Company Registration No. 01811296 (England and Wales)
PROFINE UK LIMITED
ANNUAL REPORT AND FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
PROFINE UK LIMITED
COMPANY INFORMATION
Directors
Ms U F Kretzschmar
Dr P A Mrosik
Mr R C Thiroff
(Appointed 22 August 2019)
Company number
01811296
Registered office
Lancaster Road
Fradley Park
Lichfield
Staffordshire
WS13 8RY
Auditor
Azets Audit Services
Ventura House
Ventura Park Road
Tamworth
Staffordshire
B78 3HL
Business address
Lancaster Road
Fradley Park
Lichfield
Staffordshire
WS13 8RY
PROFINE UK LIMITED
CONTENTS
Page
Strategic report
1 - 2
Directors' report
3 - 4
Independent auditor's report
5 - 6
Profit and loss account
7
Statement of comprehensive income
8
Balance sheet
9
Statement of changes in equity
10
Statement of cash flows
11
Notes to the financial statements
12 - 24
PROFINE UK LIMITED
STRATEGIC REPORT
FOR THE YEAR ENDED 31 DECEMBER 2019
- 1 -
The directors present the strategic report for the year ended 31 December 2019.
Fair review of the business
We aim to present a balanced review of the performance of our business during the year and its position at the year end. Our review is consistent with the size and non-complex nature of our business and is written in the context of the risks and uncertainties we face.
Principal risks and uncertainties
Due to the transfer of key customer business from Profine UK to Group, volatile exchange rate as a result of continued uncertainly surrounding the UK’s departure from the European Union and generally unfavourable market conditions, the company made a loss before tax this year.
The main financial risks arising from the company’s activities are credit risk, interest rate risk, liquidity risk and currency risk. These factors were particularly influential during the uncertain and volatile political situation. The company incurred increased costs as a result of Brexit preparations and reduction in liquidity through stock piling.
The company’s policy in respect of credit risk is to require credit checks on potential customers before sales are made and to have appropriate credit insurance and trading terms reflecting our customers’ purchase volumes. The company did not incur any significant bad debts in 2019 despite challenging market conditions.
Financing risks
The directors have prepared the financial statements on the going concern basis. The company is reliant upon financial support from its parent company, Profine GmbH, which in turn is dependent upon financial support from its related group companies, in the form of extending credit on group loans and providing additional financial support as is required to enable it to continue to trade and to meet its debts and liabilities as they fall due.
Covid19
Since the year end, the spread of COVID-19 has severely impacted many local economies around the globe. In many countries, businesses are being forced to cease or limit operations for long or indefinite periods of time, the Company has been fortunate enough to be able to postpone some of its non essential contracts whilst servicing others remotely.
Measures taken to contain the spread of the virus, including travel bans, quarantines, social distancing, and closures of non-essential services have triggered significant disruptions to businesses worldwide, resulting in an economic slowdown. Governments and central banks have responded with monetary and fiscal interventions to stabilise economic conditions and the Company had utilised the Furlough measures introduced by the Government.
The duration and impact of the COVID-19 pandemic, as well as the effectiveness of government and central bank responses, remains unclear at this time. It is not possible to reliably estimate the duration and severity of these consequences, as well as their impact on the financial position and results of the Company for future periods.
Key performance indicators
Turnover for the current year decreased 8.3% to £21.8m due to re-adjustments in our supply chain and difficult market conditions which we were trying to counteract by increased efforts in product innovations and new customer acquisition. Despite this the company performed well in respect of its competitors, increasing market share. General cost of sales increased proportionately mainly due to FX rate effects on material costs and European transport.
With the risks of future material costs, market demand and exchange rate uncertainties we are aware that any plans for the future development of the business may be subject to unforeseen events outside our control. Brexit is likely to impact companies such as ours that have a substantial level of trade within Europe, for now the level of impact is uncertain.
PROFINE UK LIMITED
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
- 2 -
Dr P A Mrosik
Director
1 October 2020
PROFINE UK LIMITED
DIRECTORS' REPORT
FOR THE YEAR ENDED 31 DECEMBER 2019
- 3 -
The directors present their annual report and financial statements for the year ended 31 December 2019.
Principal activities
The company continues to market PVC profiles and other components for the production of windows, which are sold to third party customers.
The current economic environment in the construction sector has slightly deteriorated from the previous year in terms of volumes. This and unprecedented increases of raw material prices
and increased European transport costs,
combined with unfavourable FX rates has
resulted in t
he company
reporting an
operating
loss
of £2.79
m
.
Directors
The directors who held office during the year and up to the date of signature of the financial statements were as follows:
Ms U F Kretzschmar
Dr P A Mrosik
Mr R C Thiroff
(Appointed 22 August 2019)
Results and dividends
The results for the year are set out on page 7.
The company's
loss
after tax for the year amounted to £4,882,474 (2018 - £1,119,766). The directors recommend that no dividend be paid.
No preference dividends were paid.
Future developments
The directors aim to maintain the management policies, to achieve growth in what is expected to be an increasingly competitive and challenging market, by introducing innovative and future-proof products as well as gaining market share through conversion of competitor business. The company will also have to develop strategies for combating and/or profiting from the future terms of trade between the UK and European Union.
In May 2020 Profine UK acquired the assets of Aperture Trading Group, a competitor that had entered administration as the nation initiated lockdown to combat the Covid-19 pandemic.
The acquisition resulted in the establishment of a manufacturing facility in the UK on a large scale site of 509,000 sq. ft. Throughout 2020 an integration plan will see the transfer of all UK specific production to the UK which not only mitigates the risk resulting from the UK’s exit from the EU but also reduces Profine UK’s cost base, particularly in relation to inbound freight. In addition Profine UK has successful continued the business of the competitor adding substantial turnover and profitability to the Group.
In conclusion this not only secures the future trading of Profine UK but establishes a profitable base on which the business can seek to grow its market share.
Auditor
In accordance with the company's articles, a resolution proposing that Azets Audit Services be reappointed as auditor of the company will be put at a General Meeting.
PROFINE UK LIMITED
DIRECTORS' REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
- 4 -
Statement of directors' responsibilities
The directors are responsible for preparing the annual report and the financial statements in accordance with applicable law and regulations.
Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the 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.
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 in order to
become
aware of all relevant audit information and to establish that the company’s auditor is aware of that information.
On behalf of the board
Dr P A Mrosik
Director
1 October 2020
PROFINE UK LIMITED
INDEPENDENT AUDITOR'S REPORT
TO THE MEMBERS OF PROFINE UK LIMITED
- 5 -
Opinion
We have audited the financial statements of Profine UK Limited (the 'company') for the year ended 31 December 2019 which comprise the profit and loss account, the statement of comprehensive income, the balance sheet, the statement of changes in equity, the statement of cash flows and notes to the financial statements, including a summary of significant accounting policies.
The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including FRS 102
The Financial Reporting Standard applicable in the UK and Republic of Ireland
(United Kingdom Generally Accepted Accounting Practice).
In our opinion the financial statements:
-
give a true and fair view of the state of the company's affairs as at 31 December 2019 and of its loss for the year then ended;
-
have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and
-
have been prepared in accordance with the requirements of the Companies Act 2006.
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.
PROFINE UK LIMITED
INDEPENDENT AUDITOR'S REPORT (CONTINUED)
TO THE MEMBERS OF PROFINE UK LIMITED
- 6 -
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.
Lee Van Houplines (Senior Statutory Auditor)
for and on behalf of Azets Audit Services
1 October 2020
Statutory Auditor
Ventura House
Ventura Park Road
Tamworth
Staffordshire
B78 3HL
PROFINE UK LIMITED
PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED 31 DECEMBER 2019
- 7 -
2019
2018
Notes
£
£
Turnover
3
21,799,025
23,845,634
Cost of sales
(20,622,016)
(22,679,186)
Gross profit
1,177,009
1,166,448
Distribution costs
(973,325)
(498,059)
Administrative expenses
(2,992,980)
(2,033,754)
Other operating expenses
(1,750)
(170)
Operating loss
4
(2,791,046)
(1,365,535)
Interest receivable and similar income
7
1,670
2,590
Loss before taxation
(2,789,376)
(1,362,945)
Tax on loss
8
(2,093,098)
243,179
Loss for the financial year
(4,882,474)
(1,119,766)
The profit and loss account has been prepared on the basis that all operations are continuing operations.
PROFINE UK LIMITED
STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2019
- 8 -
2019
2018
£
£
Loss for the year
(4,882,474)
(1,119,766)
Other comprehensive income
-
-
Total comprehensive income for the year
(4,882,474)
(1,119,766)
PROFINE UK LIMITED
BALANCE SHEET
AS AT
31 DECEMBER 2019
31 December 2019
- 9 -
2019
2018
Notes
£
£
£
£
Fixed assets
Tangible assets
9
1,511,576
736,017
Current assets
Stocks
10
2,748,882
2,998,586
Debtors
11
2,697,838
4,875,024
Cash at bank and in hand
978,529
774,791
6,425,249
8,648,401
Creditors: amounts falling due within one year
12
(5,510,518)
(2,075,637)
Net current assets
914,731
6,572,764
Total assets less current liabilities
2,426,307
7,308,781
Capital and reserves
Called up share capital
16
17,920,002
17,920,002
Profit and loss reserves
(15,493,695)
(10,611,221)
Total equity
2,426,307
7,308,781
The financial statements were approved by the board of directors and authorised for issue on 1 October 2020 and are signed on its behalf by:
Ms U F Kretzschmar
Director
Company Registration No. 01811296
PROFINE UK LIMITED
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2019
- 10 -
Share capital
Profit and loss reserves
Total
£
£
£
Balance at 1 January 2018
17,920,002
(9,491,455)
8,428,547
Year ended 31 December 2018:
Loss and total comprehensive income for the year
-
(1,119,766)
(1,119,766)
Balance at 31 December 2018
17,920,002
(10,611,221)
7,308,781
Year ended 31 December 2019:
Loss and total comprehensive income for the year
-
(4,882,474)
(4,882,474)
Balance at 31 December 2019
17,920,002
(15,493,695)
2,426,307
PROFINE UK LIMITED
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2019
- 11 -
2019
2018
Notes
£
£
£
£
Cash flows from operating activities
Cash (absorbed by)/generated from operations
21
(2,263,468)
551,595
Investing activities
Purchase of tangible fixed assets
(1,110,377)
(678,228)
Proceeds on disposal of tangible fixed assets
-
900
Interest received
1,670
2,590
Net cash used in investing activities
(1,108,707)
(674,738)
Financing activities
Proceeds from borrowings
3,575,913
498,270
Net cash generated from financing activities
3,575,913
498,270
Net increase in cash and cash equivalents
203,738
375,127
Cash and cash equivalents at beginning of year
774,791
399,664
Cash and cash equivalents at end of year
978,529
774,791
PROFINE UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
- 12 -
1
Accounting policies
Company information
Profine UK Limited is a
private
company
limited by shares
incorporated in England and Wales.
The registered office is
Lancaster Road, Fradley Park, Lichfield, Staffordshire, WS13 8RY.
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.
1.2
Going concern
The financial statements show a loss before tax for the year of £2,789,376 (2018: Loss £1,362,945) and a reduction in net current assets to £914,731. Profit and loss forecasts prepared to 31 December 2020 demonstrate that the company is anticipated to record further losses. Uncertainties also arise from the impact of Covid19 and negotiations surrounding the UK's exit from the European Union. The directors have however prepared the financial statements on the going concern basis. The company is reliant upon financial support from its parent company, Profine GmbH (which is in turn dependent upon support from related group companies), in the form of extending credit on group loans and providing additional financial support as required to enable it to continue to trade and to meet its debts and liabilities as they fall due. Profine UK Limited allows the group to supply its product manufactured in Germany into the UK market place. The directors have obtained a letter of support from the directors of HTT Holding GmbH, the ultimate holding company, stating that it is their intention that such support will continue for a period of at least 12 months following the signature of these financial statements.
1.3
Turnover
Turnover is recognised at the fair value of the consideration received or receivable for goods and services provided in the normal course of business
, and
is shown net of VAT and other sales related taxes
.
The fair value of consideration takes into account trade discounts, settlement discounts and volume rebates.
Revenue from the sale of goods is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer
(usually on dispatch of the goods)
, the amount of revenue can be measured reliably, it is probable that the economic benefits associated with the transaction will flow to the entity and the costs incurred or to be incurred in respect of the transaction can be measured reliably.
1.4
Tangible fixed assets
Tangible fixed assets
are initially measured at cost and subsequently measured at cost or valuation, net of depreciation and any impairment losses.
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 - Leasehold
equal instalments over the period of the lease
Plant and machinery
20 - 33% straight line
Fixtures, fittings and equipment
20% per annum 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
.
PROFINE UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
1
Accounting policies
(Continued)
- 13 -
1.5
Impairment of fixed assets
At each reporting
period
end date, the
company
reviews the carrying amounts of its tangible
assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any).
1.6
Stocks
Stocks are stated at the lower of cost and estimated selling price less costs to complete and sell. Cost comprises direct materials and, where applicable, direct labour costs and those overheads that have been incurred in bringing the stocks to their present location and condition.
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.
1.7
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. Bank overdrafts are shown within borrowings in current liabilities.
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 balance sheet when the company becomes party to the contractual provisions of the instrument.
Financial assets and liabilities are offset
, with
the net amounts presented in the financial statements
,
when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis or to realise the asset and settle the liability simultaneously.
Basic financial assets
Basic financial assets, which include debtors and cash and bank balances, are initially measured at transaction price including transaction costs and are subsequently carried at amortised cost using the effective interest
method unless the arrangement constitutes a financing transaction, where the transaction is measured at the present value of the future receipts discounted at a market rate of interest.
Financial assets classified as receivable within one year are not amortised.
Other financial assets
Other financial assets, 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.
PROFINE UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
1
Accounting policies
(Continued)
- 14 -
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 creditors, bank loans, loans from
fellow group companies and preference shares that are classified as debt, are
initially recognised at transaction price unless the arrangement constitutes a
financing transaction, where the debt instrument is measured at the present value of
the future
paymen
ts discounted at a market rate of interest.
Financial liabilities classified as payable within one year are not amortised.
Debt instruments are subsequently carried at amortised cost, using the effective
interest rate method.
Trade creditors
are obligations to pay for goods or services that have been acquired
in the ordinary course of business from suppliers. A
m
ounts payable are classified as
current liabilities if payment is due within one year or less. If not, they are presented
as non-current liabilities. Trade creditors are recognised initially at transaction price
and subsequently measured at amortised cost using the effective interest method.
Other financial liabilities
Derivatives, 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
through
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.
PROFINE UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
1
Accounting policies
(Continued)
- 15 -
Derecognition of financial liabilities
Financial liabilities are derecognised when the company’s contractual obligations
expire or are discharged or cancelled.
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 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.
1.11
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.
1.12
Retirement benefits
Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due.
PROFINE UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
1
Accounting policies
(Continued)
- 16 -
1.13
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 lease
d
asset are consumed.
1.14
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 profit and loss account 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.
3
Turnover and other revenue
2019
2018
£
£
Other significant revenue
Interest income
1,670
2,590
2019
2018
£
£
Turnover analysed by geographical market
United Kingdom
21,596,388
21,689,233
Europe
202,637
2,156,401
21,799,025
23,845,634
PROFINE UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
- 17 -
4
Operating loss
2019
2018
£
£
Operating loss for the year is stated after charging/(crediting):
Exchange losses/(gains)
1,762
209
Fees payable to the company's auditors for the audit of the company's annual accounts
18,250
18,250
Depreciation of owned tangible fixed assets
334,818
34,595
(Loss)/profit on disposal of tangible fixed assets
-
(900)
Cost of stocks recognised as an expense
18,310,665
20,505,509
Operating lease charges
958,541
819,426
5
Employees
The average monthly number of persons (including directors) employed by the company during the year was:
2019
2018
Number
Number
Selling and distribution
4
4
Administration
7
11
Warehouse
16
7
Management
5
5
Technical
4
3
36
30
Their aggregate remuneration comprised:
2019
2018
£
£
Wages and salaries
1,599,872
962,103
Social security costs
132,504
119,298
Pension costs
58,807
36,996
1,791,183
1,118,397
6
Directors' remuneration
2019
2018
£
£
Remuneration for qualifying services
58,333
-
Company pension contributions to defined contribution schemes
3,792
-
62,125
-
PROFINE UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
6
Directors' remuneration
(Continued)
- 18 -
The number of directors for whom retirement benefits are accruing under defined contribution schemes amounted to 1 (2018 - 0).
7
Interest receivable and similar income
2019
2018
£
£
Interest income
Interest on bank deposits
897
457
Other interest income
773
2,133
Total income
1,670
2,590
Investment income includes the following:
Interest on financial assets not measured at fair value through profit or loss
897
457
8
Taxation
2019
2018
£
£
Deferred tax
Origination and reversal of timing differences
2,093,098
(243,179)
The actual charge/(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:
2019
2018
£
£
Loss before taxation
(2,789,376)
(1,362,945)
Expected tax credit based on the standard rate of corporation tax in the UK of 19.00% (2018: 19.00%)
(529,981)
(258,960)
Tax effect of expenses that are not deductible in determining taxable profit
14,549
4,303
Unutilised tax losses carried forward
516,933
276,041
Permanent capital allowances in excess of depreciation
(65,117)
(23,484)
Depreciation on assets not qualifying for tax allowances
63,616
2,271
Deferred tax adjustments in respect of prior years
2,093,098
(243,179)
Profit on sale of fixed assets
-
(171)
Taxation charge/(credit) for the year
2,093,098
(243,179)
The company has taxable losses of £13,909,964 (2018 - £11,189,263) available to carry forward against future trading profits.
PROFINE UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
- 19 -
9
Tangible fixed assets
Land and buildings - Leasehold
Assets under construction
Plant and machinery
Fixtures, fittings and equipment
Total
£
£
£
£
£
Cost
At 1 January 2019
340,186
611,007
173,839
156,605
1,281,637
Additions
-
19,442
1,090,935
-
1,110,377
Transfers
-
(611,007)
611,007
-
-
At 31 December 2019
340,186
19,442
1,875,781
156,605
2,392,014
Depreciation and impairment
At 1 January 2019
279,796
-
109,219
156,605
545,620
Depreciation charged in the year
22,646
-
312,172
-
334,818
At 31 December 2019
302,442
-
421,391
156,605
880,438
Carrying amount
At 31 December 2019
37,744
19,442
1,454,390
-
1,511,576
At 31 December 2018
60,390
611,007
64,620
-
736,017
10
Stocks
2019
2018
£
£
Finished goods and goods for resale
2,748,882
2,998,586
11
Debtors
2019
2018
Amounts falling due within one year:
£
£
Trade debtors
2,227,919
2,542,825
Amounts owed by group undertakings
334,441
-
Other debtors
-
50,000
Prepayments and accrued income
135,478
189,101
2,697,838
2,781,926
2019
2018
Amounts falling due after more than one year:
£
£
Deferred tax asset (note 14)
-
2,093,098
Total debtors
2,697,838
4,875,024
PROFINE UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
- 20 -
12
Creditors: amounts falling due within one year
2019
2018
£
£
Loans and overdrafts
13
4,074,183
498,270
Trade creditors
768,342
686,719
Other taxation and social security
466,870
566,682
Accruals and deferred income
201,123
323,966
5,510,518
2,075,637
13
Loans and overdrafts
2019
2018
£
£
Loans from group undertakings
4,074,183
498,270
Payable within one year
4,074,183
498,270
14
Deferred taxation
The following are the major deferred tax liabilities and assets recognised by the company and movements thereon:
Assets
Assets
2019
2018
Balances:
£
£
Tax losses
-
2,093,098
2019
Movements in the year:
£
Asset at 1 January 2019
(2,093,098)
Charge to profit or loss
2,093,098
Liability at 31 December 2019
-
A deferred tax asset of £
2,093,098
was recognised in
the year ended 31 December 2018,
in respect of trading losses the company ha
d
accumulated. It was previously considered that the company was more likely than not to record taxable profits against which the asset would be utilised. Having prepared renewed projections for
the year ended 31 December 2020
at the time of signing of these financial statements the directors have taken the decision to derecognise the asset. The asset will be reinstated at such time as the directors are satisfied that the company will return to profitability.
PROFINE UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
- 21 -
15
Retirement benefit schemes
2019
2018
Defined contribution schemes
£
£
Charge to profit or loss in respect of defined contribution schemes
58,807
36,996
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.
16
Share capital
2019
2018
£
£
Ordinary share capital
Issued and fully paid
9,600,002 Ordinary of £1 each
9,600,002
9,600,002
Preference share capital
Issued and fully paid
8,320,000 Preference of £1 each
8,320,000
8,320,000
Preference shares classified as equity
8,320,000
8,320,000
Total equity share capital
17,920,002
17,920,002
17
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:
2019
2018
£
£
Within one year
442,889
446,057
Between two and five years
366,236
723,646
In over five years
4,217
-
813,342
1,169,703
18
Related party transactions
Transactions with related parties
During the year the company entered into the following transactions with related parties:
PROFINE UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
18
Related party transactions
(Continued)
- 22 -
Sales
Purchases
2019
2018
2019
2018
£
£
£
£
Entities with control, joint control or significant influence over the company
68,565
342,261
18,548,328
20,373,519
Fellow Group Companies
6,858
-
4,531
-
The company owns plant and machinery which is used by a fellow subsidiary, Recycling PVC Limited. The company charges rent for the use of this machinery. These charges amounted to £59,063 in the year ended 31 December 2019.
The following amounts were outstanding at the reporting end date:
2019
2018
Amounts due to related parties
£
£
Entities with control, joint control or significant influence over the company
4,074,183
498,270
The above amount represents the balance owed to the parent company Profine GmbH. No interest is charged on this loan and there is no fixed date for repayment.
The following amounts were outstanding at the reporting end date:
2019
2018
Amounts due from related parties
£
£
Fellow Group Companies
334,441
-
The company provided a loan in the year of £260,773 to Recycling PVC Limited, which is a fellow subsidiary and this is included within the above amount. Interest of £733 has been charged on this loan and there is no fixed date for repayment.
PROFINE UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
- 23 -
19
Events after the reporting date
Since the year end, the spread of COVID-19 has severely impacted many local economies around the globe. In many countries, businesses are being forced to cease or limit operations for long or indefinite periods of time, the Company has been fortunate enough to be able to postpone some of its non essential contracts whilst servicing others remotely.
Measures taken to contain the spread of the virus, including travel bans, quarantines, social distancing, and closures of non-essential services have triggered significant disruptions to businesses worldwide, resulting in an economic slowdown. Governments and central banks have responded with monetary and fiscal interventions to stabilise economic conditions and the Company has utilised the Furlough measures introduced by the Government.
The Company has determined that these events are non-adjusting subsequent events. Accordingly, the financial position and results of operations as of and for the year ended 31 December 2019 have not been adjusted to reflect their impact. The duration and impact of the COVID-19 pandemic, as well as the effectiveness of government and central bank responses, remains unclear at this time. It is not possible to reliably estimate the duration and severity of these consequences, as well as their impact on the financial position and results of the Company for future periods.
In May 2020 the company created a subsidiary company to acquire the assets of a competitor business which will allow for increased capacity and an expansion of its customer base.
20
Ultimate controlling party
The immediate parent company is Profine GmbH, a company registered in Germany, which owns 100% of the company's ordinary share capital. The ultimate parent company is HTT Holding GmbH, a company registered in Germany.
21
Cash (absorbed by)/generated from operations
2019
2018
£
£
Loss for the year after tax
(4,882,474)
(1,119,766)
Adjustments for:
Taxation charged/(credited)
2,093,098
(243,179)
Investment income
(1,670)
(2,590)
Gain on disposal of tangible fixed assets
-
(900)
Depreciation and impairment of tangible fixed assets
334,818
34,595
Movements in working capital:
Decrease/(increase) in stocks
249,704
(51,772)
Decrease in debtors
84,088
2,118,755
Decrease in creditors
(141,032)
(183,548)
Cash (absorbed by)/generated from operations
(2,263,468)
551,595
PROFINE UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
- 24 -
22
Analysis of changes in net funds/(debt)
1 January 2019
Cash flows
31 December 2019
£
£
£
Cash at bank and in hand
774,791
203,738
978,529
Borrowings excluding overdrafts
(498,270)
(3,575,913)
(4,074,183)
276,521
(3,372,175)
(3,095,654)
23
Non-audit services provided by auditor
In common with many businesses of our size and nature we use our auditor to prepare and submit returns to the tax authorities and assist with the preparation of the financial statements.
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