axalta Coating Systems West Bromwich UK Limited coupled with inflationary increases to sales prices.
The reduced gross margin percentage is driven by a series of inflationary impacts associated with raw materials and fixed costs as well as recruitment of additional temporary manpower to support and expedite the transfer of production. Increases in distribution cost caused by the move to third party warehousing support along with increased administration expenses, predominantly driven by increased group management fees, have contributed to the current year loss.
At the year end the company continues to maintain a strong balance sheet position underpinned by significant fixed asset investment to support the business demand now the transfer of production from Axalta Coating systems West Bromwich UK Limited is completed.
Principal risks and uncertainties
The directors are of the opinion that the company has adopted a thorough risk management process that involves the formal review of all the risks identified below. The board monitors and reviews risks on a regular basis, in order to mitigate each risk area.
Cash flow risk
The company's activities expose it to the financial risk of changes in foreign currency exchange rates. The company may use foreign exchange forward contracts to hedge its exposures where appropriate but will also look to naturally hedge through the matching of the same foreign currency receipts and payments.
Credit risk
The company's principal financial assets are bank balances and cash, trade and other receivables and amounts due from group undertakings. Its credit risk is primarily attributable to its trade receivables. The amounts presented in the balance sheet are net of allowances for doubtful receivables. An allowance for impairment is made where there is an identified loss event which, based on previous experience, is evidence of a reduction in the recoverability of the cash flows.
The credit risk in liquid funds is limited because the counterparties are banks with credit ratings assigned by international credit ratings agencies.
The company has no significant concentration of credit risk, with exposure spread over a large number of customers.
AXALTA COATING SYSTEMS HUTHWAITE UK LIMITED
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
- 2 -
Principal risks and uncertainties (continued)
Interest rate risk
The directors look to enter into finance arrangements on the best commercial terms and will monitor existing rates in comparison to the market. Although not currently utilised, interest rate swaps are an option to manage interest rate risk. The company seeks to invest its cash resources risk free at the best interest rates available.
Liquidity risk
In order to maintain liquidity to ensure that sufficient funds are available for ongoing operations and future developments, the company monitors the timing of cash flows and aligns this with its strategic planning. Forecasts are produced to assist management in identifying liquidity requirements and maintaining adequate resources. The company's primary source of finance is the operating cash flows it generates.
Raw materials input costs
The recent increases in commodity costs including crude oil, resin feedstocks and steel prices allied with weaknesses in Sterling has contributed to a sharp increase in input costs. We continually monitor input costs and seek to minimise the impact by forward purchasing and trading in multiple currencies. Where appropriate, we look to pass on any cost increases to our customer base.
Economic downturn
The success of the business is reliant on consumer and industrial spending. An economic downturn, resulting in reduction of consumer spending power may have a direct impact on the income achieved by the company. In response to this risk, senior management monitor the economic conditions.
Inflation
Ongoing inflationary pressures will continue to be a key focus for the Huthwaite management team, Axalta’s global procurement team will play a major role in supporting the business and mitigating where possible material and fixed cost inflation.
Transfer of production
As the transfer process is now completed and capital expenditure program reaches its final stage it is important that the manufacturing function consolidates and stabilises its position to support the business in regard to its 2023 targets and goals.
Key financial performance indicators
The key financial key performance indicators of the company are considered to be turnover, gross margin, loss before tax, EBITDA and net assets, which are monitored on a monthly basis.
J I Blenkinsopp
Director
27 September 2023
AXALTA COATING SYSTEMS HUTHWAITE UK LIMITED
DIRECTORS' REPORT
FOR THE YEAR ENDED 31 DECEMBER 2022
- 3 -
The directors present their report and financial statements of the company for the year ended 31 December 2022.
Directors
The directors who held office during the year and up to the date of signature of the financial statements were as follows:
J I Blenkinsopp
R Joyce
F Dolan
Results and dividends
The results for the year are set out on page 8. No interim dividends were paid (2021: £nil). The directors do not recommend payment of a final dividend (2021: £nil).
Going concern
The directors have, at the time of approving these financial statements, a reasonable expectation that the company has adequate resources to continue in operational existence for the foreseeable future. In reaching this conclusion, they have prepared trading forecasts for the period to 31 December 2024 and are satisfied that the company has sufficient financial resources to continue to operate and meet its liabilities as they fall due, for a period of at least 12 months from the date of signing these financial statements. It is noted that the company is a member of the Axalta cash pool arrangement meaning that additional funds can be made available to the company as and when required. Thus, they continue to adopt the going concern basis of accounting in preparing these financial statements.
Future developments
Given the developments of the business during the period and its position within the marketplace, the directors believe the company is in a strong position to further develop its business and customer base, with the support and assistance of the Axalta Coating Systems Ltd group. In 2023 the business strategy will be to consolidate and stabilise the expanded manufacturing function while managing inflationary pressures, supported by Axalta's global procurement team to mitigate, where possible, fixed cost inflation.
Financial risk management objectives and policies
The company's activities expose it to a number of financial risks including cash flow, interest rate, credit and liquidity risks. These specific risks, their impact on the company and how the directors mitigate this risk are dealt with as part of the Strategic Report and form part of this report through cross-reference.
Auditor
Johnston Carmichael LLP have indicated their willingness to be reappointed for another term and appropriate arrangements have been put in place for them to be deemed reappointed as auditor in the absence of an Annual General Meeting.
Statement of disclosure to auditor
So far as the directors are aware, there is no relevant audit information of which the company's auditor is unaware. Additionally, the directors 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
J I Blenkinsopp
Director
27 September 2023
AXALTA COATING SYSTEMS HUTHWAITE UK LIMITED
DIRECTORS' RESPONSIBILITIES STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 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.
AXALTA COATING SYSTEMS HUTHWAITE UK LIMITED
INDEPENDENT AUDITOR'S REPORT
TO THE MEMBERS OF AXALTA COATING SYSTEMS HUTHWAITE UK LIMITED
- 5 -
Opinion
We have audited the financial statements of Axalta Coating Systems Huthwaite UK Limited (the 'company') for the year ended 31 December 2022 which comprise the profit and loss account, the balance sheet, the statement of changes in equity 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 FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland ( United Kingdom Generally Accepted Accounting Practice).
In our opinion the financial statements:
give a true and fair view of the state of the company's affairs as at 31 December 2022 and of its loss for the year then ended;
have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and
have been prepared in accordance with the requirements of the Companies Act 2006.
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 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.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of our audit:
the information given in the strategic report and the directors' report for the financial year for which the financial statements are prepared is consistent with the financial statements; and
the strategic report and the directors' report have been prepared in accordance with applicable legal requirements.
AXALTA COATING SYSTEMS HUTHWAITE UK LIMITED
INDEPENDENT AUDITOR'S REPORT (CONTINUED)
TO THE MEMBERS OF AXALTA COATING SYSTEMS HUTHWAITE UK LIMITED
- 6 -
Matters on which we are required to report by exception
In the light of our knowledge and understanding of the company and its environment obtained in the course of the audit, we have not identified material misstatements in the strategic report and the directors' report.
We have nothing to report in respect of the following matters 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' responsibilities statement set out on page 4, 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 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.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s website at: http://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
Extent to which the audit was considered capable of detecting irregularities, including fraud
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 extent to which our procedures are capable of detecting irregularities, including fraud, is detailed below.
We assessed whether the engagement team collectively had the appropriate competence and capabilities to identify or recognise non-compliance with laws and regulations by considering their experience, past performance and support available.
All engagement team members were briefed on relevant identified laws and regulations and potential fraud risks at the planning stage of the audit. Engagement team members were reminded to remain alert to any indications of fraud or non-compliance with laws and regulations throughout the audit.
We obtained an understanding of the legal and regulatory frameworks that are applicable to company and the sector in which it operates, focusing on those provisions that had a direct effect on the determination of material amounts and disclosures in the financial statements. The most relevant frameworks we identified include:
UK Generally Accepted Accounting Practice
Companies Act 2006
UK Corporate Tax legislation
Health and Safety legislation
AXALTA COATING SYSTEMS HUTHWAITE UK LIMITED
INDEPENDENT AUDITOR'S REPORT (CONTINUED)
TO THE MEMBERS OF AXALTA COATING SYSTEMS HUTHWAITE UK LIMITED
- 7 -
Extent the audit was considered capable of detecting irregularities, including fraud (continued)
We gained an understanding of how the company is complying with these laws and regulations by making enquiries of management. We corroborated these enquiries through our review of submitted returns and relevant correspondence with regulatory bodies.
We assessed the susceptibility of the financial statements to material misstatement, including how fraud might occur, by meeting with management and those charged with governance to understand where it was considered there was susceptibility to fraud. This evaluation also considered how management and those charged with governance were remunerated and whether this provided an incentive for fraudulent activity. We considered the overall control environment and how management and those charged with governance oversee the implementation and operation of controls. We identified a heightened fraud risk in relation to:
In addition to the above, the following procedures were performed to provide reasonable assurance that the financial statements were free of material fraud or error:
Performing audit work procedures confirming the completeness of revenue recognised within the financial statements, including a reconciliation of sales orders to the sales ledger by value, tracing a sample of sales from the point of initiation through to the sales ledger ensuring sales have been accurately recorded, and performing appropriate cut-off procedures at the year end;
Discussing with those charged with governance in reference to: breaches of laws and regulation or for any indication of any potential litigation and claims; and events or conditions that could indicate an incentive or pressure to commit fraud or provide an opportunity to commit fraud;
Reviewing the level of and reasoning behind the company’s procurement of legal and professional services;
Review of key documentation confirming ongoing compliance with health, safety and environmental requirements;
Performing audit work procedures over the risk of management override of controls, including testing of journal entries and other adjustments for appropriateness, evaluating the business rationale of significant transactions outside the normal course of business and reviewing judgements made by management in their calculation of accounting estimates for potential management bias;
Completion of appropriate checklists and use of our experience to assess the Company’s compliance with the Companies Act 2006; and
Agreement of the financial statement disclosures to supporting documentation.
Our audit procedures were designed to respond to the risk of material misstatements in the financial statements, recognising that 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 intentional concealment, forgery, collusion, omission or misrepresentation. There are inherent limitations in the audit procedures performed 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.
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.
Stephen McIlwaine (Senior Statutory Auditor)
For and on behalf of Johnston Carmichael LLP
28 September 2023
Chartered Accountants
Statutory Auditor
Bishop's Court
29 Albyn Place
Aberdeen
AB10 1YL
AXALTA COATING SYSTEMS HUTHWAITE UK LIMITED
PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED 31 DECEMBER 2022
- 8 -
2022
2021
£
£
Turnover
3
16,220,462
12,480,340
Cost of sales
(14,645,667)
(9,868,562)
Gross profit
1,574,795
2,611,778
Distribution costs
(2,495,656)
(1,917,702)
Administrative expenses
(1,842,399)
(1,502,031)
Other operating income
60,891
1,610
Operating loss
4
(2,702,369)
(806,345)
Interest receivable and similar income
6
4,393
146
Interest payable and similar expenses
7
(67,429)
(274)
Loss before taxation
(2,765,405)
(806,473)
Tax on loss
8
(48,124)
(1,635)
Loss and total comprehensive expense for the financial year
(2,813,529)
(808,108)
The profit and loss account has been prepared on the basis that all operations are continuing operations.
There are no recognised gains and losses in the current or prior period other than as included in the profit and loss account. Accordingly, no statement of comprehensive income is presented.
The loss and comprehensive expense for the period is solely attributable to the shareholder of the company's immediate parent.
AXALTA COATING SYSTEMS HUTHWAITE UK LIMITED
BALANCE SHEET
AS AT 31 DECEMBER 2022
31 December 2022
- 9 -
2022
2021
Notes
£
£
£
£
Fixed assets
Intangible assets
9
39,456
39,456
Tangible assets
10
6,433,560
5,182,223
6,473,016
5,221,679
Current assets
Stocks
11
5,261,587
4,217,429
Debtors
12
2,843,149
5,655,387
Cash at bank and in hand
1,121,945
824,217
9,226,681
10,697,033
Creditors: amounts falling due within one year
13
(8,726,880)
(6,180,490)
Net current assets
499,801
4,516,543
Total assets less current liabilities
6,972,817
9,738,222
Provisions for liabilities
14
(569,759)
(521,635)
Net assets
6,403,058
9,216,587
Capital and reserves
Called up share capital
16
187,392
187,392
Share premium account
17
2,500,000
2,500,000
Profit and loss reserves
17
3,715,666
6,529,195
Total equity
6,403,058
9,216,587
The financial statements were approved by the board of directors and authorised for issue on 27 September 2023 and are signed on its behalf by:
J I Blenkinsopp
Director
Company Registration No. SC007479
AXALTA COATING SYSTEMS HUTHWAITE UK LIMITED
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2022
- 10 -
Share capital
Share premium account
Profit and loss reserves
Total
Notes
£
£
£
£
Balance at 1 January 2021
187,392
7,337,303
7,524,695
Year ended 31 December 2021:
Loss and total comprehensive expense for the year
-
-
(808,108)
(808,108)
Issue of share capital
16
2,500,000
-
2,500,000
Balance at 31 December 2021
187,392
2,500,000
6,529,195
9,216,587
Year ended 31 December 2022:
Loss and total comprehensive expense for the year
-
-
(2,813,529)
(2,813,529)
Balance at 31 December 2022
187,392
2,500,000
3,715,666
6,403,058
AXALTA COATING SYSTEMS HUTHWAITE UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
- 11 -
1
Accounting policies
Company information
Axalta Coating Systems Huthwaite UK Limited ("the company") is a private company limited by shares incorporated and domiciled in Scotland. The registered office is 6 York Street, Aberdeen, AB11 5DD. The company's main production facility is based in Huthwaite, England with depots in Aberdeen, Scotland and Belfast, Northern Ireland. The principal activities of the company and the nature of the operations are set out in the Strategic Report on page 1.
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 company. Monetary amounts in these financial statements are rounded to the nearest pound sterling.
The financial statements have been prepared under the historical cost convention. The principal accounting policies adopted are set out below.
This company is a qualifying entity for the purposes of FRS 102, being a member of a group where the parent of that group prepares publicly available consolidated financial statements, including this company, which are intended to give a true and fair view of the assets, liabilities, financial position and profit or loss of the group. The company has therefore taken advantage of exemptions from the following disclosure requirements:
The requirements of Section 7 'Statement of Cash Flows' and paragraph 3.17(d) of Section 3 'Financial Statement Presentation';
The requirements of paragraphs 11.42, 11.44, 11.45, 11.47, 11.48(a)(iii), 11.48(a)(iv), 11.48(b), 11.48(c) of Section 11 'Basic Financial Instruments; and
The requirements of paragraph 33.7 of Section 33 'Related Party Disclosures'.
The financial statements of the company are consolidated in the financial statements of Axalta Coating Systems Ltd. These consolidated financial statements are available from the group's website (www.axalta.com).
1.2
Going concern
The directors have, at the time of approving these financial statements, a reasonable expectation that the company has adequate resources to continue in operational existence for the foreseeable future. In reaching this conclusion, they have prepared trading forecasts for the period to 31 December 2024 and are satisfied that the company has sufficient financial resources to continue to operate and meet its liabilities as they fall due, for a period of at least 12 months from the date of signing these financial statements. It is noted that the company is a member of the Axalta cash pool arrangement meaning that additional funds can be made available to the company as and when required. Thus, they continue to adopt the going concern basis of accounting in preparing these financial statements.true
1.3
Turnover
Turnover is recognised at the fair value of the consideration received or receivable for goods provided in the normal course of business, and is shown net of VAT and other sales related taxes. The fair value of consideration takes into account trade discounts, settlement discounts and volume rebates.
Revenue from the sale of goods is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer (usually on dispatch of the goods), the amount of revenue can be measured reliably, it is probable that the economic benefits associated with the transaction will flow to the entity and the costs incurred or to be incurred in respect of the transaction can be measured reliably.
AXALTA COATING SYSTEMS HUTHWAITE UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
1
Accounting policies
(Continued)
- 12 -
1.4
Intangible fixed assets - goodwill
Purchased goodwill has been fully amortised.
1.5
Intangible fixed assets other than goodwill
Intangible assets acquired separately from a business are recognised at cost and are subsequently measured at cost less accumulated amortisation and accumulated impairment losses.
Research expenditure is written off against profits in the year in which it is incurred.
Amortisation is recognised so as to write off the cost of assets less their residual values over their useful lives on the following bases:
Patents
No amortisation charged until patents are in use
1.6
Tangible fixed assets
Tangible fixed assets are initially measured at cost and subsequently measured at cost, net of depreciation and any impairment losses.
Depreciation is recognised so as to write off the cost of assets less their residual values over their useful lives on the following bases:
Land and buildings freehold
50 years
Leasehold improvements
10% straight line
Plant and machinery
10 - 20% straight line
Fixtures, fittings & equipment
10 - 20% straight line
Motor vehicles
25 - 50% 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.
1.7
Impairment of fixed assets
At each reporting period end date, the company reviews the carrying amounts of its tangible and intangible 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.
1.8
Stocks
Stocks and work in progress 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.
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.
1.9
Cash at bank and in hand
Cash and cash equivalents are basic financial assets and include cash in hand and deposits held at call with banks.
AXALTA COATING SYSTEMS HUTHWAITE UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
1
Accounting policies
(Continued)
- 13 -
1.10
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 certain debtors, amounts owed by group undertakings 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. The effective interest rate is the rate that exactly discounts estimated future cash receipts/payments through the expected life of the investment to the net carrying amount on initial recognition. Financial assets classified as receivable within one year are not amortised.
Impairment of financial assets
Financial assets are assessed for indicators of impairment at each reporting end date.
Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows have been affected. If an asset is impaired, the impairment loss is the difference between the carrying amount and the present value of the estimated cash flows discounted at the asset’s original effective interest rate. The impairment loss is recognised in profit or loss.
If there is a decrease in the impairment loss arising from an event occurring after the impairment was recognised, the impairment is reversed. The reversal is such that the current carrying amount does not exceed what the carrying amount would have been, had the impairment not previously been recognised. The impairment reversal is recognised in profit or loss.
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.
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.
AXALTA COATING SYSTEMS HUTHWAITE UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
1
Accounting policies
(Continued)
- 14 -
Basic financial liabilities
Basic financial liabilities, including certain creditors and amounts owed to 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 payments discounted at a market rate of interest. Financial liabilities classified as payable within one year are not amortised.
Basic financial 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.
Derecognition of financial liabilities
Financial liabilities are derecognised when the company’s contractual obligations expire or are discharged or cancelled.
1.11
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.
1.12
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.
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.
AXALTA COATING SYSTEMS HUTHWAITE UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
1
Accounting policies
(Continued)
- 15 -
1.13
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.
1.14
Retirement benefits
Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due. Differences between contributions payable in the year and contributions actually paid are shown as either accruals or prepayments on the balance sheet.
1.15
Leases
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 leases asset are consumed.
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 are considered to be judgements that have had the most significant effect on the amounts recognised in the financial statements:
Allocation of overheads included in stock
Allocation of overheads included in stock is a judgement made by management (note 11). Directors assess the overheads to be included in stock and calculate these in accordance with their judgements.
Classification of leases
During 2017 the company entered into a sale and leaseback transaction for one of its warehouses. The directors have considered the salient aspects of the lease agreement in place, in accordance with FRS 102 Chapter 20 "Leases", and determined this to be an operating lease, along with applying the appropriate accounting.
AXALTA COATING SYSTEMS HUTHWAITE UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
2
Judgements and key sources of estimation uncertainty
(Continued)
- 16 -
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.
Carrying value, estimated useful life and depreciation of tangible assets
Carrying value, estimated useful life and depreciation of tangible assets are judgements made by the directors (note 10). The directors assess the useful life of these assets and depreciate over the appropriate period
The directors consider that there are no other judgements or estimates which have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities.
3
Turnover and other revenue
An analysis of the company's turnover is as follows:
2022
2021
£
£
Turnover analysed by class of business
Sale of coatings
16,220,462
12,480,340
The turnover shown in the profit and loss account represents amounts invoiced under the company's principal activity.
In the opinion of the directors it would be seriously prejudicial to the company's interest to disclose a geographical analysis of turnover.
4
Operating loss
2022
2021
Operating loss for the year is stated after charging:
£
£
Foreign exchange losses
234,603
11,127
Fees payable to the company's auditor for the audit of the company's financial statements
40,500
23,950
Depreciation of owned tangible fixed assets
661,680
411,725
Loss on disposal of tangible fixed assets
1,015
2,495
Operating lease charges
170,430
179,463
5
Employees
The average monthly number of persons (including directors) employed by the company during the year was:
2022
2021
Number
Number
Administration
9
6
Production
71
55
Distribution
16
13
Total
96
74
AXALTA COATING SYSTEMS HUTHWAITE UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
5
Employees
(Continued)
- 17 -
Their aggregate remuneration comprised:
2022
2021
£
£
Wages and salaries
2,990,544
2,172,652
Social security costs
291,191
189,677
Pension costs
105,196
99,322
3,386,931
2,461,651
The directors of the business are remunerated through other group companies with respect to their services to this company for both the current and prior year.
6
Interest receivable and similar income
2022
2021
£
£
Interest income
Interest receivable from group companies
4,393
146
7
Interest payable and similar expenses
2022
2021
£
£
Interest payable to group undertakings
67,429
Other interest
274
67,429
274
8
Taxation
2022
2021
£
£
Deferred tax
Origination and reversal of timing differences
(67,505)
(162,406)
Effect of tax rate change on opening balance
164,041
Other adjustments
115,629
Total deferred tax
48,124
1,635
AXALTA COATING SYSTEMS HUTHWAITE UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
8
Taxation
(Continued)
- 18 -
There is no tax going through other comprehensive income in either the current or prior year.
The actual charge for the year can be reconciled to the expected credit for the year based on the profit or loss and the standard rate of tax as follows:
2022
2021
£
£
Loss before taxation
(2,765,405)
(806,473)
Expected tax credit based on the standard rate of corporation tax in the UK of 19.00% (2021: 19.00%)
(525,427)
(153,230)
Tax effect of expenses that are not deductible in determining taxable profit
1,628
1,528
Group relief surrendered
410,794
Deferred tax adjustments in respect of prior years
115,629
Remeasurement of deferred tax for changes in tax rates
(16,195)
125,192
Other differences
61,695
28,145
Taxation charge for the year
48,124
1,635
A change in the future UK Corporation tax rate to 25% with effect from 1 April 2023 was announced in the March 2021 budget and substantively enacted on 24 May 2021. This change will have a consequential effect on the company's future tax charge in the UK and as the 25% tax rate was substantively enacted prior to the reporting date, deferred tax expected to unwind after 1 April 2023 has been calculated at 25% as opposed to the current tax rate of 19%.
9
Intangible fixed assets
Goodwill
Patents
Total
£
£
£
Cost
At 1 January 2022 and 31 December 2022
2,541,951
67,535
2,609,486
Amortisation and impairment
At 1 January 2022 and 31 December 2022
2,541,951
28,079
2,570,030
Carrying amount
At 31 December 2022
39,456
39,456
At 31 December 2021
39,456
39,456
AXALTA COATING SYSTEMS HUTHWAITE UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
- 19 -
10
Tangible fixed assets
Land and buildings freehold
Leasehold improvements
Assets under construction
Plant and machinery
Fixtures, fittings & equipment
Motor vehicles
Total
£
£
£
£
£
£
£
Cost
At 1 January 2022
1,471,166
2,161,008
47,584
3,354,791
267,431
89,525
7,391,505
Additions
910,344
1,051,572
1,961,916
Disposals
(47,584)
(1,924)
(16,585)
(66,093)
At 31 December 2022
1,471,166
3,071,352
4,404,439
267,431
72,940
9,287,328
Depreciation and impairment
At 1 January 2022
192,000
244,547
1,429,108
254,102
89,525
2,209,282
Depreciation charged in the year
24,000
265,002
366,585
6,093
661,680
Eliminated in respect of disposals
(609)
(16,585)
(17,194)
At 31 December 2022
216,000
509,549
1,795,084
260,195
72,940
2,853,768
Carrying amount
At 31 December 2022
1,255,166
2,561,803
2,609,355
7,236
6,433,560
At 31 December 2021
1,279,166
1,916,461
47,584
1,925,683
13,329
5,182,223
AXALTA COATING SYSTEMS HUTHWAITE UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
- 20 -
11
Stocks
2022
2021
£
£
Raw materials and consumables
2,505,046
2,132,448
Work in progress
337,810
403,998
Finished goods and goods for resale
2,418,731
1,680,983
5,261,587
4,217,429
12
Debtors
2022
2021
Amounts falling due within one year:
£
£
Trade debtors
2,626,025
2,906,207
Amounts owed by group undertakings
163,912
2,520,906
Other debtors
706
169,810
Prepayments and accrued income
52,506
58,464
2,843,149
5,655,387
Amounts owed by group undertakings have no fixed repayments terms, are unsecured and are interest free.
13
Creditors: amounts falling due within one year
2022
2021
£
£
Trade creditors
1,292,718
1,777,431
Amounts owed to group undertakings
6,703,535
3,669,002
Taxation and social security
110,247
36,825
Other creditors
20,000
Accruals and deferred income
600,380
697,232
8,726,880
6,180,490
Within amounts owed to group undertakings, amounts due to other group companies have no fixed repayment terms, are unsecured and are interest free. The remaining £5,850,586 is due to the Axalta cashpool arrangement which has no fixed repayment terms, is unsecured and accrues interest at a market rate.
AXALTA COATING SYSTEMS HUTHWAITE UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
- 21 -
14
Deferred taxation
Deferred tax assets and liabilities are offset where the company has a legally enforceable right to do so. The following is the analysis of the deferred tax balances (after offset) for financial reporting purposes:
Liabilities
Liabilities
2022
2021
Balances:
£
£
Accelerated capital allowances
140,401
183,393
Losses and other deductions
-
(115,629)
Chargeable gains
429,358
453,871
569,759
521,635
2022
Movements in the year:
£
Liability at 1 January 2022
521,635
Charge to profit or loss
48,124
Liability at 31 December 2022
569,759
15
Retirement benefit schemes
2022
2021
Defined contribution schemes
£
£
Charge to profit or loss in respect of defined contribution schemes
105,196
99,322
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.
No pension contributions were outstanding at the current and prior year end.
16
Share capital
2022
2021
2022
2021
Ordinary share capital
Number
Number
£
£
Issued and fully paid
Ordinary of 25p each
749,569
749,569
187,392
187,392
During the prior year, the entity issued 1 ordinary share at a par value of £0.25 to its parent company, Spencer Coatings Group Limited, for a consideration of £2,500,000, resulting in recognition of £2,499,999.75 of share premium.
AXALTA COATING SYSTEMS HUTHWAITE UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
- 22 -
17
Reserves
Share premium
The share premium account represents the excess amount received by the company over the par value of its shares.
Profit and loss reserves
The profit and loss account represents cumulative historic profit and losses, net of dividends.
18
Operating lease commitments
Lessee
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
2021
£
£
Within one year
192,742
104,648
Between two and five years
416,800
153,009
609,542
257,657
19
Related party transactions
Transactions with related parties
The company has taken advantage of the exemption available in accordance with Section 33 of FRS 102 'Related Party Disclosures' not to disclose transactions entered between two or more wholly owned members of the same group.
20
Ultimate controlling party
The company is a wholly owned subsidiary of Spencer Coatings Group Limited, a company registered in Scotland. Its ultimate parent company is Axalta Coating Systems Ltd, a company incorporated in Bermuda, which the directors consider to be the controlling party. Axalta Coating Systems Ltd represents the largest and smallest group which prepares consolidated financial statements. A copy of the Axalta Coating Systems Ltd group financial statements are available from the group's website (www.axalta.com).
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