Registered number:
FOR THE YEAR ENDED 30 SEPTEMBER 2022
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A. F. MACHINERY LIMITED
COMPANY INFORMATION
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A. F. MACHINERY LIMITED
CONTENTS
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A. F. MACHINERY LIMITED
STRATEGIC REPORT
FOR THE YEAR ENDED 30 SEPTEMBER 2022
The directors present their Strategic Report for the year ended 30 September 2022.
Principal Activity The principal activity of the Company continued to be that of agricultural contractors, as well as owning and running an anaerobic digestion plant.
The directors are satisfied with the Company’s performance for the year ended 30 September 2022, particularly considering the impact which cost increases had on the industry throughout the year.
The Company operates in a competitive marketplace with margins and costs under constant scrutiny. However, the directors are confident that the financial performance of the business will be maintained. In the year to 30 September 2022 turnover increased by 9.4% (2021: reduced by 5.1%) to £12.29 million (2021: £11.24 million) which was predominantly attributable to an increase in income from our AD plant, largely due to higher electricity prices. Contracting income and rental revenues both also increased, although crop sales fell slightly. We expect movement in our crop sales on an annual basis, being subject to cropping changes and the volatility in the market prices achieved. The directors remain pleased with the electricity generation from our AD plant as it continues to produce a good, diversified revenue stream for the business especially with the current high electricity prices. The Company saw gross profit increase from £1.5 million to £2.5 million, whilst the operational profit increased from £732,000 to £1.7 million. Profits are expected to remain at around this level for the near future, and the directors are hopeful of returning to the fantastic return achieved in 2019 in the future. Our investment property valuation has resulted in significant movements in our operating profits year on year previously. The long-standing tenant remains committed to the site and has expressed an interest in increasing their storage capacity in the near future, if possible. The directors remain confident in the asset as a good source of diversified revenue. The Company continued to invest in its people during the year, and this investment is ongoing. The Company’s capital spend for the year was £554,000 (2021: £193,000), having invested heavily in recent years. Increased investment spending is planned to take place during the years to 30 September 2023 and 2024, and the Company expects this to continue going forwards. The Company remains committed to investing in research and development each year as technology advances, as this is considered key to the Company’s future and is an area which the Company is actively developing. These investments in technology continue to strengthen our precision farming capability and remote monitoring systems in order to enhance our contract farming offering further. The economic climate continues to exhibit many uncertainties especially regarding costs and the impact of the ongoing conflict in Ukraine. The directors recognise the risks associated with these and consider the business remains well-placed with a strong balance sheet. This, coupled with a well thought out operational strategy, will see the Company continue to grow in the future. The Company also continues to maintain a strong relationship with its bank. The directors are very proud of our dedicated, professional and talented employees, and would like to thank them all for their continued hard work and commitment. Their skill and experience help to ensure that A F Machinery remains one of the leading contract farming operations in the area.
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A. F. MACHINERY LIMITED
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 30 SEPTEMBER 2022
It is the aim of the directors to minimise the exposure to risk in all areas of the business but as is common with most businesses in our industry we are subject to various risks. The directors consider the most important of these risks to be credit, liquidity and interest rates.
Credit risk - the Company mainly trades with long standing customers including a related party farming partnership. The nature of these relationships assists management in controlling its credit risk in addition to normal management process. Liquidity risk - the directors control and monitor the Company's cash flow on a regular basis including reference to monthly budgets. Interest rate risk - the Company is exposed to interest rate fluctuations as the rate payable on its bank loans and long term liabilities are linked to base rate. The directors carefully monitor cash flow to ensure liabilities can be met as they fall due. Other key risks Other key business risks affecting the Group are considered to relate to competition within the industry, fuel costs, non-compliance with applicable legislation, availability of labour and governance. Management are heavily involved in the day to day running of the business and aims to mitigate these other risks via its strategy and working closely with R G Abrey Farms. The Company continues to monitor the impact of the decision for the UK to leave the EU on the agricultural sector and will respond to any changes in risk accordingly. Impacts of future trade deals with the EU and further afield will be managed by the business at the point these are reached. The directors remain aware of the risks associated and consider the business is well-placed. The Ukraine conflict is a risk that is being closely monitored by the directors and its impact on the agricultural industry.
The directors monitor performance on a monthly basis through a number of key performance indicators including turnover, operational profit and capital spend. The directors are satisfied that the performance relating to these is very much in line with expectations.
This report was approved by the board and signed on its behalf.
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A. F. MACHINERY LIMITED
DIRECTORS' REPORT
FOR THE YEAR ENDED 30 SEPTEMBER 2022
The directors present their report and the financial statements for the year ended 30 September 2022.
The directors are responsible for preparing the Strategic Report, the Directors' 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 applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice), including Financial Reporting Standard 102 ‘The Financial Reporting Standard applicable in the UK and Republic of Ireland'. 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 for the Company's financial statements and then apply them consistently;
∙make judgments 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 to 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.
The profit for the year, after taxation, amounted to £1,306,070 (2021 - £321,898).
During the year dividends paid out amounted to £16,000 (2021 - £Nil).
The directors who served during the year were:
The Company is looking to maintain its current market position, dealing with Brexit and Covid-19 impacts as they occur. Furthermore, the Company is continually looking to invest in its operations through capital expenditure.
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A. F. MACHINERY LIMITED
DIRECTORS' REPORT (CONTINUED)
FOR THE YEAR ENDED 30 SEPTEMBER 2022
Information in respect of the principal activities, business review and outlook, key performance indicators and principal risks and uncertainties can be found in the Strategic Report.
There have been no significant events affecting the Company since the year end.
The auditors, Moore Green Chartered Accountants, will be proposed for reappointment in accordance with section 485 of the Companies Act 2006.
This report was approved by the board and signed on its behalf.
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A. F. MACHINERY LIMITED
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF A. F. MACHINERY LIMITED
We have audited the financial statements of A. F. MACHINERY LIMITED (the 'Company') for the year ended 30 September 2022, which comprise the Statement of Comprehensive Income, the Statement of Financial Position, the Statement of Cash Flows, the Statement of Changes in Equity and the related notes, 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 Financial Reporting Standard 102 ‘The Financial Reporting Standard applicable in the UK and Republic of Ireland' (United Kingdom Generally Accepted Accounting Practice).
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 Auditors' 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 United Kingdom, including the Financial Reporting Council'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.
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.
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A. F. MACHINERY LIMITED
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF A. F. MACHINERY LIMITED (CONTINUED)
The other information comprises the information included in the Annual Report other than the financial statements and our Auditors' 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.
In our opinion, based on the work undertaken in the course of the audit:
∙the information given in the Strategic Report and the Directors' Report for the financial year for which the financial statements are prepared is consistent with the financial statements; and
∙the Strategic Report and the Directors' Report have been prepared in accordance with applicable legal requirements.
In the light of the 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 or the Directors' Report.
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A. F. MACHINERY LIMITED
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF A. F. MACHINERY LIMITED (CONTINUED)
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 Auditors' Report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below:
Due to the field in which the Company operates, we identified the areas most likely to have a direct material impact on the financial statements as compliance with UK tax legislation, UK accounting standards and the Companies Act 2006. In addition, we considered the provisions of other laws and regulations which whilst not having a direct impact on the financial statements, are fundamental to the Company’s ability to operate including health and safety; employment law, and compliance with various other regulations relevant to the operation of the Company’s farming operation.
Our approach to identifying and assessing the risk of material misstatement in respect of irregularities, including fraud and non-compliance with laws and regulations, included the following: • Enquiries with management about any known or suspected instances of non-compliance with laws and regulations, accidents in the workplace, potential litigation or claims and fraud; • Reviewing legal and professional fees to confirm matters where the Company engaged lawyers during the year; • Reviewing financial statement disclosures and testing to supporting documentation to assess compliance with applicable laws and regulations; • Reviewing any relevant correspondence with external authorities; • Challenging assumptions and judgements made by management in their significant accounting estimates, particularly around year end stock valuation; • Auditing the risk of management override of controls, including through testing journal entries and other adjustments for appropriateness, and evaluating the business rationale of any significant transactions outside the normal course of business. Due to the inherent limitations of an audit, there is a risk that we will not detect all irregularities, including those leading to a material misstatement in the financial statements or non-compliance with regulation. This risk increases the more that compliance with a law or regulation is removed from the events and transactions reflected in the financial statements, as we will be less likely to become aware of instances of non-compliance. The risk is also greater regarding irregularities occurring due to fraud rather than error, as fraud involves intentional concealment, forgery, collusion, omission or misrepresentation.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council's website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our Auditors' Report.
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A. F. MACHINERY LIMITED
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF A. F. MACHINERY LIMITED (CONTINUED)
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 Auditors' 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.
for and on behalf of
22 Friars Street
Suffolk
CO10 2AA
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A. F. MACHINERY LIMITED
STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 SEPTEMBER 2022
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A. F. MACHINERY LIMITED
REGISTERED NUMBER: 02561921
STATEMENT OF FINANCIAL POSITION
AS AT 30 SEPTEMBER 2022
The financial statements were approved and authorised for issue by the board and were signed on its behalf by:
The notes on pages 16 to 34 form part of these financial statements.
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STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 SEPTEMBER 2022
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STATEMENT OF CHANGES IN EQUITY (CONTINUED)
FOR THE YEAR ENDED 30 SEPTEMBER 2022
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A. F. MACHINERY LIMITED
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 SEPTEMBER 2022
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A. F. MACHINERY LIMITED
STATEMENT OF CASH FLOWS (CONTINUED)
FOR THE YEAR ENDED 30 SEPTEMBER 2022
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A. F. MACHINERY LIMITED
ANALYSIS OF NET DEBT
FOR THE YEAR ENDED 30 SEPTEMBER 2022
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A. F. MACHINERY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2022
A F Machinery Limited is a private company limited by shares and incorporated in England and Wales, registration number 02561921. The principal place of business is The Estate Office, Larkshall, East Wretham, Thetford, Norfolk, IP24 1QY.
The principal activity of the Company continued to be that of agricultural contractors, as well as owning and running an anaerobic digestion plant.
2.Accounting policies
The financial statements have been prepared under the historical cost convention unless otherwise specified within these accounting policies and in accordance with Financial Reporting Standard 102, the Financial Reporting Standard applicable in the UK and the Republic of Ireland and the Companies Act 2006.
The financial statements are presented in Sterling (£) and all values are rounded to the nearest £, except where stated.
The preparation of financial statements in compliance with FRS 102 requires the use of certain critical accounting estimates. It also requires management to exercise judgment in applying the Company's accounting policies (see note 3).
The following principal accounting policies have been applied:
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A. F. MACHINERY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2022
2.Accounting policies (continued)
The directors have considered the Company’s position at the time of signing the financial statements, particularly the cost-of-living crisis and ongoing inflationary pressures, and the potential impact of these on both the Company and the wider economy.
The business operates alongside R G Abrey Farms, a farming partnership in which all directors are partners. The two businesses are run alongside one another with the operations and oversight being assessed on a “consolidated” basis rather than across the two businesses separately. As such, the directors have revised their going concern approach to assess the “business” as one operation. The Company’s performance is subject to the Partnership and is fully supported by the Partnership however it does have its own diversified revenue streams including its investment property and the AD plant. The Company and Partnership have operated profitably for the year ended 30 September 2022 and expect to produce an increased profit in the coming year to 30 September 2023. However, the significant increases in costs experienced by the industry mean that cashflow has continued to be under pressure. As a result, in the year to 30 September 2023 the business identified that it would breach its overdraft facility and consequently agreed a temporary extension of its overdraft facility from £5m to £7m ending on 30 September 2023. As part of the cashflow review, the business has projected cashflows through to 30 September 2024 which has identified a further expected breach in the period from April to September 2024 albeit to a lesser extent than experienced in 2023 and this has been communicated to the bank. The bank has confirmed their commitment to the business and the directors consider that the temporary extension by the bank is a clear sign of the good longstanding relationship which we have with them. Furthermore, the overdraft extension was sanctioned alongside conditions and caveats that the business, as a whole, will agree to complete a full reassessment of its financing structure in the next annual review which is due to be held in October 2023. The directors confirm that no formal agreement has been approved at the time of signing these financial statements, but based on the conversations to date with the bank, evidence of recent support from the bank and forecast improvements in long term profitability, the directors are confident both they and the bank will reach an agreed restructure of their overall lending position in October 2023 which will allow them to meet their liabilities as they fall due. After making the above enquiries, the directors have a reasonable expectation that the Company and business, as a whole, has adequate resources to meet its working capital requirements and continue in operational existence for the foreseeable future. Based on this, the directors have concluded that they have a reasonable expectation that the Company and business, as a whole, will have adequate resources to continue in operational existence for the foreseeable future, being at least twelve months from the date of signing these financial statements, and they therefore continue to adopt the going concern basis of accounting in preparing these financial statements.
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A. F. MACHINERY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2022
2.Accounting policies (continued)
Turnover from contracting farming operations, including the provision of storage and labour, is recognised in the period in which the services are provided to the customer. Arable crop sales Turnover from the sale of arable crops is recognised on despatch of the finished product from the farm gate. AD plant turnover Turnover from the electricity generated is recognised in the period during which it was generated and can be measured reliably. Rental income The turnover on rental income is recognised in the period to which it relates. If it is not possible to distinguish between the research phase and the development phase of an internal project, the expenditure is treated as if it were all incurred in the research phase only.
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A. F. MACHINERY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2022
2.Accounting policies (continued)
Grants of a revenue nature are recognised in the Statement of Comprehensive Income in the same period as the related expenditure.
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A. F. MACHINERY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2022
2.Accounting policies (continued)
At each reporting date the Company assesses whether there is any indication of impairment. If such indication exists, the recoverable amount of the asset is determined which is the higher of its fair value less costs to sell and its value in use. An impairment loss is recognised where the carrying amount exceeds the recoverable amount.
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A. F. MACHINERY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2022
2.Accounting policies (continued)
Land is not depreciated. Depreciation on other assets is charged so as to allocate the cost of assets less their residual value over their estimated useful lives, using either the straight-line or reducing balance method.
Depreciation is provided on the following basis:
The assets' residual values, useful lives and depreciation methods are reviewed, and adjusted prospectively if appropriate, or if there is an indication of a significant change since the last reporting date.
Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised in profit or loss.
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A. F. MACHINERY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2022
2.Accounting policies (continued)
Provisions are charged as an expense to profit or loss in the year that the Company becomes aware of the obligation, and are measured at the best estimate at the reporting date of the expenditure required to settle the obligation, taking into account relevant risks and uncertainties. When payments are eventually made, they are charged to the provision carried in the Statement of Financial Position.
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A. F. MACHINERY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2022
2.Accounting policies (continued)
Useful economic lives of tangible assets The annual depreciation charge for tangible fixed assets is sensitive to changes in the estimated useful economic lives and residual values of the assets. The useful economic lives and residual values are reassessed annually. They are amended when necessary to reflect current estimates, based on technological advancement, future investments, economic utilisation and the physical condition of the assets. See Note 13 for the carrying amount of the tangible assets, and Note 2.12 for the depreciation rates. Contracting income The annual amount of contracting income is based on a percentage of income the customer receives for the crops. The final result is not known when compiling the annual financial statements and is therefore estimated on the prices received for the crops already sold, plus any expected future changes in market rates. This is subsequently adjusted when the final results are known. Investment property valuation Investment property was professionally valued during the year ended 30 September 2020. Where directors do not obtain an external valuation, they use their knowledge of the local property market and the building to update this value. The directors look at local property transactions of similar buildings including reference to the length of leases and assessing external factors such as transport links as a benchmark to estimate the current value of the property.
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A. F. MACHINERY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2022
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A. F. MACHINERY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2022
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A. F. MACHINERY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2022
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A. F. MACHINERY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2022
12.Taxation (continued)
The Spring Budget 2021 announced corporation tax rates are due to rise from 1 April 2023 to 25% for profits over £250,000. A marginal rate will exist between the low profits rate of £50,000 and the main rate.
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A. F. MACHINERY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2022
13.Tangible fixed assets (continued)
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A. F. MACHINERY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2022
The 2022 valuations were made by the Directors, on an open market value for existing use basis.
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A. F. MACHINERY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2022
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A. F. MACHINERY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2022
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A. F. MACHINERY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2022
Investment property revaluation reserve
Profit and loss account
There is a joint and several liability with R G Abrey Farms, a farming partnership in which all directors are partners, under a revolving credit facility. At the year end, the liability for the facility was £2,250,000 (2021 - £2,250,000). The facility is due for renewal in January 2025.
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A. F. MACHINERY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2022
The Company operates a defined contributions pension scheme. The assets of the scheme are held separately from those of the Company in an independently administered fund. The pension cost charge represents contributions payable by the Company to the fund and amounted to £57,838 (2021 - £71,578). Contributions totalling £Nil (2021 - £Nil) were payable to the fund at the reporting date and are included in creditors.
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A. F. MACHINERY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2022
The Company is controlled by the six directors
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