CALEY OCEAN SYSTEMS LIMITED
ANNUAL REPORT AND FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 DECEMBER 2018
Company Registration No. SC200730 (Scotland)
CALEY OCEAN SYSTEMS LIMITED
COMPANY INFORMATION
Directors
Mr David Cooper
Mr James McPherson
Mr Ross McLellan
Mr David Hutchinson
(Appointed 7 September 2018)
Secretary
Burness Paull LLP
Company number
SC200730
Registered office
375 Govan Road
Watermark Business Park
Govan
Glasgow
G51 2SE
Auditor
William Duncan + Co Ltd
30 Miller Road
Ayr
Ayrshire
KA7 2AY
Business address
375 Govan Road
Watermark Business Park
Govan
Glasgow
G51 2SE
Bankers
Royal Bank of Scotland
Glasgow Burnside Branch
272 Stonelaw Road
Rutherglen
Glasgow
G73 3SB
Solicitors
Burness Paull LLP
120 Bothwell Street
Glasgow
G2 7JL
CALEY OCEAN SYSTEMS LIMITED
CONTENTS
Page
Strategic report
1
Directors' report
2
Directors' responsibilities statement
3
Independent auditor's report
4 - 5
Statement of income and retained earnings
6
Statement of financial position
7
Notes to the financial statements
8 - 20
CALEY OCEAN SYSTEMS LIMITED
STRATEGIC REPORT
FOR THE YEAR ENDED 30 DECEMBER 2018
- 1 -
The directors present the strategic report and financial statements for the year ended 30 December 2018.
Fair review of the business
The company has a diversified marine focused customer base, including the oil and gas sector which has remained depressed during the period following the prolonged offshore downturn. With this background in mind, the directors are concentrating on maximising sales efforts across the marine industries and ensuring customer satisfaction through exemplary project delivery. The continued development of its specialist product range has allowed the company to differentiate itself in all markets.
During the year the Company has delivered improved performance although an onerous contract provision totalling £0.2m and has been included in these financial statements that reflects closing out exceptional legacy contracts. The company has delivered net profit for the financial year although it does not fully reflect the underlying strength of the business.
Principal risks and uncertainties
The oil and gas sector is one market within which the company does business and it has been depressed during
the period. With this background in mind, the directors are generally pleased with the company performance and
the extent to which the company has diversified away from the depressed sector.
Key performance indicators
The company's key financial performance indicators for the period were;
2018 2017
Turnover (£000) 8,891 10,957
Gross Margin (£000) 1,741 2,185
Gross Margin % 20% 20%
Other information and explanations
The coming financial year brings a more positive outlook due to the stabilising oil price indicating improved market conditions in the Oil and Gas sectors for new project activity. Thus, the directors are encouraged by the increased potential of the forthcoming years.
Mr Ross McLellan
Director
31 July 2019
CALEY OCEAN SYSTEMS LIMITED
DIRECTORS' REPORT
FOR THE YEAR ENDED 30 DECEMBER 2018
- 2 -
The directors present their annual report and financial statements for the year ended 30 December 2018.
Principal activities
The principal activity of the company continued to be that of the design of lifting and handling equipment and other special purpose machinery.
Directors
The directors who held office during the year and up to the date of signature of the financial statements were as follows:
Mr David Cooper
Mr James McPherson
Mr Ross McLellan
Mr David Hutchinson
(Appointed 7 September 2018)
Results and dividends
The results for the year are set out on page 6.
No ordinary dividends were paid. The directors do not recommend payment of a final dividend.
Auditor
In accordance with the company's articles, a resolution proposing that William Duncan + Co Ltd be reappointed as auditor of the company will be put at a General Meeting.
Statement of disclosure to auditor
So far as each person who was a director at the date of approving this report is aware, there is no relevant audit information of which the company’s auditor is unaware. Additionally, the directors individually have taken all the necessary steps that they ought to have taken as directors in order to make themselves aware of all relevant audit information and to establish that the company’s auditor is aware of that information.
On behalf of the board
Mr Ross McLellan
Director
31 July 2019
CALEY OCEAN SYSTEMS LIMITED
DIRECTORS' RESPONSIBILITIES STATEMENT
FOR THE YEAR ENDED 30 DECEMBER 2018
- 3 -
The directors are responsible for preparing the annual report and the financial statements in accordance with applicable law and regulations.
Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the company and of the profit or loss of the company for that period. In preparing these financial statements, the directors are required to:
-
select suitable accounting policies and then apply them consistently;
-
make judgements and accounting estimates that are reasonable and prudent;
-
state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements;
-
prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business.
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the company’s transactions and disclose with reasonable accuracy at any time the financial position of the company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
CALEY OCEAN SYSTEMS LIMITED
INDEPENDENT AUDITOR'S REPORT
TO THE MEMBERS OF CALEY OCEAN SYSTEMS LIMITED
- 4 -
Opinion
We have audited the financial statements of Caley Ocean Systems Limited (the 'company') for the year ended 30 December 2018 which comprise the statement of income and retained earnings, the statement of financial position and notes to the financial statements, including a summary of significant accounting policies.
The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including FRS 102
The Financial Reporting Standard applicable in the UK and Republic of Ireland
(United Kingdom Generally Accepted Accounting Practice).
In our opinion the financial statements:
-
give a true and fair view of the state of the company's affairs as at 30 December 2018 and of its profit for the year then ended;
-
have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and
-
have been prepared in accordance with the requirements of the Companies Act 2006.
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor's
responsibilities for the audit of the financial statements
section of our report. We are independent of the company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard
, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Conclusions relating to going concern
We have nothing to report in respect of the following matters in relation to which the ISAs (UK) require us to report to you where:
-
the directors' use of the going concern basis of accounting in the preparation of the financial statements is not appropriate; or
-
the directors have not disclosed in the financial statements any identified material uncertainties that may cast significant doubt about the company’s ability to continue to adopt the going concern basis of accounting for a period of at least twelve months from the date when the financial statements are authorised for issue
.
The directors are responsible for the other information. The other information comprises the information included in the annual report, other than the financial statements and our auditor’s report thereon. Our opinion on the
financial statements
does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the financial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of our audit
:
-
the information given in the strategic report and the directors' r
eport 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.
CALEY OCEAN SYSTEMS LIMITED
INDEPENDENT AUDITOR'S REPORT (CONTINUED)
TO THE MEMBERS OF CALEY OCEAN SYSTEMS LIMITED
- 5 -
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the company and its environment obtained in the course of the audit, we have not identifie
d
material misstatements in the strategic report and the directors'
r
eport
.
We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion:
-
adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us; or
-
the financial statements are not in agreement with the accounting records and returns; or
-
certain disclosures of directors' remuneration specified by law are not made; or
-
we have not received all the information and explanations we require for our audit.
Responsibilities of directors
As explained more fully in the directors'
r
esponsibilities
s
tatement, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the company or to cease operations, or have no realistic alternative but to do so.
Auditor's responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
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.
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.
Graeme Bryson CTA (Senior Statutory Auditor)
for and on behalf of William Duncan + Co Ltd
1 August 2019
Chartered Accountants
Statutory Auditor
30 Miller Road
Ayr
Ayrshire
KA7 2AY
CALEY OCEAN SYSTEMS LIMITED
STATEMENT OF INCOME AND RETAINED EARNINGS
FOR THE YEAR ENDED 30 DECEMBER 2018
- 6 -
2018
2017
Notes
£
£
Revenue
3
8,890,962
10,957,459
Cost of sales
(7,149,897)
(8,772,535)
Gross profit
1,741,065
2,184,924
Administrative expenses
(1,759,151)
(1,814,039)
Other operating income
15,216
48,326
Exceptional items
4
(559,762)
(2,037,875)
Operating loss
5
(562,632)
(1,618,664)
Investment income
8
804
9
Finance costs
9
(18,667)
(20,363)
Loss before taxation
(580,495)
(1,639,018)
Tax on loss
10
2,183,436
53,367
Profit/(loss) for the financial year
1,602,941
(1,585,651)
Retained earnings brought forward
7,793,590
9,379,241
Retained earnings carried forward
9,396,531
7,793,590
The Income Statement has been prepared on the basis that all operations are continuing operations.
CALEY OCEAN SYSTEMS LIMITED
STATEMENT OF FINANCIAL POSITION
AS AT
30 DECEMBER 2018
30 December 2018
- 7 -
2018
2017
Notes
£
£
£
£
Non-current assets
Property, plant and equipment
11
1,322,583
1,263,033
Current assets
Inventories
12
145,003
386,115
Trade and other receivables
13
14,416,231
14,272,525
Cash and cash equivalents
3,442
-
14,564,676
14,658,640
Current liabilities
14
(6,350,728)
(7,948,083)
Net current assets
8,213,948
6,710,557
Total assets less current liabilities
9,536,531
7,973,590
Provisions for liabilities
16
(60,000)
(100,000)
Net assets
9,476,531
7,873,590
Equity
Called up share capital
18
80,000
80,000
Retained earnings
9,396,531
7,793,590
Total equity
9,476,531
7,873,590
The financial statements were approved by the board of directors and authorised for issue on 31 July 2019 and are signed on its behalf by:
Mr Ross McLellan
Director
Company Registration No. SC200730
CALEY OCEAN SYSTEMS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 DECEMBER 2018
- 8 -
1
Accounting policies
Company information
Caley Ocean Systems Limited is a
private
company
limited by shares
incorporated in Scotland.
The registered office is
375 Govan Road, Watermark Business Park, Govan, Glasgow, G51 2SE.
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 a
mounts
in these financial statements are
rounded to the nearest £.
The financial statements have been prepared under the historical cost convention. The principal accounting policies adopted are set out below.
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
.
T
he company has
therefore
taken advantage of
e
xemptions from the following disclosure requirements:
-
Section 4 ‘Statement of Financial Position’ – Reconciliation of the opening and closing number of shares
;
-
Section 7 ‘Statement of Cash Flows’ – Presentation of a statement of cash
f
low and related notes and disclosures
;
-
Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instrument Issues’ – Carrying amounts, interest income/expense and net gains/losses for each category of financial instrument; basis of determining fair values; details of collateral, loan defaults or breaches, details of hedges, hedging fair value changes recognised in profit or loss and in other comprehensive income
;
-
Section 33 ‘Related Party Disclosures’ – Compensation for key management personnel
.
The financial statements of the company are consolidated in the financial statements of
Seanamic Group Limited
. These consolidated financial statements are available from its registered office.
1.2
Going concern
Based on the Company’s financial projections, it is expected that the Company will have adequate cash to enable it to meet its liabilities in the ordinary course of business as they fall due for the next 12 months.
Nevertheless, in the event of a short-term working capital need, the parent company Seanamic Group Limited, intends to provide the necessary financial support should it be necessary to allow the company to meet its liabilities as they fall due for the 12 months following the approval of the financial statements. Therefore, at the time of approving the financial statements, the directors have a reasonable expectation that the company has adequate resources to continue in operational existence for the foreseeable future. Thus, the directors continue to adopt the going concern basis of accounting in preparing the financial statements.
The accompanying financial statements have been prepared assuming that the group will continue as a going concern.
CALEY OCEAN SYSTEMS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 30 DECEMBER 2018
1
Accounting policies
(Continued)
- 9 -
1.3
Revenue
Turnover represents amounts receivable for the design of lifting and handling equipment and other special purpose machinery net of VAT.
Revenue from contracts is recognised by reference to the stage of completion when the stage of completion and overall contract value can be estimated reliably. The stage of completion is calculated by reviewing work completed in comparison to contract milestones and the directors’ assessment based on their expertise within that market. Due to the nature of the contracts undertaken, many major costs are incurred later in the contract during the build and fabrication stage and an estimate of accrued costs is required when reaching contract milestones. The estimate for accrued costs is judgemental and based upon proportion of turnover recognised as income and expected gross margin such that profit accrues evenly throughout the term of the contract.
1.4
Property, plant and equipment
Property, plant and equipment
are initially measured at cost and subsequently measured at cost or valuation, net of depreciation and any impairment losses.
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:
Land and buildings Freehold
2% p. a. straight line
Land and buildings Leasehold
10% p.a straight line
Plant and machinery
25% p.a straight line
Fixtures, fittings & equipment
25% p.a straight line
Computer equipment
33% p.a straight line
Motor vehicles
25% p.a 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
.
1.5
Impairment of non-current assets
At each reporting
period
end date, the
company
reviews the carrying amounts of its tangible
assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the company
estimates the recoverable amount of the cash-generating unit to which the asset belongs.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.
CALEY OCEAN SYSTEMS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 30 DECEMBER 2018
1
Accounting policies
(Continued)
- 10 -
Recognised impairment losses are reversed if, and only if, the reasons for the impairment loss have ceased to apply. Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit)
in
prior years. A reversal of an impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.
1.6
Inventories
Inventories
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 inventories to their present location and condition.
At each reporting date, an assessment is made for impairment. Any excess of the carrying amount of inventories 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.
1.7
Cash and cash equivalents
Cash and cash equivalents
are basic financial assets
and
include cash in hand, deposits held at call with banks, other short-term liquid investments with original maturities of three months or less, and bank overdrafts.
1.8
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 statement of financial position 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 trade and other receivables and cash and bank balances, are initially measured at transaction price including transaction costs and are subsequently carried at amortised cost using the effective interest
method unless the arrangement constitutes a financing transaction, where the transaction is measured at the present value of the future receipts discounted at a market rate of interest.
Financial assets classified as receivable within one year are not amortised.
Other financial assets
Other financial assets, 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.
CALEY OCEAN SYSTEMS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 30 DECEMBER 2018
1
Accounting policies
(Continued)
- 11 -
Impairment of financial assets
Financial assets, other than those
held
at
fair value through profit and loss
, are assessed for indicators of impairment at each reporting end date.
Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows have been affected.
If an asset is impaired, the impairment loss is the difference between the carrying amount and the present value of the estimated cash flows discounted at the asset’s original effective interest rate. The impairment loss is recognised in profit or loss.
If there is a decrease in the impairment loss arising from an event occurring after the impairment was recognised, the impairment is reversed. The reversal is such that the current carrying amount does not exceed what the carrying amount would have been, had the impairment not previously been recognised. The impairment reversal is recognised in profit or loss.
Derecognition of financial assets
Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire or are settled, or when
the company
transfers the financial asset and substantially all the risks and rewards of ownership to another entity, or if some significant risks and rewards of ownership are retained but control of the asset has transferred to another party that is able to sell the asset in its entirety to an unrelated third party.
Classification of financial liabilities
Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the company after deducting all of its liabilities.
Basic financial liabilities
Basic financial liabilities, including trade and other payables are
initially recognised at transaction price unless the arrangement constitutes a
financing transaction, where the debt instrument is measured at the present value of
the future receipts discounted at a market rate of interest.
Financial liabilities classified as payable within one year are not amortised.
Trade payables
are obligations to pay for goods or services that have been acquired
in the ordinary course of business from suppliers. A
m
ounts payable are classified as
current liabilities if payment is due within one year or less.
Other financial liabilities
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
s
ubsequently re-measured at their fair value. Changes in the fair value of derivatives are recognised in profit or loss in finance costs or finance income as appropriate, unless hedge accounting is applied and the hedge is a cash flow hedge.
Debt instruments that do not meet the conditions in FRS 102 paragraph 11.9 are subsequently measured at fair value through profit or loss. Debt instruments may be designated as
being measured at
fair value 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.
Derecognition of financial liabilities
Financial liabilities are derecognised when the company’s contractual obligations
expire or are discharged or cancelled.
CALEY OCEAN SYSTEMS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 30 DECEMBER 2018
1
Accounting policies
(Continued)
- 12 -
1.9
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.
1.10
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
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 income statement, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax assets and liabilities are offset when the
company
has a legally enforceable right to offset current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority.
1.11
Provisions
Provisions are recognised when the
company
has a legal or constructive present obligation as a result of a past event, it is probable that the
company
will be required to settle that obligation and a reliable estimate can be made of the amount of the obligation.
The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the reporting end date, taking into account the risks and uncertainties surrounding the obligation.
Where the effect of the time value of money is material, the amount expected to be required to settle the obligation is recognised at present value. When a provision i
s
measured at present value
,
the unwinding of the discount is recognised as a finance cost in profit or loss in the period
in which
it arises.
1.12
Employee benefits
The costs of short-term employee benefits are recognised as a liability and an expense, unless those costs are required to be recognised as part of the cost of stock or non-current 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.
CALEY OCEAN SYSTEMS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 30 DECEMBER 2018
1
Accounting policies
(Continued)
- 13 -
1.13
Retirement benefits
Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due.
1.14
Leases
Rental income from operating leases is recognised on a straight line basis over the term of the relevant lease. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised on a straight line basis over the lease term.
Rentals payable under operating leases,
including
any lease incentives received, are charged to income 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 asset are consumed.
1.15
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 are included in the income statement for the period.
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.
Due to the nature of the contracts undertaken, many major costs are incurred later in the contract during the build and fabrication stage. An estimate of accrued costs is required when reaching contract milestones. The estimate for accrued costs is judge mental and based upon proportion of turnover recognised as income and expected gross margin such that profit accrues evenly throughout the term of the contract
.
3
Revenue
An analysis of the company's revenue is as follows:
2018
2017
£
£
Revenue analysed by class of business
Sales
8,890,962
10,957,459
2018
2017
£
£
Other significant revenue
Interest income
804
9
CALEY OCEAN SYSTEMS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 30 DECEMBER 2018
3
Revenue
(Continued)
- 14 -
2018
2017
£
£
Revenue analysed by geographical market
United Kingdom
3,062,712
3,954,006
Asia
3,415,500
3,796,950
Australasia
-
22,671
North America
1,940,750
572,783
Europe
216,000
1,823,910
Middle East
-
89,142
South America
256,000
697,997
8,890,962
10,957,459
4
Exceptional costs
2018
2017
£
£
Provision for onerous contracts
229,762
2,037,875
Exceptional Professional Fees
330,000
-
559,762
2,037,875
5
Operating loss
2018
2017
Operating loss for the year is stated after charging/(crediting):
£
£
Exchange (gains)/losses
(1,892)
2,464
Fees payable to the company's auditor for the audit of the company's financial statements
24,475
24,996
Depreciation of owned property, plant and equipment
112,348
116,890
Cost of inventories recognised as an expense
5,412,223
7,317,003
Operating lease charges
63,579
46,411
Exchange differences recognised in profit or loss during the year, except for those arising on financial instruments measured at fair value through profit or loss, amounted to £1,892 (2017 - £2,464).
CALEY OCEAN SYSTEMS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 30 DECEMBER 2018
- 15 -
6
Employees
The average monthly number of persons (including directors) employed by the company during the year was:
2018
2017
Number
Number
Direct & Engineering
33
28
Administration
8
8
41
36
Their aggregate remuneration comprised:
2018
2017
£
£
Wages and salaries
2,013,443
2,008,622
Social security costs
165,902
165,588
Pension costs
154,256
146,187
2,333,601
2,320,397
7
Directors' remuneration
2018
2017
£
£
Remuneration for qualifying services
180,000
325,546
Remuneration disclosed above include the following amounts paid to the highest paid director:
2018
2017
£
£
Remuneration for qualifying services
n/a
150,000
8
Investment income
2018
2017
£
£
Interest income
Interest on bank deposits
-
9
Other interest income
804
-
Total income
804
9
CALEY OCEAN SYSTEMS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 30 DECEMBER 2018
- 16 -
9
Finance costs
2018
2017
£
£
Interest on bank overdrafts and loans
18,667
20,363
10
Taxation
2018
2017
£
£
Current tax
UK corporation tax on profits for the current period
(967,464)
-
Adjustments in respect of prior periods
(1,215,972)
(51,422)
Total current tax
(2,183,436)
(51,422)
Deferred tax
Origination and reversal of timing differences
-
(1,945)
Total tax credit
(2,183,436)
(53,367)
The actual credit 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:
2018
2017
£
£
Loss before taxation
(580,495)
(1,639,018)
Expected tax credit based on the standard rate of corporation tax in the UK of 19.00% (2017: 19.00%)
(110,294)
(311,413)
Tax effect of expenses that are not deductible in determining taxable profit
19,736
352
Unutilised tax losses carried forward
-
304,837
Adjustments in respect of prior years
(1,215,972)
(51,422)
Effect of change in corporation tax rate
-
(243)
Depreciation on assets not qualifying for tax allowances
4,569
4,522
Research and development tax credit
(881,475)
-
Taxation for the year
(2,183,436)
(53,367)
CALEY OCEAN SYSTEMS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 30 DECEMBER 2018
- 17 -
11
Property, plant and equipment
Land and buildings Freehold
Land and buildings Leasehold
Plant and machinery
Fixtures, fittings & equipment
Computer equipment
Motor vehicles
Total
£
£
£
£
£
£
£
Cost
At 31 December 2017
1,037,852
164,435
189,216
20,172
190,004
14,881
1,616,560
Additions
-
151,145
3,019
829
16,905
-
171,898
At 30 December 2018
1,037,852
315,580
192,235
21,001
206,909
14,881
1,788,458
Depreciation and impairment
At 31 December 2017
82,186
4,933
122,230
14,150
115,147
14,881
353,527
Depreciation charged in the year
20,717
3,329
35,790
3,119
49,393
-
112,348
At 30 December 2018
102,903
8,262
158,020
17,269
164,540
14,881
465,875
Carrying amount
At 30 December 2018
934,949
307,318
34,215
3,732
42,369
-
1,322,583
At 30 December 2017
955,666
159,502
66,986
6,022
74,857
-
1,263,033
CALEY OCEAN SYSTEMS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 30 DECEMBER 2018
- 18 -
12
Inventories
2018
2017
£
£
Raw materials and consumables
145,003
151,773
Work in progress
-
234,342
145,003
386,115
13
Trade and other receivables
2018
2017
Amounts falling due within one year:
£
£
Trade receivables
1,870,503
2,048,309
Gross amounts owed by contract customers
1,753,223
2,614,501
Corporation tax recoverable
2,184,241
-
Amounts owed by group undertakings
8,422,584
9,453,877
Other receivables
145,355
5,000
Prepayments and accrued income
40,325
150,838
14,416,231
14,272,525
14
Current liabilities
2018
2017
Notes
£
£
Bank loans and overdrafts
15
1,493,094
411,596
Payments received on account
-
279,429
Trade payables
2,096,057
2,060,365
Amounts owed to group undertakings
96,139
60,735
Other taxation and social security
58,820
126,940
Other payables
110,009
107,820
Accruals and deferred income
2,496,609
4,901,198
6,350,728
7,948,083
15
Borrowings
2018
2017
£
£
Bank overdrafts
1,493,094
411,596
Payable within one year
1,493,094
411,596
Bank borrowings are secured via a fixed and floating charges over the assets of the company in addition to a group cross guarantee against the assets of the other UK group entities.
CALEY OCEAN SYSTEMS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 30 DECEMBER 2018
- 19 -
16
Provisions for liabilities
2018
2017
£
£
Warranty provision
60,000
100,000
Movements on provisions:
Warranty provision
£
At 31 December 2017
100,000
Other movements
(40,000)
At 30 December 2018
60,000
17
Retirement benefit schemes
2018
2017
Defined contribution schemes
£
£
Charge to profit or loss in respect of defined contribution schemes
154,256
146,187
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.
18
Share capital
2018
2017
£
£
Ordinary share capital
Issued and fully paid
51,200 Ordinary A shares of £1 each
51,200
51,200
28,800 Ordinary B shares of £1 each
28,800
28,800
80,000
80,000
19
Financial commitments, guarantees and contingent liabilities
At the end of the period under review, performance bonds and guarantees totalling £67,618 (2017 £747,000) were in issue to customers by Royal Bank of Scotland Plc. These guarantees are payable if the company fails to fulfil the terms of the contracts covered by them.
The bonds and guarantees are incorporated within the standard security over the premises and through the bond and floating charge over all the assets of the
Caley Ocean
Systems
Limited.
CALEY OCEAN SYSTEMS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 30 DECEMBER 2018
- 20 -
20
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:
2018
2017
£
£
Within one year
32,800
32,800
Between two and five years
131,200
131,200
In over five years
46,467
79,267
210,467
243,267
21
Ultimate parent company and controlling party
The majority of the equity of the company is owned by Simmons Private Equity II LP, a private equity fund registered in Guernsey. Simmons Private Equity II LP is controlled by its general partner, the ultimate controlling party, Parallel General Partner Limited, a non-cellular Guernsey limited company.
During the year, the company was controlled by the Board of Directors.
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