Company Registration No. 03556697 (England and Wales)
L & I EATON ARC LIMITED
ANNUAL REPORT AND FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 OCTOBER 2019
L & I EATON ARC LIMITED
COMPANY INFORMATION
Director
Mr L J Bootle
Company number
03556697
Registered office
Unit Gf1, The Quad
Atherleigh Business Park, Gibfield Park Avenue
Atherton
Manchester
M46 0SY
Auditor
Lopian Gross Barnett & Co
1st Floor, Cloister House
Riverside
New Bailey Street
Manchester
M3 5FS
Business address
Unit Gf1, The Quad
Atherleigh Business Park, Gibfield Park Avenue
Atherton
Manchester
M46 0SY
L & I EATON ARC LIMITED
CONTENTS
Page
Strategic report
1 - 2
Director's 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 - 27
L & I EATON ARC LIMITED
STRATEGIC REPORT
FOR THE YEAR ENDED 31 OCTOBER 2019
- 1 -
The director presents the strategic report for the year ended 31 October 2019.
Fair review of the business
A dominant company in the accident repair industry which works with core partners including insurance
companies, work providers, vehicle manufacturers, retail and public sector.
The company presently has 7 sites in prime locations throughout England and Scotland. It has a total of 31 vehicle manufacturer approvals, making it a significant player in the UK market, these include BMW, Jaguar, Land Rover, Mercedes, VW Group and Tesla.
The financial results reported below reflect the restated figures as identified during the course of the current period audit. A detailed summary is included within note 32
which includes an increase in the 2018 gross profit of £1.8m and a cumulative increase in net assets of £1.9m.
Turnover during the year decreased from £21.8m to £21.2m.
The gross profit margin was 41.4%, compared with 45.3% in the previous year. This is in line with the director’s expectations and reflects the medium-term strategic decision to broaden its customer base and therefore reduce its reliance on any particular customer or site. This is being achieved through several methods and the director believes the current strategy is prudent and will strengthen the company’s position in the long term.
Net assets as of 31 October 2019 were £
7.1
m as against £5.6m in 2018
.
The director is
pleased
with the results which have been significantly boosted by the prior period restatements.
Principal risks and uncertainties
The primary risk to the level of activity relates to loss of approval from one or more major insurance customers. It is difficult to guard against such a loss but there are strong relationships built on excellent customer service and repair quality. As noted above the director is continuing to develop relationships with other insurance companies and work providers to reduce the commercial risk of any particular customer having a dominant position.
The secondary risks are the declining number of accident repairs due to the increasing level of vehicle safety features resulting in fewer accidents and not keeping abreast of technology.
The director wishes to maintain and further broaden the portfolio of insurance companies and work providers who provide quality revenue streams.
Development and performance
The industry is rapidly changing due to the technological evolution of vehicles towards electric, hybrid and autonomous driving. The company is committed to continuous investment in its processes, staff training and technological implementation to ensure it remains at the forefront of the industry and continues to develop strong relationships with current and future partners.
The growth in net assets is
a
direct result of previous investment and commitment to the future of the accident repair industry.
The company has strong operational cash flows and funds its expansion from retained profits rather than external funders.
As part of the company's plans for expansion, three additional sites will open in 2020. These will be located in the key regional areas of Glasgow and Birmingham, together with a new Manchester site which will be the company's first commercial repair centre.
These acquisitions have been funded using the company's existing cash reserves.
L & I EATON ARC LIMITED
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 OCTOBER 2019
- 2 -
Key performance indicators
The company operates in a competitive market place and the director and senior management are committed to maintain and enhance customer service and satisfaction levels. This will ensure that efficiencies are maintained and the insurers Key Performance Indicators (KPI) are met.
The key performance indicators (KPI's) that the company regards as important are:
a. gross profit margin;
b. the ratio of administrative expenses to turnover;
c. the ratio of operating profit to turnover; and
d. earnings before interest, tax, depreciation, impairment charge and amortisation (EBITDA).
For the year under review, those Key Performance Indicators were:
2019
2018
Gross margin
41.4%
45.3%
Administrative expenses to turnover
32.9%
31.1%
Operating profit to turnover
8.
5
%
14
.2
%
Earnings before interest, tax, depreciation and amortisation
£
2,471,320
£
3,807,946
An analysis of the company's competitors illustrates that the gross profit margin, cash position, net assets and other key performance indicators continues to be above the industry average.
Mr L J Bootle
Director
2 December 2020
L & I EATON ARC LIMITED
DIRECTOR'S REPORT
FOR THE YEAR ENDED 31 OCTOBER 2019
- 3 -
The director presents his annual report and financial statements for the year ended 31 October 2019.
Principal activities
The principal activity of the company continued to be that of motor vehicle body repairs.
Director
The director who held office during the year and up to the date of signature of the financial statements was as follows:
Mr L J Bootle
Results and dividends
The results for the year are set out on page 7.
No ordinary dividends were paid. The director does not recommend payment of a final dividend.
Auditor
Lopian Gross Barnett & Co were appointed as auditor to the company and in accordance with section 485 of the Companies Act 2006.
Statement of director's responsibilities
The director is responsible for preparing the annual report and the financial statements in accordance with applicable law and regulations.
Company law requires the director to prepare financial statements for each financial year. Under that law the director has 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 director must not approve the financial statements unless he is 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 director is 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 director is 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. He is 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 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.
L & I EATON ARC LIMITED
DIRECTOR'S REPORT (CONTINUED)
FOR THE YEAR ENDED 31 OCTOBER 2019
- 4 -
On behalf of the board
Mr L J Bootle
Director
2 December 2020
L & I EATON ARC LIMITED
INDEPENDENT AUDITOR'S REPORT
TO THE MEMBERS OF L & I EATON ARC LIMITED
- 5 -
Disclaimer of opinion on financial statements
We were engaged to audit the financial statements of L & I Eaton Arc Limited (the 'company') for the year ended 31 October 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).
We do not express an opinion on the accompanying financial statements. Because of the significance of the matter described in the 'Basis for Disclaimer of Opinion' section of our report, we have not been able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion on these financial statements.
Basis for disclaimer of opinion
Management have explained the background and reasons for the circumstances encountered in note
32
.
As a consequence of the situation arising from those circumstances we have been unable to obtain sufficient audit evidence on which to base an opinion. In particular, that not all transactions of the company have been recorded in its books and records.
The company is in the process of identifying the missing transactions and their nature as well as collecting and collating evidence to support their accounting treatment.
Management have quantified what they believe the impact is, as at the time of the approval of the accounts, in note 32.
Once this process is complete, adjustments to correctly reflect them in the financial statements will be necessary. The potential impact of the adjustments could be material and affect a number of balances in the primary statements.
Opinions on other matters prescribed by the Companies Act 2006
Because of the significance of the matter described in the basis for disclaimer of opinion section of our report, we
have been unable to form an opinion that:
-
the information given in the strategic report and directors’ report for the financial year for which the financial statements are prepared is consistent with the financial statements; and
-
the strategic report and directors’ report have been prepared in accordance with applicable legal requirements.
Matters on which we are required to report by exception
Notwithstanding our disclaimer of an opinion on the financial statements, in the light of the knowledge and understanding of the company and its environment obtained in the course of the audit performed and subject to the pervasive limitation described above, we have not identified material misstatements in the strategic report or the directors’ report.
Arising from the limitation of our work referred to above:
-
we have not obtained all the information and explanations that we considered necessary for the purpose of our audit; and
-
we were unable to determine whether adequate accounting records had been maintained.
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion:
-
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.
L & I EATON ARC LIMITED
INDEPENDENT AUDITOR'S REPORT (CONTINUED)
TO THE MEMBERS OF L & I EATON ARC LIMITED
- 6 -
Responsibilities of director
As explained more fully in the director's
r
esponsibilities
s
tatement, the director is 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 director determines 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 director is 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 director either intends to liquidate the company or to cease operations, or has no realistic alternative but to do so.
Auditor's responsibilities for the audit of the financial statements
Our responsibility is to conduct an audit of the company’s financial statements in accordance with International Standards on Auditing (UK) and to issue an auditor’s report.
However, because of the matter described in the basis for disclaimer of opinion section of our report, we were not able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion on these financial statements.
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, and we have fulfilled our other ethical responsibilities in accordance with these requirements.
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 him 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.
Jason Selig BA ACA CTA DChA (Senior Statutory Auditor)
for and on behalf of Lopian Gross Barnett & Co
2 December 2020
Chartered Accountants
Statutory Auditor
1st Floor, Cloister House
Riverside
New Bailey Street
Manchester
M3 5FS
L & I EATON ARC LIMITED
PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED 31 OCTOBER 2019
- 7 -
2019
2018
as restated
Notes
£
£
Turnover
3
21,201,060
21,883,371
Cost of sales
(12,420,062)
(11,974,062)
Gross profit
8,780,998
9,909,309
Administrative expenses
(6,982,628)
(6,795,522)
Operating profit
4
1,798,370
3,113,787
Interest receivable and similar income
7
-
8,077
Interest payable and similar expenses
8
(250)
(18,687)
Amounts written off investments
9
-
(75,877)
Profit before taxation
1,798,120
3,027,300
Tax on profit
10
(352,070)
(600,108)
Profit for the financial year
1,446,050
2,427,192
The profit and loss account has been prepared on the basis that all operations are continuing operations.
L & I EATON ARC LIMITED
STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 OCTOBER 2019
- 8 -
2019
2018
£
£
Profit for the year
1,446,050
2,427,192
Other comprehensive income
-
-
Total comprehensive income for the year
1,446,050
2,427,192
L & I EATON ARC LIMITED
BALANCE SHEET
AS AT
31 OCTOBER 2019
31 October 2019
- 9 -
2019
2018
as restated
Notes
£
£
£
£
Fixed assets
Tangible assets
13
2,136,204
2,217,980
Investments
14
1,164,354
1,164,254
3,300,558
3,382,234
Current assets
Stocks
17
264,460
272,828
Debtors
18
9,203,194
6,386,490
Cash at bank and in hand
1,915,699
2,176,177
11,383,353
8,835,495
Creditors: amounts falling due within one year
19
(7,481,045)
(6,419,618)
Net current assets
3,902,308
2,415,877
Total assets less current liabilities
7,202,866
5,798,111
Creditors: amounts falling due after more than one year
20
-
(82,049)
Provisions for liabilities
23
(104,199)
(63,445)
Net assets
7,098,667
5,652,617
Capital and reserves
Called up share capital
26
100
100
Profit and loss reserves
7,098,567
5,652,517
Total equity
7,098,667
5,652,617
The financial statements were approved and signed by the director and authorised for issue on 2 December 2020
Mr L J Bootle
Director
Company Registration No. 03556697
L & I EATON ARC LIMITED
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 OCTOBER 2019
- 10 -
Share capital
Profit and loss reserves
Total
Notes
£
£
£
As restated for the period ended 31 October 2018:
Balance at 1 November 2017 (as restated)
100
3,851,325
3,851,425
Year ended 31 October 2018:
Profit and total comprehensive income for the year
-
2,427,192
2,427,192
Dividends
11
-
(626,000)
(626,000)
Balance at 31 October 2018 (as restated)
100
5,652,517
5,652,617
Year ended 31 October 2019:
Profit and total comprehensive income for the year
-
1,446,050
1,446,050
Balance at 31 October 2019
100
7,098,567
7,098,667
L & I EATON ARC LIMITED
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 OCTOBER 2019
- 11 -
2019
2018
as restated
Notes
£
£
£
£
Cash flows from operating activities
Cash generated from operations
31
1,918,298
2,938,172
Interest paid
(250)
(18,687)
Income taxes paid
(544,208)
(333,976)
Net cash inflow from operating activities
1,373,840
2,585,509
Investing activities
Purchase of tangible fixed assets
(592,674)
(368,949)
Proceeds on disposal of tangible fixed assets
1,500
(266,877)
Purchase of subsidiaries
(100)
-
Receipts arising from loans made
(1,064,495)
(1,718,410)
Interest received
-
8,077
Net cash used in investing activities
(1,655,769)
(2,346,159)
Financing activities
Repayment of bank loans
(101,894)
172,049
Payment of finance leases obligations
123,345
-
Dividends paid
-
(626,000)
Net cash generated from/(used in) financing activities
21,451
(453,951)
Net decrease in cash and cash equivalents
(260,478)
(214,601)
Cash and cash equivalents at beginning of year
2,176,177
2,390,778
Cash and cash equivalents at end of year
1,915,699
2,176,177
L & I EATON ARC LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 OCTOBER 2019
- 12 -
1
Accounting policies
Company information
L & I Eaton Arc Limited is a
private
company
limited by shares
incorporated in England and Wales.
The registered office is
Unit Gf1, The Quad, Atherleigh Business Park, Gibfield Park Avenue, Atherton, Manchester, M46 0SY.
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, modified to include the revaluation of freehold properties and to include investment properties and certain financial instruments at fair value. The principal accounting policies adopted are set out below.
The company has taken advantage of the exemption under section 400 of the
Companies Act 2006 not to prepare consolidated accounts. The financial statements present information about the company as an individual entity and not about its group
.
L & I Eaton Arc Limited is a wholly owned subsidiary of The James Group Limited and the results of L & I Eaton Arc Limited are included in the consolidated financial statements of The James Group Limited which are available from its registered office.
1.2
Going concern
A
true
t the time of approving the financial statements
,
t
he director has a reasonable expectation that the
company
has adequate resources to continue in operational existence for the foreseeable future. Thus
t
he director continues to adopt the going concern basis of accounting in preparing the financial statements.
The Director has closely monitored the Government guidance in response to the Covid-19 Pandemic and have implemented measures in line with Governmental guidelines. The Director has assessed the impact of Covid-19 on the company and conclude that there are no items resulting from the Covid-19 Pandemic which require disclosure at the balance sheet date.
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.
When cash inflows are deferred and represent a financing arrangement, the fair value of the consideration is the present value of the future receipts. The difference between the fair value of the consideration and the nominal amount received is recognised as interest income.
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.
L & I EATON ARC LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 OCTOBER 2019
1
Accounting policies
(Continued)
- 13 -
Revenue from contracts for the provision of professional services is recognised by reference to the stage of completion when the stage of completion, costs incurred and costs to complete can be estimated reliably. The stage of completion is calculated by comparing costs incurred, mainly in relation to contractual hourly staff rates and materials, as a proportion of total costs. Where the outcome cannot be estimated reliably, revenue is recognised only to the extent of the expenses recognised that
it is probable will be
recover
ed
.
1.4
Intangible fixed assets - goodwill
Goodwill represents the excess of the cost of acquisition of unincorporated businesses over the fair value of net assets acquired. It is initially recognised as an asset at cost and is subsequently measured at cost less accumulated
amortisation and accumulated impairment losses. Goodwill is considered to have a finite useful life and is amortised on a systematic basis over its expected life, which is 5 years.
For the purposes of impairment testing, goodwill is allocated to the cash-generating units expected to benefit from the acquisition. Cash-generating units to which goodwill has been allocated are tested for impairment at least annually, or more frequently when there is an indication that the unit may be impaired. If the recoverable amount of the cash-generating unit is less than the carrying amount of the unit, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro-rata on the basis of the carrying amount of each asset in the unit.
1.5
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:
Leasehold improvements
Over the lease term
Plant and equipment
Straight line over 5 years
Fixtures and fittings
Straight line over 3 years
Motor vehicles
25% per annum reducing balance
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
.
1.6
Fixed asset investments
Interests in subsidiaries, associates and jointly controlled entities are initially measured at cost and subsequently measured at cost less any accumulated impairment losses.
The investments are assessed for impairment at each reporting date
and
any
impairment
losses or reversals of impairment losses are recognised immediately in profit or loss.
A subsidiary is an entity controlled by the company
. Control is
the power to govern the financial and operating policies of
the
entity so as to obtain benefits from its activities.
1.7
Impairment of fixed assets
At each reporting
period
end date, the
company
reviews the carrying amounts of its tangible
and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the company
estimates the recoverable amount of the cash-generating unit to which the asset belongs.
L & I EATON ARC LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 OCTOBER 2019
1
Accounting policies
(Continued)
- 14 -
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.
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.
1.8
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.
Stocks held for distribution at no or nominal consideration are measured at the lower of replacement cost and cost, adjusted where applicable for any loss of service potential.
At each reporting date, an assessment is made for impairment. Any excess of the carrying amount of stocks over its estimated selling price less costs to complete and sell is recognised as an impairment loss in profit or loss. Reversals of impairment losses are also recognised in profit or loss.
1.9
Cash 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.
1.10
Financial instruments
The company has elected to apply the provisions of Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instruments Issues’ of FRS 102 to all of its financial instruments.
Financial instruments are recognised in the company's balance sheet when the company becomes party to the contractual provisions of the instrument.
Financial assets and liabilities are offset
, with
the net amounts presented in the financial statements
,
when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis or to realise the asset and settle the liability simultaneously.
Basic financial assets
Basic financial assets, which include 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.
L & I EATON ARC LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 OCTOBER 2019
1
Accounting policies
(Continued)
- 15 -
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.
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.
L & I EATON ARC LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 OCTOBER 2019
1
Accounting policies
(Continued)
- 16 -
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 th
r
ough 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.
1.11
Equity instruments
Equity instruments issued by the company are recorded at the proceeds received, net of transaction costs. Dividends payable on equity instruments are recognised as liabilities once they are no longer at the discretion of the company.
1.12
Taxation
The tax expense represents the sum of the tax currently payable and deferred tax.
Current tax
The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the profit and loss account because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The
company’s
liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting end date.
Deferred tax
Deferred tax liabilities are generally recognised for all timing differences and deferred tax assets are recognised to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits. Such assets and liabilities are not recognised if the timing difference arises from goodwill or from the initial recognition of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit.
The carrying amount of deferred tax assets is reviewed at each reporting end date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited in the profit and loss account, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax assets and liabilities are offset when the
company
has a legally enforceable right to offset current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority.
L & I EATON ARC LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 OCTOBER 2019
1
Accounting policies
(Continued)
- 17 -
1.13
Employee benefits
The costs of short-term employee benefits are recognised as a liability and an expense, unless those costs are required to be recognised as part of the cost of stock or fixed assets.
The cost of any unused holiday entitlement is recognised in the period in which the employee’s services are received.
Termination benefits are recognised immediately as an expense when the company is demonstrably committed to terminate the employment of an employee or to provide termination benefits.
1.14
Retirement benefits
Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due.
1.15
Leases
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessees. All other leases are classified as operating leases.
Assets held under finance leases are recognised as assets at the lower of the assets fair
value at the date of inception and the present value of the minimum lease payments. The related liability is included in the balance sheet as a finance lease obligation. Lease payments are treated as consisting of capital and interest elements. The interest is charged to profit or loss so as to produce a constant periodic rate of interest on the remaining balance of the liability.
Rentals payable under operating leases,
including
any lease incentives received, are charged to
profit or loss
on a straight line basis over the term of the relevant lease except where another more systematic basis is more representative of the time pattern in which economic benefits from the lease
s
asset are consumed.
2
Judgements and key sources of estimation uncertainty
In the application of the company’s accounting policies, the director is 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
2018
2019
as restated
£
£
Turnover analysed by class of business
Parts, paint and labour
21,201,060
21,883,371
L & I EATON ARC LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 OCTOBER 2019
3
Turnover and other revenue
(Continued)
- 18 -
2019
2018
£
£
Other significant revenue
Interest income
-
8,077
2018
2019
as restated
£
£
Turnover analysed by geographical market
United Kingdom
21,201,060
21,883,371
4
Operating profit
2019
2018
Operating profit for the year is stated after charging:
£
£
Fees payable to the company's auditor for the audit of the company's financial statements
30,000
15,500
Depreciation of owned tangible fixed assets
672,950
694,159
Cost of stocks recognised as an expense
9,138,958
8,716,034
Operating lease charges
458,315
454,539
5
Employees
The average monthly number of persons (including directors) employed by the company during the year was:
2019
2018
Number
Number
Administrative
37
36
Indirect
105
101
Direct
77
74
Total
219
211
Their aggregate remuneration comprised:
2019
2018
£
£
Wages and salaries
6,304,886
6,112,107
Pension costs
96,056
54,989
6,400,942
6,167,096
L & I EATON ARC LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 OCTOBER 2019
- 19 -
6
Director's remuneration
2019
2018
£
£
Remuneration for qualifying services
66,816
10,263
7
Interest receivable and similar income
2019
2018
£
£
Interest income
Other interest income
-
8,077
8
Interest payable and similar expenses
2019
2018
£
£
Interest on financial liabilities measured at amortised cost:
Interest on bank overdrafts and loans
-
9,753
Other finance costs:
Interest on finance leases and hire purchase contracts
250
8,934
250
18,687
9
Amounts written off investments
fixed asset investments
2019
2018
£
£
Other gains and losses
-
(75,877)
10
Taxation
2018
2019
as restated
£
£
Current tax
UK corporation tax on profits for the current period
311,317
630,347
Deferred tax
Origination and reversal of timing differences
40,753
(30,239)
Total tax charge
352,070
600,108
L & I EATON ARC LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 OCTOBER 2019
10
Taxation
(Continued)
- 20 -
The actual charge for the year can be reconciled to the expected charge for the year based on the profit or loss and the standard rate of tax as follows:
2018
2019
as restated
£
£
Profit before taxation
1,798,120
3,027,300
Expected tax charge based on the standard rate of corporation tax in the UK of 19.00% (2018: 19.00%)
341,643
575,187
Tax effect of expenses that are not deductible in determining taxable profit
9,527
6,369
Group relief
(40,361)
(4,456)
Deferred tax
40,753
(30,239)
Capital allowances
(127,353)
(78,643)
Depreciation
127,861
131,890
Taxation charge for the year
352,070
600,108
11
Dividends
2019
2018
£
£
Interim paid
-
626,000
12
Intangible fixed assets
Goodwill
£
Cost
At 1 November 2018 and 31 October 2019
286,965
Amortisation and impairment
At 1 November 2018 and 31 October 2019
286,965
Carrying amount
At 31 October 2019
-
At 31 October 2018
-
L & I EATON ARC LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 OCTOBER 2019
- 21 -
13
Tangible fixed assets
Leasehold improvements
Plant and equipment
Fixtures and fittings
Motor vehicles
Total
£
£
£
£
£
Cost
At 1 November (as restated)
935,595
3,234,755
451,371
842,396
5,464,117
Additions
73,068
250,761
68,540
200,305
592,674
Disposals
-
-
(145,956)
(20,140)
(166,096)
At 31 October 2019
1,008,663
3,485,516
373,955
1,022,561
5,890,695
Depreciation and impairment
At 1 November (as restated)
296,317
2,158,160
421,210
370,450
3,246,137
Depreciation charged in the year
103,032
478,659
26,258
65,001
672,950
Eliminated in respect of disposals
-
-
(145,956)
(18,640)
(164,596)
At 31 October 2019
399,349
2,636,819
301,512
416,811
3,754,491
Carrying amount
At 31 October 2019
609,314
848,697
72,443
605,750
2,136,204
At 31 October 2018 (as restated)
639,278
1,076,595
30,161
471,946
2,217,980
14
Fixed asset investments
2019
2018
Notes
£
£
Investments in subsidiaries
15
1,164,354
1,164,254
Movements in fixed asset investments
Shares in group undertakings
£
Cost or valuation
At 1 November 2018
1,240,131
Additions
100
At 31 October 2019
1,240,231
Impairment
At 1 November 2018 & 31 October 2019
75,877
Carrying amount
At 31 October 2019
1,164,354
At 31 October 2018
1,164,254
L & I EATON ARC LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 OCTOBER 2019
- 22 -
15
Subsidiaries
Details of the company's subsidiaries at 31 October 2019 are as follows:
Name of undertaking
Registered office
Class of
% Held
shares held
Direct
Indirect
Brookland (Lincoln) Limited
England and Wales
Ordinary
0
100.00
Brooklands Auto Body Centre Limited
England and Wales
Ordinary
100.00
-
Wheel Aid Limited
England and Wales
Ordinary
100.00
-
16
Financial instruments
2018
2019
as restated
£
£
Carrying amount of financial assets
Debt instruments measured at amortised cost
7,956,350
5,955,159
Carrying amount of financial liabilities
Measured at amortised cost
3,728,673
3,484,446
17
Stocks
2019
2018
£
£
Finished goods and goods for resale
264,460
272,828
18
Debtors
2018
2019
as restated
Amounts falling due within one year:
£
£
Trade debtors
2,662,395
1,846,648
Corporation tax recoverable
1,018,287
297,446
Amounts owed by group undertakings
1,321,268
1,190,719
Other debtors
3,972,687
2,917,792
Prepayments and accrued income
228,557
133,885
9,203,194
6,386,490
L & I EATON ARC LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 OCTOBER 2019
- 23 -
19
Creditors: amounts falling due within one year
2018
2019
as restated
Notes
£
£
Bank loans
21
70,155
90,000
Obligations under finance leases
22
123,345
-
Trade creditors
2,357,124
2,087,934
Amounts owed to group undertakings
285,997
315,996
Corporation tax
1,784,463
1,296,514
Other taxation and social security
1,967,909
1,720,707
Other creditors
393,056
436,515
Accruals and deferred income
498,996
471,952
7,481,045
6,419,618
The bank loan is secured by a fixed and floating charge over the assets of the company.
20
Creditors: amounts falling due after more than one year
2019
2018
Notes
£
£
Bank loans and overdrafts
21
-
82,049
The bank loan was secured by a fixed and floating charge over the assets of the company.
21
Loans and overdrafts
2019
2018
£
£
Bank loans
70,155
172,049
Payable within one year
70,155
90,000
Payable after one year
-
82,049
The bank loan is secured by a fixed and floating charge.
22
Finance lease obligations
2019
2018
Future minimum lease payments due under finance leases:
£
£
Within one year
41,115
-
In two to five years
82,230
-
123,345
-
L & I EATON ARC LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 OCTOBER 2019
22
Finance lease obligations
(Continued)
- 24 -
Finance lease payments represent rentals payable by the company for certain items of plant and machinery. Leases include purchase options at the end of the lease period, and no restrictions are placed on the use of the assets. The average lease term is 3 years. All leases are on a fixed repayment basis and no arrangements have been entered into for contingent rental payments.
23
Provisions for liabilities
2019
2018
Notes
£
£
Deferred tax liabilities
24
104,199
63,445
24
Deferred taxation
The following are the major deferred tax liabilities and assets recognised by the company and movements thereon:
Liabilities
Liabilities
2019
2018
Balances:
£
£
Accelerated capital allowances
104,199
63,445
2019
Movements in the year:
£
Liability at 1 November 2018
63,445
Charge to profit or loss
40,754
Liability at 31 October 2019
104,199
25
Retirement benefit schemes
2019
2018
Defined contribution schemes
£
£
Charge to profit or loss in respect of defined contribution schemes
96,056
54,989
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.
26
Share capital
2019
2018
£
£
Ordinary share capital
Issued and fully paid
100 Ordinary of £1 each
100
100
L & I EATON ARC LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 OCTOBER 2019
26
Share capital
2019
2018
£
£
(Continued)
- 25 -
27
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
695,269
635,625
Between two and five years
-
695,269
695,269
1,330,894
28
Related party transactions
The company has given cross guarantees in respect of group company bank loans and overdrafts. As at both 31 October 2019 and 2018 no contingent liabilities existed.
The company has taken advantage of the exemption available in FRS102 'Related party disclosures' whereby it has not disclosed transactions with the ultimate parent company or any wholly owned subsidiary undertaking of the group.
29
Directors' transactions
Description
% Rate
Opening balance
Amounts advanced
Closing balance
£
£
£
Loan
-
2,908,192
1,064,495
3,972,687
2,908,192
1,064,495
3,972,687
30
Ultimate controlling party
The company is a wholly owned subsidiary of The James Group Limited, registered office Unit Gf1, The Quad, Atherleigh Business Park Gibfield Park Avenue, Atherton, Manchester, United Kingdom, M46 0SY.
The ultimate controlling party is L J Bootle.
L & I EATON ARC LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 OCTOBER 2019
- 26 -
31
Cash generated from operations
2018
2019
as restated
£
£
Profit for the year after tax
1,446,050
2,427,192
Adjustments for:
Taxation charged
352,070
600,108
Finance costs
250
18,687
Investment income
-
(8,077)
Depreciation and impairment of tangible fixed assets
672,950
694,159
Amounts written off investments
-
75,877
Movements in working capital:
Decrease in stocks
8,368
237,872
Increase in debtors
(1,031,368)
(556,824)
Increase/(decrease) in creditors
469,978
(550,822)
Cash generated from operations
1,918,298
2,938,172
32
Prior period adjustment
Changes to the balance sheet
As previously reported
Adjustment
As restated at 31 Oct 2018
£
£
£
Fixed assets
Tangible assets
1,572,623
645,357
2,217,980
Current assets
Debtors due within one year
3,180,853
3,205,637
6,386,490
Bank and cash
2,178,079
(1,902)
2,176,177
Creditors due within one year
Creditors: amounts falling due within one year
(4,499,534)
(1,920,084)
(6,419,618)
Net assets
2,432,021
1,929,008
4,361,029
Capital and reserves
Profit and loss
3,723,509
1,929,008
5,652,517
As previously reported
Adjustment
As restated
Period ended 31 October 2018
£
£
£
Turnover
22,068,325
(184,954)
21,883,371
Cost of sales
(13,966,133)
1,992,071
(11,974,062)
Gross profit
8,102,192
1,807,117
9,909,309
Administrative expenses
(6,603,212)
(192,310)
(6,795,522)
L & I EATON ARC LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 OCTOBER 2019
32
Prior period adjustment
As previously reported
Adjustment
As restated
Period ended 31 October 2018
£
£
£
(Continued)
- 27 -
Operating profit
1,498,980
1,614,807
3,113,787
Taxation
(307,596)
(292,512)
(600,108)
Profit for the financial period
1,191,384
1,322,295
2,513,679
Notes to reconciliation
The Prior Year Adjustment to Retained Earnings is analysed as follows:
Amounts relating to prior to the year ended 31 October 2018 - £606,713
Amounts relating to prior to the year ended 31 October 2019 - £1,322,295
The overall impact on retained earnings is £1,929,008.
Basis for prior period adjustment
As a result of the significant growth in the company’s activities the financial control systems did not keep up with the growth of the business. The weakness in the financial systems, which was not identified by the auditors of the past period accounts, resulted in transactions being both omitted and incorrectly treated in those accounts.
As a result of these errors the profits of previous periods has been understated. The financial effect of the errors that have been identified as at the signing of this period’s accounts is provided above. The effect of rectifying the identified errors has been to strengthen the company's balance sheet.
The company has recognised the weakness of the systems operated in the past and the circumstances that gave rise to the errors encountered. The company is committed to strengthening its financial control systems with a view to ensuring that those weaknesses are all eliminated and a new, robust system of internal controls put in place.
Pursuant to this commitment a full analysis of profits of previous periods is currently being undertaken. The company aims to have the full and final position in relation to the issues encountered resolved before the preparation of the 31 October 2020 accounts. Any further amendments to reflect the past errors which have not yet been identified and rectified will be included and disclosed in those accounts which will be subject to the full audit process.
2019-10-31
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