The directors present the strategic report for the year ended 31 December 2022.
Results for our UK parent company indicate a strong profit for 2022, with profit after tax of £1.7m (2021: £445k profit). This does, however, include £4.3m of dividends from the Serbian entities, without which the UK parent company would have reported a significant loss. Our UK subsidiary, Albon Forge Ltd, has reported a loss of £460k (2021: £156k loss). Our Serbian (£4.3m profit) and US (£89k profit) entities continue to be profitable and ensure healthy group profits.
We are currently taking steps to minimise losses in the UK and ensure the financial health of the Albon Group moving forward.
On a group basis, Albon has reported an operating profit of circa £2.4 million (2021: £4.6m profit). Group Turnover improved significantly in 2022 to £42.5m (2021: £34.9m).
Albon continues to operate a warehousing and repacking facility from rented premises in Oklahoma. Rods shipped into the USA from Serbia will continue to be stored and distributed from this facility.
Albon continues to work on new opportunities for blue chip companies for both UK and Serbia. Construction of a third factory in Serbia is now complete and lines are operational.
We continue to invest time and resources in R&D activities to ensure we can remain competitive and offer our customers the latest technologies. We continue to explore opportunities to diversify our product portfolio and potentially offer our customers in-house forgings options as well as machining for existing and new product lines.
The customer base across the group in 2022 remained consistent, with some new Blue Chip customers added to the portfolio in 2022.
Net Borrowings across the group has increased to £22 million (2021: £16.7 million). The borrowings were utilised primarily to fund the new factory in Serbia, along with the production lines required to manufacture parts for new contracts awarded in 2020.
Group capital spend in 2022 was circa £6.8m (2021: £5.5m). The Albon group continues to invest in plant to both fulfil obligations under new contracts as well as improve production efficiencies.
Historically, one of the key risks facing the Company was debt accrued with HMRC in respect of PAYE and VAT liabilities. Working Capital pressures, caused by increasing costs and reduced supplier payment terms, rendered the company unable to pay HMRC debts as they fell due. All debts to 31 December 2022 were repaid in full by January 2024, with no further action being taken by HMRC. At the time of signing these accounts new Time To Pay arrangements are in place, which cover all outstanding VAT and PAYE for both Albon Engineering & Manufacturing PLC and Albon Forge Ltd which have accrued since the 2022 year end date.
Global conflicts are not yet having any serious implications for the Albon Group. However, we remain vigilant and continue to update ourselves on the latest situation. Transit times for some imported product is being impacted by increased transit times. However, we are currently able to adapt our schedules to minimise the impact of these delays.
Several of our customers have commented in recent months that they are looking to reduce their supply chain risk by procuring more product from local sources. This is seen as a positive message from our customer base as it implies there may be more opportunity for future business as customers chose to move away from supplies from lower cost countries in favour of a lower risk option.
The Albon Group has always been exposed to translation and transaction foreign exchange risk. Wherever possible this is managed by matching currencies for revenues and expenditure, or by agreeing exchange adjustments with stakeholders. Forward contracts are used where there is known to be a mismatch of currencies, in an attempt to mitigate foreign exchange risk.
Availability of cash continues to be one of the key constraints across the Albon group. We continue to seek ways to improve working capital.
Competitive pressures could result in loss of sales. Albon manages this risk by providing high quality products, fast response times, tight control of costs and through the engineering talent both in component build and in having an own-sourced machine tool capability that provides rapid, attractively priced, bespoke solutions.
Global economic uncertainty is a general risk. Albon provides product to a wide range of markets, from private vehicles to power generation, marine, mining and construction equipment. This provides some mitigation, as each market has different influencing factors long-term. Albon gathers regular information from customers and suppliers and strives to maintain a flexible cost base for short term reaction to fluctuations in demand. Albon favours investment in programmes for customers who themselves have shown commitment to long term investment.
Group Turnover improved significantly in 2022 (2022: £42.5m, 2021: £34.9m), which is a key indicator for management.
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Turnover | 42.5 | 34.9 |
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Operating Profit | 2.4 | 4.6 |
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Profit before Tax | 1.4 | 4.0 |
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Albon UK has retained its ISO9001 and IATF/TS 16949 quality related certifications as well as ISO 14001 Environmental certification.
Section 172 Statement
The directors understand that they have a duty to promote the success of the Company for the benefit for its members as a whole, as detailed in section 172(1)(a) to (f) Companies Act 2006. The directors consider the following to be key stakeholders;
Customers
Suppliers
Shareholders
Employees
Environment
Regulators
The likely consequences of any decision in the long term
The board carefully reviews all decisions and considers the impact on the business in the long term. For example, when reviewing employment decisions future needs of the business are considered as well as short term requirements.
The interests of the company’s employees and co-workers
All of our Employees are offered the option of joining a union when they are employed at Albon. Regular meetings are held with the Union representative to discuss any concerns.
The need to foster the company’s business relationships with suppliers, customers and others
Albon works closely with both customers and suppliers. Representatives of Albon regularly attend seminars and presentations put on by members of our supply chain. Like-wise we also prepare presentations for our key stakeholders.
Frequent calls are held with all members of the supply chain to ensure that discussions can be held in a productive environment to ensure that customer schedules are met.
As a responsible company we always seek to engage with external regulators in a timely and professional manner.
The impact of the company’s operations on the community and the environment
We are careful to minimise noise and light pollution for our neighbouring businesses. Our premises are located within industrial areas, keeping community disruption to a minimum. In 2017/2018 we replaced all lighting in our Rochford factories with LED alternatives. We continue to look at new ways to reduce our environmental impact, most recently we are currently awaiting delivery of Electric Forklifts to replace our existing Diesel versions. We responsibly dispose of all waste through licensed carriers.
The desirability of the company for maintaining a reputation for high standards of business conduct
The board recognises the importance of operating a robust corporate governance framework. No political donations were made in the year (2021: £nil).
The need to act fairly as between members of the company
All shareholders hold the same class of share and therefore benefit from the same voting rights.
On behalf of the board
The directors present their annual report and financial statements for the year ended 31 December 2022.
The consolidated profit and loss account for the year is set out on page 10.
An interim ordinary dividend was paid amounting to £1,350,000 (2021: £722,000). The directors do not recommend payment of a final dividend.
The directors who held office during the year and up to the date of signature of the financial statements were as follows:
Albon continuously works with customers to incorporate improvements in quality, efficiency and cost into component manufacture. Our machine tool facility includes a team of multi-skilled engineers, providing technical support, internally and to customers, and leading-edge innovations in connecting rod design and critical component machining.
Group Management accounts indicate that turnover is likely to be approximately £50m for 2023. Group forecasts indicate turnover is likely to be in the region of £43m for 2024, while UK facilities are streamlined (see below). Turnover in Serbia is forecast to remain stable at 47m EUROS through 2024 and 2025.
Over the past few years, the group has made significant investment in Serbia to build additional facilities and install manufacturing lines for new contracts. The Group now operates from 3 state of the art factories in Serbia, and has acquired land to facilitate construction of a fourth factory in the next few years.
Senior management have recently made the difficult decision to cease manufacturing operations in the UK and move Conn-Rod manufacture to our facilities in Serbia. Negotiations are underway with current UK customers to obtain approval to manufacture product from our Serbian facilities.
It is our current intention to retain a UK Head Office and warehousing facility (for rods supplied to UK customers). Both Rochford factories are being marketed for sale. Interest received will determine which factory (if any) is used as the Head Office location. If a buyer is found for each factory then the company would consider renting a smaller premises locally to accommodate offices and some factory space to use as storage/toolroom.
Albon continues to quote new business on a regular basis and has several projects under consideration with blue-chip OEMS.
Albon considers the development of connecting rods and critical components to be a primary opportunity for continued expansion of the business. To further that goal Albon continually explores technological advances in the development of connecting rods and other engine components.
Current areas of Research and Development include, but are not limited to, investigations into alternative materials, coatings and designs to improve product performance and efficiency, lower CO2 emissions, optimise cost of manufacture and ownership, minimise weight, reduce waste and defer end-of-life.
Albon intends to continue to expand the engineering capability in Serbia with the intention to diversify the current product range within known markets. New ICE (Internal Combustion Engine) fuels (e.g. Hydrogen) are currently being explored. We are supporting the development of these technologies through the redesign of connecting rods and currently have parts on test with one of our UK industrial customers. We are also exploring the potential expansion of our forged product offering.
The group has followed the 2019 HM Government Environmental Reporting Guidelines. The group has also used the GHG Reporting Protocol – Corporate Standard and have used the 2022 UK Government’s Conversion Factors for Company Reporting
The chosen intensity measurement ratio is total gross emissions in metric tonnes CO2e per £1m of Turnover, the recommended ratio for the sector.
We have consistently monitored our half-hourly metered electricity data, enabling us to analyse monthly consumption in relation to manufacturing output. This approach has provided valuable insights into potential efficiency improvements. Additionally, we have optimized the use of our company vans by minimizing single delivery and collection trips, leading to a significant reduction in mileage. These combined efforts have successfully reduced our carbon emissions by 84.3 tCO2e in 2022.
We have audited the financial statements of Albon Engineering and Manufacturing Ltd (the 'parent company') and its subsidiaries (the 'group') for the year ended 31 December 2022 set out on pages 10 to 41. 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).
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 group and parent 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.
Material uncertainty related to going concern
We draw attention to note 1.3 in the financial statements, which indicates the company has cashflow challenges, primarily concerned with timing of repayment of their UK bank loan, which is now due for repayment. As stated in note 1.3, these events or conditions, along with the other matters as set forth in note 1.3, indicate that a material uncertainty exists that may cast significant doubt on the company’s ability to continue as a going concern. Our opinion is not modified in respect of this matter.
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.
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:
the information given in the strategic report and the directors' report for the financial year for which the financial statements are prepared is consistent with the financial statements; and
the strategic report and the directors' report have been prepared in accordance with applicable legal requirements.
In the light of the knowledge and understanding of the group and the parent company and their 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:
adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or
the parent company financial statements are not in agreement with the accounting records and returns; or
certain disclosures of directors' remuneration specified by law are not made; or
we have not received all the information and explanations we require for our audit.
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 parent 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 parent company or to cease operations, or have no realistic alternative but to do so.
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.
Our approach to identifying and assessing the risks of material misstatement in respect of irregularities, including fraud and non-compliance with laws and regulations, was as follows:
the engagement partner ensured that the engagement team collectively had the appropriate competence, capabilities and skills to identify or recognise non-compliance with applicable laws and regulations;
we identified the laws and regulations applicable to the group and parent company through discussions with directors and other management, and from our commercial knowledge and experience of the manufacturing sector;
we focused on specific laws and regulations which we considered may have a direct material effect on the financial statements or the operations of the group and parent company, including the Companies Act 2006, taxation legislation, employment, environmental and health and safety legislation;
we assessed the extent of compliance with the laws and regulations identified above through making enquiries of management; and
identified laws and regulations were communicated within the audit team regularly and the team remained alert to instances of non-compliance throughout the audit.
We assessed the susceptibility of the group’s financial statements to material misstatement, including obtaining an understanding of how fraud might occur, by:
making enquiries of management as to where they considered there was susceptibility to fraud, their knowledge of actual, suspected and alleged fraud;
considering the internal controls in place to mitigate risks of fraud and non-compliance with laws and regulations; and
Understanding the business model as part of the control and business environment.
To address the risk of fraud through management bias and override of controls, we:
performed analytical procedures to identify any unusual or unexpected relationships;
tested journal entries to identify unusual transactions;
assessed whether judgements and assumptions made in determining the accounting estimates set out in note 2 were indicative of potential bias; and
investigated the rationale behind significant or unusual transactions.
In response to the risk of irregularities and non-compliance with laws and regulations, we designed procedures which included, but were not limited to:
agreeing financial statement disclosures to underlying supporting documentation;
enquiring of management as to actual and potential litigation and claims;
reviewing correspondence with HMRC, relevant regulators including the Health and Safety Executive; and
enquiring with the company management of actual and potential non-compliance with laws and regulations.
There are inherent limitations in our audit procedures described above. The more removed that laws and regulations are from financial transactions, the less likely it is that we would become aware of non-compliance. Auditing standards also limit the audit procedures required to identify non-compliance with laws and regulations to enquiry of the directors and other management and the inspection of regulatory and legal correspondence, if any.
Material misstatements that arise due to fraud can be harder to detect than those that arise from error as they may involve deliberate concealment or collusion. Our audit procedures are designed to detect material misstatement. We are not responsible for preventing non-compliance or fraud and cannot be expected to detect non-compliance with all laws and regulations.
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.
The income statement has been prepared on the basis that all operations are continuing operations.
Albon Engineering and Manufacturing Ltd (“the company”) is a limited company registered and incorporated in England and Wales. The registered office is Rochehall Way, Purdeys Industrial Estate, Rochford, Essex.
The group consists of Albon Engineering and Manufacturing Ltd and all of its subsidiaries, as set out in note 14.
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 and group. Monetary amounts in these financial statements are rounded to the nearest £.
The financial statements have been prepared on the historical cost convention, modified to include the revaluation of freehold properties. The principal accounting policies adopted are set out below.
The company is a qualifying entity for the purposes of FRS 102, being a member of a group where the parent of that group prepares publicly available consolidated financial statements, including this company, which are intended to give a true and fair view of the assets, liabilities, financial position and profit or loss of the group. The company has therefore taken advantage of exemptions from the following disclosure requirements for parent company information presented within the consolidated financial statements:
Section 7 ‘Statement of Cash Flows’: Presentation of a statement of cash flow and related notes and disclosures;
Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instrument Issues: Interest income/expense and net gains/losses for financial instruments not measured at fair value; basis of determining fair values; details of collateral, loan defaults or breaches, details of hedges, hedging fair value changes recognised in profit or loss and in other comprehensive income;
Section 26 ‘Share based Payment’: Share-based payment expense charged to profit or loss, reconciliation of opening and closing number and weighted average exercise price of share options, how the fair value of options granted was measured, measurement and carrying amount of liabilities for cash-settled share-based payments, explanation of modifications to arrangements;
Section 33 ‘Related Party Disclosures’: Compensation for key management personnel.
As permitted by s408 Companies Act 2006, the company has not presented its own profit and loss account and related notes. The company’s profit for the year was £1,654,520 (2021 - £445,473 profit).
The consolidated group financial statements consist of the financial statements of the parent company Albon Engineering and Manufacturing Ltd together with all entities controlled by the parent company (its subsidiaries) and the group’s share of its interests in joint ventures and associates.
All financial statements are made up to 31 December 2022. Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with those used by other members of the group.
All intra-group transactions, balances and unrealised gains on transactions between group companies are eliminated on consolidation. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.
The group's business activities together with the factors likely to affect its future development, performance and position, are set out in the Business Review section of the Strategic Report. The financial statements have been prepared on a going concern basis.
Albon Engineering & Manufacturing PLC, as a standalone entity, has been loss making and cash negative for a number of years. The Serbian entities have historically been able to generate sufficient surplus cash to support UK trading. However, at the start of 2024 the management team took some time to re-assess the sustainability of this strategy long term. Several factors were taken into consideration during discussions:
- Expiration of existing UK bank loan Aug-24;
- Current UK and Serbian business levels and profitability;
- Expected future trading levels;
- Creditor pressure;
- Working Capital requirements of the business;
- Availability of funding;
- Performance of Serbian Operations;
- Available capacity within Serbian facilities.
Having reviewed these factors, a decision was made in Q2 2024 to stop manufacturing within the UK and concentrate efforts on growing Serbian operations, with the intention on retaining a UK Head Office to support Group Sales and Finance functions.
Given that existing facilities in Serbia have surplus floor-space available, all key customers and suppliers have been consulted and given the option to transfer existing contracts to Serbia. Following this consultation, two significant contracts are being transferred, while the remainder are to be phased out. A plan is underway to move required equipment to Serbia and start manufacture during Q4 2024. Given the lower cost base in Serbia, existing contracts will be more profitable once parts are produced in Serbia.
Following these restructuring decisions in Q2 and Q3 2024, the majority of Manufacturing staff in the UK have now been made redundant. Members of the maintenance team have been retained in order to assist with decommissioning and transfer of equipment.
The Company owns two Freehold properties in Rochford which both act as security for the Mortgage held with Lloyds Bank which is currently due for repayment. The Company has now accepted an offer (in July 2024) on the smaller of the 2 factories, with the sale expected to complete during Q4 2024. This will provide a cash injection to be used to substantially settle the Lloyds Mortgage. The plan is for further funds to be transferred from Serbia to clear the remainder of the UK bank debt, thus leaving the remaining UK property un-encumbered and removing any pressure relating to repayment of bank debt and bank covenants. Representatives of Lloyds bank have been closely involved with the entire sales process and payments continue to be made on an interest only basis. We cannot however predict timing of any action the bank might take to recover their debt though the bank have communicated some flexibility in timing to support the company as it disposes of the UK factory asset.
Payment plans have been agreed with Key Suppliers, including HMRC. With support from Serbian operations, all commitments have been met and suppliers continue to work with the business to ensure debts are cleared before. Serbian operations continue to meet their own commitments while supporting the UK entity with cash flow.
As part of the change in group strategy, management have reviewed the business model of Albon Forge Ltd. They are exploring opportunities for future development for the entity. In the short term, the majority of the Forge staff have been made redundant while management consider the future direction of the entity.
Moving forward all costs associated with the UK head office will be recharged to Serbian entities on a monthly basis to ensure the UK Operations continue to break even and have sufficient cash to support ongoing commitments.
The directors believe that moving manufacturing operations to Serbia is in the best interests of the Group as a whole, and give the best opportunities in terms of ongoing margins and profitability. The directors have considered the impact of all of the above, and with sale of the factory and cash support from Serbian operations, remain confident that the company will continue in operational existence for the foreseeable future and consequently continue to adopt the going concern basis in preparing these accounts.
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.
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 recognised in the income statement.
The assets' residual values and useful lives are reviewed, and adjusted, if appropriate, at the end of each reporting period. The effect of any change is accounted for prospectively.
At each reporting period end date, the group reviews the carrying amounts of its tangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). 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.
The carrying amount of the investments accounted for using the equity method is tested for impairment as a single asset. Any goodwill included in the carrying amount of the investment is not tested separately for impairment.
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.
The group 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 group's statement of financial position when the group becomes party to the contractual provisions of the instrument.
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, 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.
Trade debtors, loans and other receivables that have fixed or determinable payments that are not quoted in an active market are classified as 'loans and receivables'. Loans and receivables are measured at amortised cost using the effective interest method, less any impairment.
Interest is recognised by applying the effective interest rate, except for short-term receivables when the recognition of interest would be immaterial. The effective interest method is a method of calculating the amortised cost of a debt instrument and of allocating the interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts through the expected life of the debt instrument to the net carrying amount on initial recognition.
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.
Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire or are settled, or when the group 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.
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 group after deducting all of its liabilities.
Basic financial liabilities, including creditors, bank loans, loans from fellow group 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 receipts 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 payables 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 payables are recognised initially at transaction price and subsequently measured at amortised cost using the effective interest method.
Financial liabilities are derecognised when the group's contractual obligations expire or are discharged or cancelled.
Equity instruments issued by the group 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 group.
The tax expense represents the sum of the tax currently payable and deferred tax.
The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the income statement 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 group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting end date.
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 income statement, 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 if, and only if, there is 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.
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.
Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due.
The group operates a defined contribution plan for its employees. A defined contribution plan is a pension plan under which the company pays fixed contributions into a separate entity. Once the contributions have been paid the company has no further payment obligations. The contributions are recognised as an expense when they are due. Amounts not paid are shown in accruals in the balance sheet. The assets of the plan are held separately from the company in independently administered funds.
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 statement of financial position 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.
Rental income from operating leases is recognised on a straight line basis over the term of the relevant lease. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised on a straight line basis over the lease term.
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 leased asset are consumed.
Government grant represents the fair value of the income received or receivable from the furlough scheme introduced by the UK government due to the pandemic caused by COVID-19.
Income from the furlough scheme is recognised in the period the furlough income relates to and recorded as ‘other income’.
Furlough scheme income has also been received from the government in Serbia.
Transactions in foreign currencies are recorded using the rate of exchange ruling at the end of the month following the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated using the rate of exchange ruling at the balance sheet date and the gains or losses on translation are included in the profit and loss account.
The assets and liabilities of overseas subsidiary undertakings are translated at the closing exchange rate whilst the profit and loss accounts are translated using the average rate for the year. Gains and losses arising on these translations are taken to reserves, net of exchange differences on related foreign currency borrowings.
Exchange differences arising on translation differences at year end rates on investments made by way of loans to subsidiary undertakings, intended to be, for all practical purposes, as permanent as equity, are accounted for on consolidation as an adjustment to reserves.
In the application of the group’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.
The estimates and assumptions which have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities are as follows.
When calculating the stock provision, management considers the nature and condition of the stock, as well as applying assumptions around anticipated saleability of finished goods. See note 15 for the net carrying amount of the stock and associated provision.
When calculating the work in progress, management calculates labour & utility costs per rod for each product and allocates 50% to the cost of raw materials.
Land and buildings are recorded at fair value either based on directors' valuation or external valuation if there has been any significant movements in the property market.
At the end of each reporting period, the directors update their assessment of the fair value of each property, taking into account the most recent independent valuations. The directors determine a property's value within a range of reasonable fair value estimates.
The latest external valuation was performed on 30 January 2012 and 15 August 2013 for Agena Technology Doo and Albon Manufacturing & Engineering Doo respectively. The valuation was based on rental yields that can be achieved by the properties. As at 31 December 2022, an external valuer confirmed that there has been no significant movements in general market conditions in Serbia on the basis of which the directors can conclude that the value of the properties remained at the same level as previous years.
The properties owned by the parent company were revalued by the directors based on a professional valuation carried out by external valuers, Glenny LLP. The valuation was dated 5 September 2024 but provided a valuation as at 31 December 2022.
An analysis of the group's turnover is as follows:
The average monthly number of persons (including directors) employed by the group and company during the year was:
Their aggregate remuneration comprised:
The number of directors for whom retirement benefits are accruing under defined contribution schemes amounted to 2 (2021 - 2).
The tax rate for the current period was 19% (2021: 19%).
As of 1 April 2023, the UK corporation tax rate increased to 25%.
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:
In addition to the amount charged to the income statement, the following amounts relating to tax have been recognised directly in other comprehensive income:
The net carrying value of tangible fixed assets includes the following in respect of assets held under finance leases or hire purchase contracts.
Group
Serbia - Albon Engineering & Manufacturing Doo - The property was revalued by external valuers, SGS Beograd Ltd, on 15 August 2013, to open market value based on existing use value.
Serbia - Agena Technology Doo - An external valuation was carried out on the property on 30 January 2012 by LeRoy Realty Consultants Doo on an open market value basis.
As at 31 December 2022 the directors consider the aggregate market value of the properties in Albon Engineering & Manufacturing Doo & Agena Technology Doo to be £11,835,367.
Company
The property was revalued to £12.82m by the directors based on a professional valuation carried out by external valuers, Glenny LLP. The valuation was dated 5 September 2024 but provided a valuation as at 31 December 2022.
If revalued assets were stated on an historical cost basis (after foreign exchange adjustment) rather than a fair value basis, the total amounts included would have been as follows:
Listed investments included above:
Details of the company's subsidiaries at 31 December 2022 are as follows:
The registered office addresses of the subsidiary companies are:
USA entities: 3001 NW 36th, Norman, Oklahoma 73072, USA
Serbian entities: Industrijska 94, Ruma, Serbia
UK entities: Rochehall Way, Purdeys Industrial Estate, Rochford, Essex, United Kingdom, SS4 1JU
Under section 479C - audit exemption for a subsidiary company, the company has provided a statement of guarantee by a parent undertaking of a subsidiary undertaking on behalf of Albon Forge Limited. Consequently, Albon Forge Limited is exempt from the requirements of the Companies Act relating to the audit of its individual accounts.
There is no significant difference between the replacement cost of finished goods and their carrying amounts.
Stock is stated after provisions for impairment of £566,777 (2021: £532,815).
Trade debtors disclosed above are measured at amortised cost.
Trade debtors are stated after provisions for impairment of £137,400 (2021: £nil).
Company
The bank loans are secured by fixed and floating charges over the freehold property and all further undertakings of the company.
The aggregate amount of secured bank creditors due within one year at the year end was £5,869,785 (2021: £666,152).
Obligations under finance lease contracts are secured against the related assets. The aggregate amount of secured finance lease creditors due within one year at the year end was £567,273 (2021: £417,176).
Group
Agena Technology Doo loan is secured over the assets of the company in favour of Societe Generale Bank, Procredit Bank and Eurobank AD. Albon Engineering & Manufacturing Doo loan is secured over the assets of the company in favour of Halkbank.
Albon Manufacturing LLC - No bank loans at the year end.
Albon Forge Ltd overdraft is secured over the assets of the company in favour of Lloyds Bank.
The aggregate amount of secured bank creditors due within one year is £10,706,708 (2021: £4,640,678).
Obligations under finance lease contracts are secured against the related assets. The aggregate amount of secured finance lease creditors due within one year at the year end was £593,533 (2021: £432,619).
The terms of the bank loans, interest rates and repayment details are as follows:
Company
At the year end the company had a bank loan fully repayable by 2024 in quarterly instalments £100,000 at an interest rate of 2.6% above the Base Rate.
At the year end the company had a bank loan fully repayable by 2024 in monthly instalments of £6,428 at an interest rate of 6% per annum.
Group
USA - No bank loans at the year end.
Serbia - There are 15 bank loans:
- loan 1 - fully repayable by September 2023 by monthly instalments of €33,033 at an interest rate of 2.5% above 6 month EURIBOR;
- loan 2 - fully repayable by November 2029 by monthly instalments of €7,721 at an interest rate of 2.95% above 6 month EURIBOR;
- loan 3 - fully repayable by November 2031 in monthly instalments of €23,333 at an interest rate of 3.3% above 6 month EURIBOR;
- loan 4 - fully repayable by December 2025 in monthly instalments of €37,500 at an interest rate of 3.3% above 6 month EURIBOR;
- loan 5 - fully repayable by November 2023 in monthly instalments of €25,000 at an interest rate of 3% above 3 month EURIBOR;
- loan 6 - fully repayable by October 2023 in one instalment of the full amount at an interest rate of 2.95% above 3 month EURIBOR;
- loan 7 - fully repayable by November 2023 in monthly instalments of €16,667 at an interest rate of 3% above 3 month EURIBOR;
- loan 8 - fully repayable by December 2023 in monthly instalments of €41,667 at an interest rate of 3% above 3 month EURIBOR;
- loan 9 - fully repayable by December 2023 in monthly instalments of €41,667 at an interest rate of 3% above 3 month EURIBOR.
- loan 10 - fully repayable by February 2026 in monthly instalments of €54,167 at an interest rate of 3.3% above 6 month EURIBOR.
- loan 11 - fully repayable by May 2026 in monthly instalments of €16,667 at an interest rate of 3.3% above 6 month EURIBOR.
- loan 12 - fully repayable by December 2026 in monthly instalments of €22,107 at an interest rate of 2.95% above 6 month EURIBOR.
- loan 13 - fully repayable by March 2028 in monthly instalments of €20,000 at an interest rate of 2.9% above 3 month EURIBOR.
- loan 14 - fully repayable by March 2028 in monthly instalments of €66,667 at an interest rate of 2.9% above 3 month EURIBOR.
- loan 15 - fully repayable by July 2028 in monthly instalments of €41,666.67 at an interest rate of 2.85% above 3 month EURIBOR.
- loan 16 - fully repayable by December 2027 in monthly instalments of €41,666.67 at an interest rate of 2.89% above 3 month EURIBOR.
Company
The aggregate amount of secured bank creditors due in more than one year is £nil (2021: £5,600,496).
Obligations under finance lease contracts are secured against the related assets. The aggregate amount of secured finance lease creditors due after one year at the year end was £1,466,171 (2021: £680,877).
Group
The aggregate amount of secured bank creditors due in more than one year is £11,791,593 (2021: £14,271,197).
The bank loans are secured by fixed and floating charges over the Groups's freehold land, buildings and by a charge on specific items of plant and machinery.
Obligations under finance lease contracts are secured against the related assets. The aggregate amount of secured finance lease creditors due after one year at the year end was £1,521,625 (2021: £730,110).
Finance lease payments represent rentals payable by the company or group 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 3-5 years. All leases are on a fixed repayment basis and no arrangements have been entered into for contingent rental payments.
Deferred tax assets and liabilities are offset where the group or company has a legally enforceable right to do so. The following is the analysis of the deferred tax balances (after offset) for financial reporting purposes:
A defined contribution pension scheme is operated for all qualifying employees. The assets of the scheme are held separately from those of the group in an independently administered fund.
There is a single class of Ordinary shares. There are no restrictions on the distribution of dividends and prepayment of capital.
Retained earnings represents accumulated comprehensive income for the year and prior periods less dividends paid.
At the reporting end date the group had outstanding commitments for future minimum lease payments under non-cancellable operating leases, which fall due as follows:
The remuneration of key management personnel is as follows.
The following amounts were outstanding at the reporting end date:
Amounts owed by related parties
At 31 December 2022 the balance (included within other debtors) owed by key management personnel stood at £926,119 (2021: £1,348,172). Interest has been charged by the company in respect of this balance at the HMRC official rate of interest.
On 11th July 2024, Albon Engineering and Manufacturing Plc passed a special resolution of re-registration. As a result of this the entity was registered as a private limited company under the name Albon Engineering and Manufacturing Limited.
In August 2024, management reviewed the business model of Albon Forge and began looking at alternative opportunities to continue the business activities. In the short term this led to redundancies of the staff currently working for that entity.