WEG (UK) Ltd |
Strategic Report |
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Statement by the directors in performance of their statutory duties in accordance with s172(1) Companies Act 2006 |
The Board of Directors consider that they have conducted themselves in a way that promotes success of the company for the benefit of its members and stakeholders, as a whole, in good faith throughout the year. The Board confirms that it routinely communicates with members, employees, customers, suppliers, other stakeholders and representatives of those groups, to encourage openness and transparency, promote a culture of honesty and intgrity, and commit to ensuring the highest level of health, safety and environmental factors. |
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Review of the business |
2023 presented the business with challenges, mainly in the area of Global Logistics supply chain. Fortunately we seen a stabilisation in the fluctuation of raw material prices and international shipping costs of the imports from Brazil and China. |
Despite these challenges the company managed to achieve a strong revenue growth of 7% higher than 2022. |
We anticipate that the market value has remained unchanged through 2023 thus our market share has grown yet again in the Electric Motor Industry. |
We anticipate that Product market pricing will remain around the same levels in 2024 as we saw in 2023. However, we expect continued revenue growth for 2024 of approximately 15% through a combination of organic growth and changes in the sales channels and product mix. |
Order booking during 2023 was strong, resulting in a growth in yearly order booking value over 2022, giving us a good carryover with revenue to be realised in 2024. |
Order intake increase was aided by the expansion in sales in higher value non-core products. This integration of new product lines will remain a focus area for the immediate future. |
The Key Performance Indicators used by the business are: |
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|
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Perfomance in 2023 |
|
Performance in 2022 |
|
|
Turnover |
£44.6m |
|
£41.8m |
|
Gross Profit % |
17.7% |
|
17.4% |
|
Net Profit Before Tax % |
3.0% |
|
3.8% |
|
Debtor Days |
125 |
|
120 |
|
Principal risks and uncertainties |
Currency exchange rate stability remains as an important factor in the future profitability of the business. |
The main risks and uncertainties facing the business are the cost volatility of raw materials, mainly steel, copper and other base metals, as well as the increasing costs and instability in the global logistics and shipping industry. |
|
Future developments |
The company is seeing a recovery in capital project activity, particularly in the oil, gas and mining industry segments where the company has strong customer representation. |
The focus will be kept on the accelerated integration and growth of new products to the sales mix, which has already had a positive impact in the last two years. |
The drivers for growth will be: |
● |
Continued migration in the market for higher efficiency low voltage electric motors meeting the IE3 and IE4 efficiency standards; |
● |
Strong growth targets of the geared motor and industrial gearbox business area, as well as the expansion in sales of electronic automation products; and |
● |
Increased focus on high value product offerings and integrated product solution packages. |
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Research and development |
Technological innovation encompasses new products, materials, tests and technology with the aim of increasing efficiency, quality, sustainability and competitiveness, as well as reducing costs and raw materials used in products. The wider group invests heavily in an R&D team where creativity is encouraged. |
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Engagement with employees, suppliers, customers and others |
The company prides itself on the development of people at all levels, providing training and support to all employees regardless of ethnicity and disability, with real routes of internal promotion and career progression. Regular communication occurs with employees in an informed environment, integrating their involvement to the continued growth and success of the business. High quality relationships are forged with suppliers, customers and other stakeholders, evidenced by the numerous longstanding associations that exist. In all cases, principal decisions affecting the company are undertaken with due regard and consideration for stakeholders. |
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This report was approved by the board on 5 February 2024 and signed on its behalf. |
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|
P O'Neill |
Director |
|
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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. |
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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. |
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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. |
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Opinions on other matters prescribed by the Companies Act 2006 |
In our opinion, based on the work undertaken in the course of the audit: |
● |
the information given in the strategic report and the directors’ report for the financial year for which the financial statements are prepared is consistent with the financial statements; and |
● |
the strategic report and the directors’ report have been prepared in accordance with applicable legal requirements. |
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Matters on which we are required to report by exception |
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below: |
● |
enquiring of management, including obtaining and reviewing supporting documentation concerning policies and procedures relating to the identification, evaluation and compliance with laws and regulations, whether they were aware of any instances of non-compliance, review for actual and potential litigation and claims, detecting and responding to the risks of fraud, whether they have knowledge of any actual, suspected or alleged fraud, and internal controls established to mitigate risks related to fraud or non-compliance with laws and regulations; |
● |
obtaining an understanding of the legal and regulatory framework that the company operates in, reviewing laws and regulations that may have a direct effect on the financial statements or are fundamental to the company's operations; |
● |
discussing among the engagement team those areas that may be susceptible to irregularities, ensuring that we remain vigilant, sceptical, open-minded, inquisitive and alert to any potential indicators of fraud; |
● |
reviewing financial statement disclosures and testing to supporting documentation to assess compliance with relevant laws and regulations; |
● |
performing analytical procedures to identify any unusual or unexpected relationships that may indicate risks of material misstatement due to fraud; |
● |
assessing and challenging sensitive assumptions and management judgements that form part of significant estimates, looking for indicators of manipulation through management bias; and |
● |
observing any signs of management override of controls, testing the appropriateness of journal entries and other adjustments, assessing whether any judgements made in making accounting estimates are indicative of potential bias, and evaluating the business rationale of any significant transactions that are unusual or outside the normal course of business. |
Because of the inherent limitations of an audit, there is a risk that we will not detect all irregularities, including those leading to a material misstatement in the financial statements or non-compliance with regulation. This risk increases the more that compliance with a law or regulation is removed from the events and transactions reflected in the financial statements, as we will be less likely to become aware of instances of non-compliance. The risk is also greater regarding irregularities occurring due to fraud rather than error, as fraud involves intentional concealment, forgery, collusion, omission or misrepresentation. |
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Stocks |
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Stocks are measured at the lower of cost and estimated selling price less costs to complete and sell after making due allowance for obsolete and slow-moving stocks. Cost is determined using the moving average method and includes attributable direct costs. The carrying amount of stock sold is recognised as an expense in the period in which the related revenue is recognised. Goods in transit from group factories are incorporated into the company's stock once goods arrive at the port of destination. |
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Debtors |
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Short term debtors are measured at transaction price (which is usually the invoice price), less any impairment losses for bad and doubtful debts. Loans and other financial assets are initially recognised at transaction price including any transaction costs and subsequently measured at amortised cost determined using the effective interest method, less any impairment losses for bad and doubtful debts. |
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Creditors |
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Short term creditors are measured at transaction price (which is usually the invoice price). Loans and other financial liabilities are initially recognised at transaction price net of any transaction costs and subsequently measured at amortised cost determined using the effective interest method. |
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Taxation |
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A current tax liability is recognised for the tax payable on the taxable profit of the current and past periods. Unrelieved tax losses and other deferred tax assets are recognised only to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits. Current and deferred tax assets and liabilities are not discounted. |
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Foreign currency translation |
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Transactions in foreign currencies are initially recognised at the rate of exchange ruling at the date of the transaction. At the end of each reporting period foreign currency monetary items are translated at the closing rate of exchange. Non-monetary items that are measured at historical cost are translated at the rate ruling at the date of the transaction. All differences are charged to profit or loss. |
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Leased assets |
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A lease is classified as a finance lease if it transfers substantially all the risks and rewards incidental to ownership. All other leases are classified as operating leases. The rights of use and obligations under finance leases are initially recognised as assets and liabilities at amounts equal to the fair value of the leased assets or, if lower, the present value of the minimum lease payments. Minimum lease payments are apportioned between the finance charge and the reduction in the outstanding liability using the effective interest rate method. The finance charge is allocated to each period during the lease so as to produce a constant periodic rate of interest on the remaining balance of the liability. Leased assets are depreciated in accordance with the company's policy for tangible fixed assets. If there is no reasonable certainty that ownership will be obtained at the end of the lease term, the asset is depreciated over the lower of the lease term and its useful life. In accordance with the Group's directive to promote consistent and comparable reporting across subsidiaries in respect of leased assets, the company adopts IFRS 16 Leases. Leased assets are accounted for as finance leases, unless they are acquired for a period of less than twelve months or of a trivial nature, in which case they are accounted for as operating leases. Operating lease payments are recognised as an expense on a straight line basis over the lease term. |
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Pensions |
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The company operates a defined contribution pension scheme. The assets of the scheme are held separately from those of the company in an independently administered fund. Contributions to defined contribution plans are expensed in the period to which they relate. Contributions to defined contribution plans are expensed in the period to which they relate. No pension commitments exist at the balance sheet date. |
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2 |
Critical accounting estimates and judgements |
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Slow moving stock provision - The company implements a policy of writing down slow moving and older items by certain percentages depending on the number of days they have been held in stock, to reduce those relevant items down to their anticipated recoverable value. |
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Warranty provision - Accrued warranty costs are based on the average actual experience of the previous two financial periods, and applying that ratio against turnover achieved in the current period. Warranty periods can vary between a few months to several years and so it is not always known at the date of approval of the financial statements whether an issue might arise further down the line against sales made up to the reporting date. |
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3 |
Analysis of turnover |
2023 |
|
2022 |
£ |
£ |
|
|
Sale of goods |
44,558,599 |
|
41,787,849 |
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|
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|
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By geographical market: |
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UK |
39,809,827 |
|
37,904,422 |
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Europe |
3,965,188 |
|
2,856,316 |
|
Rest of world |
783,584 |
|
1,027,111 |
|
|
|
|
|
|
44,558,599 |
|
41,787,849 |
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|
|
|
|
|
|
|
|
4 |
Operating profit |
2023 |
|
2022 |
£ |
£ |
|
This is stated after charging: |
|
|
Depreciation of owned fixed assets |
39,944 |
|
42,281 |
|
Depreciation of assets held under finance leases and hire purchase contracts |
|
793,297 |
|
541,710 |
|
Amortisation of intangible fixed assets |
2,416 |
|
1,884 |
|
Operating lease rentals - plant and equipment |
32,168 |
|
28,205 |
|
Auditors' remuneration for audit services |
17,900 |
|
16,890 |
|
Auditors' remuneration for other services |
13,390 |
|
13,690 |
|
Key management personnel compensation (including directors' emoluments) |
|
172,587 |
|
158,337 |
|
Foreign currency exchange (gains)/losses |
(26,557) |
|
495,877 |
|
Carrying amount of stock sold |
36,230,556 |
|
33,741,642 |
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|
|
|
|
|
|
|
|
5 |
Directors' emoluments |
2023 |
|
2022 |
£ |
£ |
|
|
Emoluments |
114,663 |
|
117,582 |
|
Company contributions to defined contribution pension plans |
57,924 |
|
40,755 |
|
|
|
|
|
|
172,587 |
|
158,337 |
|
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Number of directors to whom retirement benefits accrued: |
2023 |
|
2022 |
Number |
Number |
|
|
Defined contribution plans |
1 |
|
1 |
|
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|
|
|
|
|
|
|
|
6 |
Staff costs |
2023 |
|
2022 |
£ |
£ |
|
|
Wages and salaries |
3,099,879 |
|
2,709,967 |
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Social security costs |
339,587 |
|
316,019 |
|
Other pension costs |
463,898 |
|
395,413 |
|
|
|
|
|
|
3,903,364 |
|
3,421,399 |
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|
|
|
|
|
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|
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Average number of employees during the year |
Number |
Number |
|
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Production and service |
14 |
|
13 |
|
Sales |
47 |
|
43 |
|
|
|
|
|
|
61 |
|
56 |
|
|
|
|
|
|
|
|
|
|
7 |
Interest payable |
2023 |
|
2022 |
£ |
£ |
|
|
Loans from group undertakings |
567,848 |
|
160,287 |
|
Finance charges payable under finance leases |
|
143,389 |
|
11,928 |
|
|
|
|
|
|
711,237 |
|
172,215 |
|
|
|
|
|
|
|
|
|
|
8 |
Taxation |
2023 |
|
2022 |
£ |
£ |
|
Analysis of charge in period |
|
Current tax: |
|
UK corporation tax on profits of the period |
436,519 |
|
366,941 |
|
Adjustments in respect of previous periods |
(282) |
|
- |
|
|
|
|
|
|
436,237 |
|
366,941 |
|
|
Tax on profit on ordinary activities |
436,237 |
|
366,941 |
|
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|
|
|
|
|
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|
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Factors affecting tax charge for period |
|
The differences between the tax assessed for the period and the standard rate of corporation tax are explained as follows: |
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|
|
|
|
2023 |
|
2022 |
£ |
£ |
|
Profit on ordinary activities before tax |
1,317,091 |
|
1,606,524 |
|
|
|
|
|
|
|
|
|
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Standard rate of corporation tax in the UK |
23.5% |
|
19% |
|
£ |
£ |
|
Profit on ordinary activities multiplied by the standard rate of corporation tax |
|
309,516 |
|
305,240 |
|
|
Effects of: |
|
Expenses not deductible for tax purposes |
124,072 |
|
68,056 |
|
(Capital allowances for period in excess of depreciation) / Depreciation in excess of capital allowances |
|
2,931 |
|
(6,355) |
|
Adjustments to tax charge in respect of previous periods |
(282) |
|
- |
|
|
Current tax charge for period |
436,237 |
|
366,941 |
|
|
|
|
|
|
|
|
|
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Factors that may affect future tax charges |
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Substantively enacted by Finance Bill on 24 May 2021, the main rate of corporation tax in the United Kingdom increased from its current level of 19% to 25% from 1 April 2023. The effective hybrid rate for the company during this financial year is 23.5%. The main rate of 25% will apply in full in the next accounting period. |
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9 |
Intangible fixed assets |
£ |
|
Software: |
|
|
Cost |
|
At 1 January 2023 |
9,665 |
|
At 31 December 2023 |
9,665 |
|
|
|
|
|
|
|
|
|
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Amortisation |
|
At 1 January 2023 |
2,295 |
|
Provided during the year |
2,416 |
|
At 31 December 2023 |
4,711 |
|
|
|
|
|
|
|
|
|
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Carrying amount |
|
At 31 December 2023 |
4,954 |
|
At 31 December 2022 |
7,370 |
|
|
|
|
|
|
|
|
|
|
Capitalised software is being amortised on a straight line basis over its estimated useful economic life of 4 years. |
|
|
10 |
Tangible fixed assets |
|
At cost |
Short leasehold building alterations |
|
Plant and equipment |
|
Motor vehicles |
|
Total |
£ |
£ |
£ |
£ |
|
Cost or valuation |
|
At 1 January 2023 |
55,190 |
|
522,131 |
|
- |
|
577,321 |
|
Additions |
- |
|
26,597 |
|
- |
|
26,597 |
|
At 31 December 2023 |
55,190 |
|
548,728 |
|
- |
|
603,918 |
|
|
|
|
|
|
|
|
|
|
Depreciation |
|
At 1 January 2023 |
54,054 |
|
435,677 |
|
- |
|
489,731 |
|
Charge for the year |
1,136 |
|
38,808 |
|
- |
|
39,944 |
|
At 31 December 2023 |
55,190 |
|
474,485 |
|
- |
|
529,675 |
|
|
|
|
|
|
|
|
|
|
Carrying amount |
|
At 31 December 2023 |
- |
|
74,243 |
|
- |
|
74,243 |
|
At 31 December 2022 |
1,136 |
|
86,454 |
|
- |
|
87,590 |
|
|
|
|
|
|
|
|
|
|
11 |
Right of use assets - held under finance leases |
|
At PV of lease payments |
Short leasehold buildings |
|
Plant and equipment |
|
Motor vehicles |
|
Total |
£ |
£ |
£ |
£ |
|
Cost or valuation |
|
At 1 January 2023 |
1,637,778 |
|
181,264 |
|
424,280 |
|
2,243,322 |
|
Additions |
6,566,824 |
|
- |
|
203,887 |
|
6,770,711 |
|
Disposals |
(1,637,778) |
|
(9,000) |
|
(56,932) |
|
(1,703,710) |
|
At 31 December 2023 |
6,566,824 |
|
172,264 |
|
571,235 |
|
7,310,323 |
|
|
|
|
|
|
|
|
|
|
Depreciation |
|
At 1 January 2023 |
1,572,267 |
|
127,009 |
|
176,962 |
|
1,876,238 |
|
Charge for the year |
634,636 |
|
36,214 |
|
122,447 |
|
793,297 |
|
On disposals |
(1,637,778) |
|
(9,000) |
|
(56,932) |
|
(1,703,710) |
|
At 31 December 2023 |
569,125 |
|
154,223 |
|
242,477 |
|
965,825 |
|
|
|
|
|
|
|
|
|
|
Carrying amount |
|
At 31 December 2023 |
5,997,699 |
|
18,041 |
|
328,758 |
|
6,344,498 |
|
At 31 December 2022 |
65,511 |
|
54,255 |
|
247,318 |
|
367,084 |
|
|
|
|
|
|
|
|
|
|
12 |
Stocks |
2023 |
|
2022 |
£ |
£ |
|
|
Finished goods and goods for resale |
12,264,250 |
|
12,885,064 |
|
|
|
|
|
|
|
|
|
|
13 |
Debtors |
2023 |
|
2022 |
£ |
£ |
|
|
Trade debtors |
17,971,509 |
|
16,186,722 |
|
Trade amounts due from group undertakings |
43,463 |
|
8,794 |
|
Other debtors |
- |
|
50,031 |
|
Prepayments and accrued income |
276,572 |
|
125,830 |
|
|
|
|
|
|
18,291,544 |
|
16,371,377 |
|
|
|
|
|
|
|
|
|
|
14 |
Creditors: amounts falling due within one year |
2023 |
|
2022 |
£ |
£ |
|
|
Loans owed to group undertakings (unsecured) |
14,070,879 |
|
17,778,940 |
|
Accrued loan interest |
216,040 |
|
73,965 |
|
Obligations under finance leases |
788,440 |
|
189,215 |
|
Trade creditors |
486,867 |
|
385,619 |
|
Trade amounts owed to group undertakings |
|
5,993,203 |
|
3,281,335 |
|
Corporation tax |
35,431 |
|
- |
|
Other taxes and social security costs |
1,376,135 |
|
258,534 |
|
Accruals and deferred income |
839,364 |
|
585,220 |
|
|
|
|
|
|
23,806,359 |
|
22,552,828 |
|
|
|
|
|
|
|
|
|
|
Formal loans from group undertakings are repayable by 21 May 2024 and incur interest at 7.2% (2022 3.1%). Short term cash pooling borrowings are repayable on demand and incur debit interest at 4.5% (2022 1.2%). The interest rate implicit in the premises finance lease is 4% (2022 0.75%). |
|
|
15 |
Creditors: amounts falling due after one year |
2023 |
|
2022 |
£ |
£ |
|
|
Obligations under finance leases |
5,561,060 |
|
172,989 |
|
Accruals and deferred income |
288,184 |
|
- |
|
|
|
|
|
|
5,849,244 |
|
172,989 |
|
|
|
|
|
|
|
|
|
|
16 |
Loans |
2023 |
|
2022 |
£ |
£ |
|
Analysis of maturity of debt: |
|
Within one year or on demand |
14,070,879 |
|
17,778,940 |
|
|
|
|
|
|
|
|
|
|
Loans from group undertakings are unsecured but the ultimate parent company WEG S.A. has provided a guarantee on behalf of the company in respect of the repayment of loans to the parent undertaking. |
|
|
17 |
Obligations under finance leases |
2023 |
|
2022 |
£ |
£ |
|
|
Amounts payable: |
|
Within one year |
788,440 |
|
189,215 |
|
Within two to five years |
2,852,278 |
|
172,989 |
|
After five years |
2,708,782 |
|
- |
|
|
|
|
|
|
6,349,500 |
|
362,204 |
|
|
|
|
|
|
|
|
|
|
Liabilities for assets acquired under finance leases are secured on those assets with the exception of leased premises, which are not secured. The aggregate amount of secured finance leases at the year end is £347,603 (2022 £301,898). |
|
|
18 |
Share capital |
Nominal |
|
2023 |
|
2023 |
|
2022 |
value |
Number |
£ |
£ |
|
Allotted, called up and fully paid: |
|
Ordinary shares |
£1 each |
|
6,245,321 |
|
6,245,321 |
|
6,245,321 |
|
|
|
|
|
|
|
|
|
|
The Ordinary shares have attached to them full voting, dividend and capital distribution (including on winding up) rights. They do not confer any rights of redemption. |
|
|
19 |
Profit and loss account |
2023 |
|
2022 |
£ |
£ |
|
|
At 1 January |
1,006,256 |
|
(233,327) |
|
Profit for the financial year |
880,854 |
|
1,239,583 |
|
|
At 31 December |
1,887,110 |
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1,006,256 |
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20 |
Contingent liabilities |
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In the normal course of business, the company has provided performance guarantees and bonds to a small number of customers. All fall due to expire within 18 months of the year end. Such guarantees recorded at their maximum liability values amounted to £618,251 (2022: £171,823). The likelihood of any material discharge occurring in the foreseeable future is very low. |
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21 |
Related party transactions |
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The company has taken advantage of the exemption provisions under paragraph 33.1A of FRS 102 from disclosing transactions with wholly owned group companies. |
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22 |
Controlling party |
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The company is wholly owned by WEG Holding GmbH, a company incorporated in Austria. The ultimate parent company is WEG S.A. incorporated in Brazil. That company is not under the control of any one individual. The largest and smallest group of undertakings to which the company belongs and which draws up consolidated accounts is WEG S.A. The consolidated accounts of WEG S.A. are publicly available on their website or can be obtained from Av. Prefeito Waldemar Grubba, 3000, 89256-900, Jaragua do Sul, Santa Catarina, Brazil. |
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23 |
Presentation currency |
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The financial statements are presented in Sterling. |
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24 |
Legal form of entity and country of incorporation |
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WEG (UK) Ltd is a private company limited by shares and incorporated in England. |
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25 |
Principal place of business |
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The address of the company's principal place of business and registered office is: |
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Lakeside Point |
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Broad Ground Road |
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Redditch |
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Worcestershire |
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B98 8YP |