Company Registration No. 01212505 (England and Wales)
JW FROEHLICH UK LIMITED
ANNUAL REPORT AND FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
JW FROEHLICH UK LIMITED
COMPANY INFORMATION
Directors
JW Froehlich
DK Wells
D Ludin
GS Brinkley
H Liebgott
J Vaughan
S Jones
(Appointed 23 January 2023)
Company number
01212505
Registered office
Sable Way
Southfields Business Park
Laindon
Essex
SS15 6TU
Auditor
Rickard Luckin Limited
1st Floor
County House
100 New London Road
Chelmsford
Essex
CM2 0RG
JW FROEHLICH UK LIMITED
CONTENTS
Page
Strategic report
1 - 2
Directors' report
3 - 4
Independent auditor's report
5 - 7
Profit and loss account
8
Statement of comprehensive income
9
Balance sheet
10
Statement of changes in equity
11
Statement of cash flows
12
Notes to the financial statements
13 - 26
JW FROEHLICH UK LIMITED
STRATEGIC REPORT
FOR THE YEAR ENDED 31 DECEMBER 2022
- 1 -

The directors present the strategic report for the year ended 31 December 2022.

Fair review of the business

JW Froehlich UK Limited is a manufacturing company supplying to the automotive market. Principal activities during the year were the design, manufacture, installation and service of leak test equipment, automatic in-process assembly machines and end of assembly line function test machines.

Turnover decreased from £9,150,279 in 2021 to £7,269,375 in 2022. A slowdown of investment by customers in new programmes coupled with supply chain delays reduced the Company’s ability to generate the level of turnover required to make a profit within the financial year. However, new orders received in the second half of the year secured a full order book for 2023. It is therefore the Directors’ view that the Company will return to profit in 2023.

Principal risks and uncertainties

It was recognised that the main risk to the company achieving a level of turnover to support fixed overheads was presented by global events and the ongoing effect of the COVID-19 Pandemic on electronic component supply chains to the Company and our customers. Actions taken throughout the year helped mitigate those risks, but future performance remains dependant on the outcome of global events.

Key performance indicators

The Key Performance Indicators used to review and monitor the company are shown below:

 

 

2022

2021

 

 

£’000

£’000

 

 

 

 

 

Turnover

7,269

9,150

 

 

 

 

 

Gross Profit/(Loss)

173

2,254

 

Gross Profit %

2%

25%

 

 

 

 

 

Operating Profit/(Loss)

(2,498)

291

 

Operating Profit %

-34%

3%

 

 

 

 

 

 

Promoting the success of the company

The Directors of the company meet monthly to review key business decisions. Additional meetings are scheduled as required. The executive Directors have daily contact with the senior management team to ensure operational matters are addressed speedily. When taking decisions, in particular with regard to investment opportunities in both assets and development activities, the Directors consider the long term plans for the business.

The Directors review the impacts of key decisions on all stakeholders of the business to ensure the interests of customers, suppliers, employees, and shareholders as well as the wider community are considered. The Directors aim to treat all parties fairly in their dealings with them. The Directors and senior management team focused on maintaining a safe operating environment for employees, whilst adhering to customer delivery schedules.

JW FROEHLICH UK LIMITED
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
- 2 -

On behalf of the board

DK Wells
Director
14 March 2023
JW FROEHLICH UK LIMITED
DIRECTORS' REPORT
FOR THE YEAR ENDED 31 DECEMBER 2022
- 3 -

The directors present their annual report and financial statements for the year ended 31 December 2022.

Principal activities

The principal activity for the company during the year was the design, development and manufacture of machinery for the automotive industry.

Results and dividends

The loss for the year, after taxation, amounted to £2,502,675 (2021 - £868,473 profit).

No dividend was recommended for the year ended 31 December 2022.

Directors

The Directors who served during the year were:

JW Froehlich
DK Wells
D Ludin
GS Brinkley
H Liebgott
J Vaughan
S Jones
(Appointed 23 January 2023)
Financial instruments
Treasury operations and financial instruments

The company operates a treasury function which is responsible for managing the liquidity, interest and foreign currency risks associated with the company’s activities.

The company’s principal financial instruments include bank overdrafts and loans, the main purpose of which is to raise finance for the company’s operations. In addition, the company has various other financial assets and liabilities such as trade debtors and trade creditors arising directly from operations.

Interest rate risk

The company is exposed to fair value interest rate risk on its fixed rate borrowings and cash flow interest rate risk on bank overdrafts and loans. The company continually assess the use of interest risk derivation to manage if needed the mix of fixed and variable rate debt, to reduce its exposure to changes in interest rates.

Foreign currency risk

The company’s principal foreign currency exposures arise from trading operations with suppliers in overseas jurisdictions. This risk is balanced by invoicing customers in foreign currencies where appropriate.

Credit risk

Investment of cash surplus and borrowings are made through banks.

All customer who wish to trade on credit terms are subject to credit verification procedures. Trade debtors are reviewed on a regular basis and provision is made for doubtful debts when necessary.

Research and development

The company’s activities involve the manufacture of bespoke machinery and the provision of integrated system solutions. Consequently, the company is at the forefront of innovation, including incorporation of the latest technologies. The company is committed to a policy of future investment through expenditure on product development and improvement.

Post reporting date events

There have been no significant events since the year end.

JW FROEHLICH UK LIMITED
DIRECTORS' REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
- 4 -
Future developments

The Directors believe that the company has an excellent reputation for providing quality products and services on a global basis. They consider that investment in recent years in the development of automotive drive testing products and the associated skills mean that the company is well placed to take advantage of any future market opportunities and remain confident of long term profitability.

Auditor

The auditor, Rickard Luckin Limited, will be proposed for reappointment in accordance with section 485 of the Companies Act 2006.

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:

 

 

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

Each of the persons who are Directors at the time when this Directors’ report is approved has confirmed that:

On behalf of the board
DK Wells
Director
14 March 2023
JW FROEHLICH UK LIMITED
INDEPENDENT AUDITOR'S REPORT
TO THE MEMBERS OF JW FROEHLICH UK LIMITED
- 5 -
Opinion

We have audited the financial statements of JW Froehlich UK Limited (the 'company') for the year ended 31 December 2022 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 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).

In our opinion the financial statements:

Basis for opinion

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

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.

Other information

The other information comprises the information included in the annual report other than the financial statements and our auditor's report thereon. The directors are responsible for the other information contained within the annual report. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.

 

We have nothing to report in this regard.

Opinions on other matters prescribed by the Companies Act 2006

In our opinion, based on the work undertaken in the course of our audit:

JW FROEHLICH UK LIMITED
INDEPENDENT AUDITOR'S REPORT (CONTINUED)
TO THE MEMBERS OF JW FROEHLICH 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 identified material misstatements in the strategic report or the directors' report.

 

We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion:

Responsibilities of directors

As explained more fully in the directors' responsibilities statement, 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.

The extent to which our procedures are capable of detecting irregularities, including fraud, is detailed below.

We identified areas of laws and regulations that could reasonably be expected to have a material effect on the financial statements from our: general commercial and sector experience; through verbal and written communications with those charged with governance and other management; and via inspection of the company’s regulatory and legal correspondence.

We discussed with those charged with governance and other management the policies and procedures regarding compliance with laws and regulations.

We communicated identified laws and regulations to our team and remained alert to any indicators of non-compliance throughout the audit, we also specifically considered where and how fraud may occur within the company.

The potential effect of these laws and regulations on the financial statements varies considerably.

Firstly, the company is subject to laws and regulations that directly affect the financial statements, including: the company’s constitution, relevant financial reporting standards; company law; tax legislation and distributable profits legislation and we assess the extent of compliance with these laws and regulations as part of our procedures on the related financial statement items.

Secondly the company is subject to many other laws and regulations where the consequences of non-compliance could have a material effect on the amounts or disclosures in the financial statements, for instance through the imposition of fines and penalties, or through losses arising from litigations. We identified the following areas as those most likely to have such an affect: employment legislation; health and safety legislation; GDPR; anti-bribery and anti-corruption legislation.

JW FROEHLICH UK LIMITED
INDEPENDENT AUDITOR'S REPORT (CONTINUED)
TO THE MEMBERS OF JW FROEHLICH UK LIMITED
- 7 -

ISAs (UK) limit the required procedures to identify non-compliance with these laws and regulations to the procedures, and no procedures over and above those already noted are required. These limited procedures did not identify any actual or suspected non-compliance which laws and regulations that could have a material impact on the financial statements.

In relation to fraud, we performed the following specific procedures in addition to those already noted:

These procedures did not identify any actual or suspected fraudulent irregularity that could have a material impact on the financial statements.

Owing to the inherent limitations of an audit, there is an unavoidable risk that we may not have detected some material misstatements in the financial statements, even though we have properly planned and performed our audit in accordance with ISAs (UK). For example, the further removed non-compliance with laws and regulations is from the events and transactions reflected in the financial statements, the less likely the procedures that we are required to undertake would identify it. In addition, as with any audit, there remains a high risk of non-detection of irregularities, as these might involve collusion, forgery, intentional omissions, misrepresentation, or the override of internal controls. We are not responsible for preventing non-compliance with laws and regulations or fraud, and cannot be expected to detect non-compliance with all laws and regulations or every incidence of fraud.

A further description of our responsibilities is available on the Financial Reporting Council’s website at: https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's report.

Use of our 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.

Gayner Smith
Senior Statutory Auditor
For and on behalf of Rickard Luckin Limited
14 March 2023
Chartered Accountants
Statutory Auditor
1st Floor
County House
100 New London Road
Chelmsford
Essex
CM2 0RG
JW FROEHLICH UK LIMITED
PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED 31 DECEMBER 2022
- 8 -
2022
2021
Notes
£
£
Turnover
3
7,269,375
9,150,279
Cost of sales
(7,075,112)
(6,895,701)
Gross profit
194,263
2,254,578
Distribution costs
(957,399)
(735,441)
Administrative expenses (include: £54,889 (2021: 18,543 - loss) gain on foreign exchange and £68,544 (2021: £59,942) operating lease expenses.
(1,653,154)
(1,600,704)
Other operating (expenses)/income
(81,615)
383,867
Operating (loss)/profit
4
(2,497,905)
302,300
Interest receivable and similar income
2
28
Interest payable to group undertakings
7
(4,751)
(36,248)
Other interest payable and similar expenses
7
(21)
-
0
(Loss)/profit before taxation
(2,502,675)
266,080
Tax on (loss)/profit
8
-
0
602,393
(Loss)/profit for the financial year
(2,502,675)
868,473
JW FROEHLICH UK LIMITED
STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2022
- 9 -
2022
2021
£
£
(Loss)/profit for the year
(2,502,675)
868,473
Other comprehensive income
-
-
Total comprehensive income for the year
(2,502,675)
868,473
JW FROEHLICH UK LIMITED
BALANCE SHEET
AS AT 31 DECEMBER 2022
31 December 2022
- 10 -
2022
2021
Notes
£
£
£
£
Fixed assets
Intangible assets
9
1,394,279
1,408,205
Tangible assets
10
783,904
870,772
2,178,183
2,278,977
Current assets
Stocks
11
644,763
639,512
Debtors
12
4,081,741
4,497,328
Cash at bank and in hand
533,330
431,102
5,259,834
5,567,942
Creditors: amounts falling due within one year
13
(3,284,087)
(1,072,286)
Net current assets
1,975,747
4,495,656
Total assets less current liabilities
4,153,930
6,774,633
Provisions for liabilities
Provisions
14
42,626
160,654
(42,626)
(160,654)
Net assets
4,111,304
6,613,979
Capital and reserves
Called up share capital
15
500,000
500,000
Profit and loss reserves
3,611,304
6,113,979
Total equity
4,111,304
6,613,979
The financial statements were approved by the board of directors and authorised for issue on 14 March 2023 and are signed on its behalf by:
DK Wells
Director
Company Registration No. 01212505
JW FROEHLICH UK LIMITED
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2022
- 11 -
Share capital
Profit and loss reserves
Total
£
£
£
Balance at 1 January 2021
500,000
5,245,506
5,745,506
Year ended 31 December 2021:
Profit and total comprehensive income for the year
-
868,473
868,473
Balance at 31 December 2021
500,000
6,113,979
6,613,979
Year ended 31 December 2022:
Loss and total comprehensive income for the year
-
(2,502,675)
(2,502,675)
Balance at 31 December 2022
500,000
3,611,304
4,111,304
JW FROEHLICH UK LIMITED
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2022
- 12 -
2022
2021
Notes
£
£
£
£
Cash flows from operating activities
Cash generated from/(absorbed by) operations
21
210,330
(41,458)
Interest paid
(4,772)
(36,248)
Income taxes refunded
-
0
602,393
Net cash inflow from operating activities
205,558
524,687
Investing activities
Purchase of intangible assets
(79,677)
(346,319)
Purchase of tangible fixed assets
(23,655)
(30,162)
Interest received
2
28
Net cash used in investing activities
(103,330)
(376,453)
Financing activities
Proceeds from borrowings
(1,500,000)
-
0
Repayment of borrowings
-
1,500,000
Net cash (used in)/generated from financing activities
(1,500,000)
1,500,000
Net (decrease)/increase in cash and cash equivalents
(1,397,772)
1,648,234
Cash and cash equivalents at beginning of year
431,102
(1,217,132)
Cash and cash equivalents at end of year
(966,670)
431,102
Relating to:
Cash at bank and in hand
533,330
431,102
Loan
(1,500,000)
-
0
JW FROEHLICH UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
- 13 -
1
Accounting policies
Company information

JW Froehlich UK Limited is a private company limited by shares incorporated in England and Wales. The registered office is Sable Way, Southfields Business Park, Laindon, Essex, SS15 6TU.

1.1
Accounting convention

These financial statements have been prepared in accordance with FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland” (“FRS 102”) and the requirements of the Companies Act 2006.

The financial statements are prepared in sterling, which is the functional currency of the company. Monetary amounts in these financial statements are rounded to the nearest £.

The financial statements have been prepared under the historical cost convention. The principal accounting policies adopted are set out below.

1.2
Going concern

Atruet the time of approving the financial statements, the directors have a reasonable expectation that the company has adequate resources to continue in operational existence for the foreseeable future. Thus the directors continue to adopt the going concern basis of accounting in preparing the financial statements.

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.

 

The company recognises revenue when the amount of revenue can be measured reliably, when it is probable that future economic benefits will flow to the entity and when specific criteria have been met for each of the company's activities, as described below.

The company manufactures and sells a range of spare parts for automotive leak test equipment, automatic in-process assembly machines and end of engine assembly line function test machines. Sales of goods are recognised on sale to the customer, which is considered the point of delivery. The risk of obsolescence and loss of the parts are considered to have been transferred to the customer when the products are shipped.

 

The company designs, manufactures and installs leak test equipment, automatic in process assembly machines and end of engine assembly line function test machines. When the outcome of a contract can be estimated reliably in terms of its stage of completion, future costs to complete and collectability of billings, the company recognises revenue and expenses on the contract by reference to the stage of completion of the contract at the end of the reporting period. When a contract is loss making, full provision for the loss is made in the financial year.

The company sells service and calibration testing for leak test equipment, together with support services on the machines it designs and manufactures. Revenue is recognised in the accounting period in which the services are rendered.

1.4
Research and development expenditure

Research expenditure is written off against profits in the year in which it is incurred. Identifiable development expenditure is capitalised to the extent that the technical, commercial and financial feasibility can be demonstrated.

JW FROEHLICH UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
1
Accounting policies
(Continued)
- 14 -
1.5
Intangible fixed assets other than goodwill

Intangible assets comprise software enhancement and prototype development costs and are recognised at cost and are subsequently measured at cost less accumulated amortisation and accumulated impairment losses.

Amortisation 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:

Software Enhancement
20% straight line
Prototype Development Costs
10% straight line
1.6
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 freehold
4% per annum on cost
Plant and machinery
20% per annum on cost
Fixtures, fittings and equipment
15% per annum on cost

The gain or loss arising on the disposal of an asset is determined as the difference between the sale proceeds and the carrying value of the asset, and is credited or charged to profit or loss.

1.7
Impairment of fixed assets

At each reporting period end date, the company reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the company estimates the recoverable amount of the cash-generating unit to which the asset belongs.

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.

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.

Cost is determined on the first in, first out (FIFO) method. Cost includes the purchase price, including taxes and duties and transport and handling directly attributable to bringing the inventory to its present location and condition. The cost of work in progress includes design costs, raw materials, direct labour and other direct costs and related production overheads (based on normal operating capacity).

JW FROEHLICH UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
1
Accounting policies
(Continued)
- 15 -

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. A provision is made in full against inventory, which is older than 6 years at the balance sheet date.

 

If an item of inventory is impaired, the identified inventory is reduced to its selling price less costs to complete and sell and an impairment charge is recognised in the profit and loss account. Where a reversal of the impairment is required the impairment charge is reversed, up to the original impairment loss, and is recognised as a credit in the profit and loss account.

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.

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.

JW FROEHLICH UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
1
Accounting policies
(Continued)
- 16 -
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 payments 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. Amounts payable are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities. 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 subsequently 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.

Derecognition of financial liabilities

Financial liabilities are derecognised when the company’s contractual obligations expire or are discharged or cancelled.

1.11
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.

JW FROEHLICH UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
1
Accounting policies
(Continued)
- 17 -
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.

1.12
Provisions

Provisions are recognised when the company has a legal or constructive present obligation as a result of a past event, it is probable that the company will be required to settle that obligation and a reliable estimate can be made of the amount of the obligation.

 

The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the reporting end date, taking into account the risks and uncertainties surrounding the obligation. Where the effect of the time value of money is material, the amount expected to be required to settle the obligation is recognised at present value. When a provision is measured at present value, the unwinding of the discount is recognised as a finance cost in profit or loss in the period in which it arises.

 

Specific provisions:

 

Cost to complete contracts fully invoiced

The company estimates the costs to complete contracts fully invoices at the year end. Costs to complete includes the costs directly related to the equipment sold plus a systematic allocation of fixed and variable production overheads that are incurred in the design, build and installation process. The allocation of overheads is based on the level of capacity (in working hours) in the factory in a given year).

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

Rentals payable under operating leases, including any lease incentives received, are charged to profit or loss on a straight line basis over the term of the relevant lease except where another more systematic basis is more representative of the time pattern in which economic benefits from the leases asset are consumed.

JW FROEHLICH UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
1
Accounting policies
(Continued)
- 18 -
1.16
Government grants

Government grants are recognised at the fair value of the asset received or receivable when there is reasonable assurance that the grant conditions will be met and the grants will be received.

 

A grant that specifies performance conditions is recognised in income when the performance conditions are met. Where a grant does not specify performance conditions it is recognised in income when the proceeds are received or receivable. A grant received before the recognition criteria are satisfied is recognised as a liability.

1.17
Foreign exchange

Transactions in currencies other than pounds sterling are recorded at the rates of exchange prevailing at the dates of the transactions. At each reporting end date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the reporting end date. Gains and losses arising on translation in the period are included in profit or loss.

2
Judgements and key sources of estimation uncertainty

In the application of the company’s accounting policies, the directors are required to make judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

 

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised where the revision affects only that period, or in the period of the revision and future periods where the revision affects both current and future periods.

 

Amounts recoverable on contracts

The company designs and manufactures machines, which are viewed as long term contracts. Due to the nature of the contracts, it is necessary to consider the stage of completion and cost to complete on all open contracts. The company makes an estimate of the costs required to complete the contracts and reviews the estimated profitability of each contract and makes necessary provision to reflect current estimates.

3
Turnover and other revenue

An analysis of the company's turnover is as follows:

2022
2021
£
£
Turnover analysed by class of business
Manufacture and installation
2,807,468
4,451,841
Service and rebuild
3,955,784
4,406,772
Spares and seals
506,123
291,666
7,269,375
9,150,279
JW FROEHLICH UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
3
Turnover and other revenue
(Continued)
- 19 -
2022
2021
£
£
Turnover analysed by geographical market
UK
4,804,805
1,372,447
Europe
352,541
138,754
The Americas
965,991
3,941,784
Africa
755,164
3,500,581
Asia
390,874
196,713
7,269,375
9,150,279
2022
2021
£
£
Other revenue
Interest income
2
28
Grants received
(81,615)
383,867
4
Operating (loss)/profit
2022
2021
Operating (loss)/profit for the year is stated after charging/(crediting):
£
£
Exchange (gains)/losses
(54,889)
18,543
Government grants
81,615
(383,867)
Fees payable to the company's auditor for the audit of the company's financial statements
35,648
46,215
Depreciation of owned tangible fixed assets
110,523
120,881
Amortisation of intangible assets
93,603
57,402
Operating lease charges
68,544
59,942
5
Employees

The average monthly number of persons (including directors) employed by the company during the year was:

2022
2021
Number
Number
Office Staff
22
22
Design Staff
43
39
Total
65
61
JW FROEHLICH UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
5
Employees
(Continued)
- 20 -

Their aggregate remuneration comprised:

2022
2021
£
£
Wages and salaries
3,288,342
2,604,963
Labour costs capitalised
51,684
318,779
Social security costs
419,207
352,252
Pension costs
187,880
168,734
3,947,113
3,444,728
6
Directors' remuneration
2022
2021
£
£
Remuneration for qualifying services
355,687
311,407
Company pension contributions to defined contribution schemes
30,985
23,801
386,672
335,208
Remuneration disclosed above include the following amounts paid to the highest paid director:
2022
2021
£
£
Remuneration for qualifying services
124,324
139,143
Company pension contributions to defined contribution schemes
10,625
10,316
7
Interest payable and similar expenses
2022
2021
£
£
Interest on financial liabilities measured at amortised cost:
Interest payable to group undertakings
4,751
36,248
Other interest on financial liabilities
21
-
0
4,772
36,248
Disclosed on the profit and loss account as follows:
Interest payable to group undertakings
4,751
36,248
Other interest payable and similar expenses
21
-
JW FROEHLICH UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
- 21 -
8
Taxation
2022
2021
£
£
Current tax
Adjustments in respect of prior periods
-
0
(602,393)

The actual charge/(credit) for the year can be reconciled to the expected (credit)/charge for the year based on the profit or loss and the standard rate of tax as follows:

2022
2021
£
£
(Loss)/profit before taxation
(2,502,675)
266,080
Expected tax (credit)/charge based on the standard rate of corporation tax in the UK of 19.00% (2021: 19.00%)
(475,508)
50,555
Tax effect of expenses that are not deductible in determining taxable profit
(2,022)
(384)
Tax effect of income not taxable in determining taxable profit
(33,806)
-
0
Change in unrecognised deferred tax assets
933,633
(55,547)
Permanent capital allowances in excess of depreciation
-
0
5,376
Depreciation on assets not qualifying for tax allowances
5,345
-
0
Research and development tax credit
-
0
(602,393)
Chanages in tax rates
(427,642)
-
0
Taxation charge/(credit) for the year
-
(602,393)

The company has estimated losses of £7,166,386 (2021: £4,546,950) available for carry forward against future trading profits.

JW FROEHLICH UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
- 22 -
9
Intangible fixed assets
Software Enhancement
Prototype Development Costs
Total
£
£
£
Cost
At 1 January 2022
459,280
1,988,392
2,447,672
Additions
28,136
51,541
79,677
Disposals
(74,425)
-
0
(74,425)
At 31 December 2022
412,991
2,039,933
2,452,924
Amortisation and impairment
At 1 January 2022
408,631
630,836
1,039,467
Amortisation charged for the year
35,010
58,593
93,603
Disposals
(74,425)
-
0
(74,425)
At 31 December 2022
369,216
689,429
1,058,645
Carrying amount
At 31 December 2022
43,775
1,350,504
1,394,279
At 31 December 2021
50,649
1,357,556
1,408,205

Intangible assets contain one material asset. The E-Prime project, which is intellectual property to produce electric drive components. The carrying value of the asset at the year end is £1,284,607 (2021:£1,337,696). It has a amortisation period of 9 years remaining.

Development costs have been capitalised because they have provided skills and knowledge, which will become commercially viable in winning future projects.

JW FROEHLICH UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
- 23 -
10
Tangible fixed assets
Land and buildings freehold
Plant and machinery
Fixtures, fittings and equipment
Total
£
£
£
£
Cost
At 1 January 2022
2,310,676
360,602
807,652
3,478,930
Additions
5,567
-
0
18,088
23,655
Disposals
-
0
-
0
(100,775)
(100,775)
At 31 December 2022
2,316,243
360,602
724,965
3,401,810
Depreciation and impairment
At 1 January 2022
1,615,886
329,512
662,760
2,608,158
Depreciation charged in the year
28,178
29,539
52,806
110,523
Eliminated in respect of disposals
-
0
-
0
(100,775)
(100,775)
At 31 December 2022
1,644,064
359,051
614,791
2,617,906
Carrying amount
At 31 December 2022
672,179
1,551
110,174
783,904
At 31 December 2021
694,790
31,090
144,892
870,772
11
Stocks
2022
2021
£
£
Work in progress
13,400
10,979
Finished goods and goods for resale
631,363
628,533
644,763
639,512
12
Debtors
2022
2021
Amounts falling due within one year:
£
£
Trade debtors
1,620,471
2,939,989
Gross amounts owed by contract customers
2,274,481
1,472,829
Other debtors
60,159
30,722
Prepayments and accrued income
126,630
53,788
4,081,741
4,497,328
JW FROEHLICH UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
- 24 -
13
Creditors: amounts falling due within one year
2022
2021
£
£
Trade creditors
1,117,388
440,495
Amounts owed to group undertakings
1,712,008
254,346
Taxation and social security
105,483
98,239
Other creditors
49,080
129,649
Accruals and deferred income
300,128
149,557
3,284,087
1,072,286

Amounts due to group undertakings are unsecured and have no fixed date of repayment.

14
Provisions for liabilities
2022
2021
£
£
Costs to complete on contracts fully invoiced
42,626
160,654
Movements on provisions:
Costs to complete on contracts fully invoiced
£
At 1 January 2022
160,654
Additional provisions in the year
42,626
Reversal of provision
(160,654)
At 31 December 2022
42,626
15
Share capital
2022
2021
2022
2021
Ordinary share capital
Number
Number
£
£
Issued and fully paid
Ordinary shares of £1 each
500,000
500,000
500,000
500,000
JW FROEHLICH UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
- 25 -
16
Operating lease commitments
Lessee

At the reporting end date the company had outstanding commitments for future minimum lease payments under non-cancellable operating leases, which fall due as follows:

2022
2021
£
£
Within one year
46,036
15,578
Between two and five years
78,732
13,081
124,768
28,659
17
Capital commitments

Amounts contracted for but not provided in the financial statements:

2022
2021
£
£
Acquisition of tangible fixed assets
57,000
-
18
Related party transactions

During the year the company entered into normal trading activities with its parent company, J W Froehlich Maschinenfabrik GmbH as follows: Goods and services acquired £Nil (2021: £Nil); Goods and services supplied: £201,479 (2021: £259,134). As at 31 December 2022 the company owes the parent £1,606,359 (2021: £256,215).

 

During the year the company entered into normal trading activities with associated companies, which are also owned by J W Froehlich Maschinenfabrik GmbH. The trading activity with J W Froehlich USA Inc. were as follows: Goods and services acquired £10,188 (2021: £18,395); Goods and services supplied £380,491 (2021: £1,079,432). The trading activity with JWF (Shanghai) Co Ltd were as follows: Goods and services supplied £Nil (2021: £19,698). As at 31 December 2022 the company owes associated companies £105,648 (2021: £1,029) and is owed £Nil (2021: £2,899).

19
Ultimate controlling party

The immediate parent undertaking is J W Froehlich Maschinenfabrik GmbH. J W Froehlich Maschinenfabrik GmbH is wholly owned by J W Froehlich Vermögensverwaltung GmbH. The ultimate controlling party is Josef Froehlich, by virtue of his 100% holding in the ultimate parent Company. Copies of the accounts of J W Froehlich Vermögensverwaltung GmbH can be obtained from www.bundesanzeiaer.de.

 

20
Contingent liabilities

There were no matters as at 31 December 2022 warranting a note in respect of contingent liabilities.

JW FROEHLICH UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
- 26 -
21
Cash generated from/(absorbed by) operations
2022
2021
£
£
(Loss)/profit for the year after tax
(2,502,675)
868,473
Adjustments for:
Taxation charged/(credited)
-
0
(602,393)
Finance costs
4,772
36,248
Investment income
(2)
(28)
Amortisation and impairment of intangible assets
93,603
57,402
Depreciation and impairment of tangible fixed assets
110,523
120,881
Decrease in provisions
(118,028)
(572,115)
Movements in working capital:
(Increase)/decrease in stocks
(5,251)
103,315
Decrease in debtors
415,587
1,473,159
Increase/(decrease) in creditors
2,211,801
(1,526,400)
Cash generated from/(absorbed by) operations
210,330
(41,458)
22
Analysis of changes in net funds
1 January 2022
Cash flows
31 December 2022
£
£
£
Cash at bank and in hand
431,102
102,228
533,330
2022-12-312022-01-01falseCCH SoftwareCCH Accounts Production 2023.100JW FroehlichDK WellsD LudinGS BrinkleyH LiebgottJ VaughanS Jones012125052022-01-012022-12-3101212505bus:Director12022-01-012022-12-3101212505bus:Director22022-01-012022-12-3101212505bus:Director32022-01-012022-12-3101212505bus:Director42022-01-012022-12-3101212505bus:Director52022-01-012022-12-3101212505bus:Director62022-01-012022-12-3101212505bus:Director72022-01-012022-12-3101212505bus:RegisteredOffice2022-01-012022-12-31012125052022-12-31012125052021-01-012021-12-3101212505core:OtherDurationType12022-01-012022-12-3101212505core:OtherDurationType12021-01-012021-12-3101212505core:RetainedEarningsAccumulatedLosses2021-01-012021-12-3101212505core:RetainedEarningsAccumulatedLosses2022-01-012022-12-3101212505core:OtherResidualIntangibleAssets2022-12-3101212505core:OtherResidualIntangibleAssets2021-12-3101212505core:ComputerSoftware2022-12-3101212505core:DevelopmentCostsCapitalisedDevelopmentExpenditure2022-12-3101212505core:ComputerSoftware2021-12-3101212505core:DevelopmentCostsCapitalisedDevelopmentExpenditure2021-12-31012125052021-12-3101212505core:LandBuildingscore:OwnedOrFreeholdAssets2022-12-3101212505core:PlantMachinery2022-12-3101212505core:FurnitureFittings2022-12-3101212505core:LandBuildingscore:OwnedOrFreeholdAssets2021-12-3101212505core:PlantMachinery2021-12-3101212505core:FurnitureFittings2021-12-3101212505core:CurrentFinancialInstrumentscore:WithinOneYear2022-12-3101212505core:CurrentFinancialInstrumentscore:WithinOneYear2021-12-3101212505core:CurrentFinancialInstruments2022-12-3101212505core:CurrentFinancialInstruments2021-12-3101212505core:ShareCapital2022-12-3101212505core:ShareCapital2021-12-3101212505core:RetainedEarningsAccumulatedLosses2022-12-3101212505core:RetainedEarningsAccumulatedLosses2021-12-3101212505core:ShareCapital2020-12-3101212505core:RetainedEarningsAccumulatedLosses2020-12-31012125052021-12-3101212505core:IntangibleAssetsOtherThanGoodwill2022-01-012022-12-3101212505core:ComputerSoftware2022-01-012022-12-3101212505core:DevelopmentCostsCapitalisedDevelopmentExpenditure2022-01-012022-12-3101212505core:LandBuildingscore:OwnedOrFreeholdAssets2022-01-012022-12-3101212505core:PlantMachinery2022-01-012022-12-3101212505core:FurnitureFittings2022-01-012022-12-3101212505core:UKTax2022-01-012022-12-3101212505core:UKTax2021-01-012021-12-310121250512022-01-012022-12-310121250512021-01-012021-12-310121250522022-01-012022-12-310121250522021-01-012021-12-3101212505core:ComputerSoftware2021-12-3101212505core:DevelopmentCostsCapitalisedDevelopmentExpenditure2021-12-3101212505core:ComputerSoftwarecore:ExternallyAcquiredIntangibleAssets2022-01-012022-12-3101212505core:DevelopmentCostsCapitalisedDevelopmentExpenditurecore:ExternallyAcquiredIntangibleAssets2022-01-012022-12-3101212505core:ExternallyAcquiredIntangibleAssets2022-01-012022-12-3101212505core:LandBuildingscore:OwnedOrFreeholdAssets2021-12-3101212505core:PlantMachinery2021-12-3101212505core:FurnitureFittings2021-12-3101212505core:WithinOneYear2022-12-3101212505core:WithinOneYear2021-12-3101212505core:BetweenTwoFiveYears2022-12-3101212505core:BetweenTwoFiveYears2021-12-3101212505bus:PrivateLimitedCompanyLtd2022-01-012022-12-3101212505bus:FRS1022022-01-012022-12-3101212505bus:Audited2022-01-012022-12-3101212505bus:FullAccounts2022-01-012022-12-31xbrli:purexbrli:sharesiso4217:GBP