Company registration number 02825605 (England and Wales)
MERLO UK LIMITED
ANNUAL REPORT AND FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
MERLO UK LIMITED
CONTENTS
Page
Company information
1
Strategic report
2 - 5
Directors' report
6
Directors' responsibilities statement
7
Independent auditor's report
8 - 11
Profit and loss account
12
Balance sheet
13
Statement of changes in equity
14
Notes to the financial statements
15 - 30
MERLO UK LIMITED
COMPANY INFORMATION
- 1 -
Directors
Mr S M Groom
Mr P Merlo
(Appointed 31 October 2023)
Company number
02825605
Registered office
The Paddocks
Headlands Business Park
Salisbury Road
Ringwood
Hants
BH24 3PB
Auditor
Azets Audit Services
37 Commercial Road
Poole
Dorset
BH14 0HU
MERLO UK LIMITED
STRATEGIC REPORT
FOR THE YEAR ENDED 31 DECEMBER 2023
- 2 -
The directors present the strategic report for the year ended 31 December 2023.
Review of the business
The core business of Merlo UK continues to be the purchase, marketing and distribution of telehandlers, attachments and other rough terrain products. Spare parts and services are also supplied to the marketplace.
The company's commercial operations revolve around a comprehensive network of dealers that sell into the agricultural market (AG), the construction market (CE) and other industries.
The main business activity is carried out on a daily basis by staff who are office based in Ringwood, Hampshire, as well as a number of employees who are field based at strategic locations throughout the UK; the distribution of staff within close distance from the authorised Merlo dealer network allows for a high quality of service anywhere in the UK to be delivered.
Principal risks and uncertainties
The principal risks and uncertainties are as follows:
Supply Chain Risk
The company purchases all the Merlo branded equipment including telehandlers, attachments and spare parts from its parent company Merio SPA; the continuity and the timing of the supply of those goods is guaranteed by the parent company.
Liquidity Risk
The company ensures all of its liquidity needs are met through an agreement with its parent company. The arrangement is designed to ensure an appropriate level of funding for Merlo UK at all times.
Foreign Currency Risk
GBP has proven strong throughout 2023. Merlo UK mitigates the currency risk through foreign exchange forward contracts.
Credit Risk
Trade debtors at year end have increased by £1.1m from 2022 to 2023.
The company, also through its field-based employees and market trend data closely monitors the market with the objective to mitigate any credit risk. Merlo UK also mitigates credit risk with the use of credit insurance.
Staff Risk
Although Merlo UK does not manufacture any equipment - as it is all produced by its parent company in Italy – its employees are of the utmost importance and the company's results depend heavily on the ability, skills, willingness and motivation of all members of staff. Employees in Merlo UK manage all business processes, warehousing, sales, aftersales, finance and general administration. The company is committed to training and continuously upskilling its employees to ensure their satisfaction.
Competitive Risk
At Merlo UK the competitor's activity is monitored on an ongoing basis. This is to ensure we exceed market expectations in our product range, equipment quality, price, design and service. The telehandler market has proven extremely competitive in recent years and the company
MERLO UK LIMITED
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 3 -
COVID-19 Risk
The financial statements have been prepared on the going concern basis as the director have prepared detailed budgets for a period of at least 12 months from the date of signing the accounts which show that the group is able to meet all its liabilities as they fall due. In addition, the group has support from its ultimate parent, who is well financed and has the ability to support the business if required. However, it is acknowledged that the global and UK outbreak of COVID-19 had an impact on the global and UK economy and businesses. The industries that Merlo UK operates in of agriculture (AG) & construction (CE) have recovered better than many, seeing Merlo UK’s sales grow again in 2023. As such the directors are confident of being able to trade for a period of at least 12 months from the approval of the financial statements.
Results and dividends
The company showed increased turnover in 2023 which followed and confirmed the results achieved in 2022. The company's gross profit went from £6.0m in 2022 to £6.7m in 2023, linking with the increase in turnover and the improvement in the value of the Pound vs the Euro. Ordinary dividends were paid amounting to £1,931,200 (2022: £1,571,200). The director does not recommend payment of a further dividend.
Future developments
The company expects to build on its strong customer base in 2024, increasing its turnover and by doing so consolidating its presence and increasing its market share in the UK. The company is sufficiently capitalised, and it has every intention to continue operations in the UK market for the foreseeable future.
The company expects the AG market to continue to remain stable despite environmental and regulatory challenges for the market. A suppressed market for CE products looks set to recover in the second half of 2023 as inflation continues to fall.
Key Preformance Indicators
The company's key financial and other performance indicators during the year were as follows:
2023 2022
'000 '000
Turnover £59,618 £55,438
Gross profit margin 11.21% 10.88%
Profit before tax £3,115 £2,466
Net assets at year end £9,454 £9,040
Section 172 of the Companies Act 2006
This statement is intended by the Directors to set out how they have approached and met their responsibilities under Section 172 of the Companies Act 2006 in the financial period ending 31st December 2023.
The Directors of Contino act in accordance with a set of general duties, including those under Section 172 of the Companies Act 2006 to promote the success of the company for the benefit of its members as a whole. In doing so they complied with the below factors:
(a) the likely consequences of any decision in the long term,
(b) the interests of the company's employees,
(c) the need to foster the company's business relationships with suppliers, customers and others,
(d) impact of the company's operations on the community and the environment,
(e) the desirability of the company maintaining a reputation for high standards of business conduct,
(f) the need to act fairly as between members of the company.
MERLO UK LIMITED
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 4 -
Strategy
Strategic focus areas for 2024 include:
Driving Growth together with Merlo UK Ltd.
Merlo UK will continue to drive further growth in 2024. This will be achieved by continuing to sell highly innovative products and services to our dealer network. We will continue to challenge our dealers with our forward thinking and continue to strengthen existing relationships whilst looking for opportunities to develop further new partnerships. A 360-degree approach to feedback will ensure we remain close to changes in the market allowing us to remain agile and adaptable to market developments and trends.
Industry Focus
The Merlo UK team brings a strong and diverse knowledge base to our business alongside our continued active membership of relevant trade associations. These steps ensure we remain in touch and can play a hands-on role in the industry whilst reaffirming our position as a dependable and reliable partner for our dealers.
Operational Excellence
Merlo UK will aim to improve its operational efficiency in 2024 with a focus on good governance and a sustainable long-term strategy. We will develop our market offering in line with evolving technology, services and products that we offer to our dealer network. In doing so, we can set our operational model to evolve through an ethos of continuous improvement processes.
Our People & Culture
As a family owned and operated company, Merlo UK puts high focus on our people. Establishing a culture where employees can feel valued and able to contribute to company development is key. Recent and continued investments in our people and their skill base through bespoke individually tailored training and development programmes will ensure we can be recognised as an excellent employer.
Sustainability
Merlo UK has made an ongoing long-term commitment to significant changes to our business operations to reduce our environmental impact and ensure we play our role in being a dependable partner. We take these steps for the good of all and to offer our dealer partners a dependable and sustainable supply chain partner.
Decision Making
The Directors understand the business and the markets within which we operate. By focusing on our purpose, vision and strategy set by the Directors & Leadership Team is to ensure that we continue to deliver value to our people, customers, partners and other stakeholders. All matters that, under arrangements, are reserved for decision by the Directors are presented at Board meetings. Directors are briefed on any potential impacts and risks for our people, customers, partners and other stakeholders and how these are to be managed. The Directors consider these factors before making a final decision, which as a Board, they believe is in the best interests of the Company.
Employees
As a family owned and operated company Merlo UK puts high focus on our people. Establishing a culture where employees can feel valued and able to contribute to company and their own personal development is key. As such we are a business driven by people and that's why the primary focus for Directors of the Company is employee engagement. Employees of Merlo UK are encouraged and empowered to contribute to improving business performance. The Directors are involved in and support the following initiatives that are aimed at keeping employees informed and at gathering their feedback:
Monthly Staff Bulletins – Distributing key news and updates to the whole team.
Scheduled Individual Staff 360 Degree Feedback Sessions.
Mental Health First Aiders on hand to support employee’s wellbeing.
Motivational mapping to enable aligned career development and training.
MERLO UK LIMITED
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 5 -
Fostering Business Relationships with Suppliers, Customers and Others
The Directors recognise that fostering business relationships with key stakeholders, such as dealers, suppliers, partners and regulatory authorities, is essential to the company's success. This is part of the guidance on the key principles that each employee should follow which is outlined in our Employee Handbook issued to each employee and updated regularly.
Merlo UK is focused our partnerships. Directors ensure that the Company builds trusted long-term relationships with its dealers, using a consultative, outcome-based, value-driven methodology.
Impact on the Community and the Environment
The Directors recognise the importance of leading a company that not only generates value for Group but also contributes to wider society. Merlo UK strives to act in an environmentally friendly way, always aspiring to be a good neighbour and play an active role in the local community.
Maintaining a reputation for high standards of business conduct
The Directors of the company promote the following values and behaviours:
One Team: Collaboration is key, through this we build expertise - together as a team and with our colleagues across Merlo Group.
Moving Forward: All Employees are accountable for their actions. When we say we're going to do something we do it and move forward together.
Seek Solutions: Problems are an opportunity for us to excel. We focus on the big picture and leave our egos at home.
Deliver Value: Work with purpose and drive real business value. We're trusted to deliver products & services that make a difference.
In addition to that, The Directors foster an open and collaborative culture where all employees are encouraged and rewarded to achieve annual improvement objectives.
The need to act fairly between members of the company.
The Directors recognise their responsibility in ensuring that all members of the company are treated fairly regardless of age, gender and orientation. The company has implemented a number of programs to promote the diversity and to create inclusive environments all of which are outlined to our employee’s vis the Employee Handbook.
As a business driven by people, Directors are committed to treating everyone with respect, fairness and equality. Merlo UK is committed to encouraging the equality and diversity of our workforce and eliminating any unlawful discrimination. We aim for to be truly representative of all sections of society and our customers and for each employee to feel respected and able to give their best.
Greenhouse Gas Emissions
It is deemed that the energy consumed by the group is less than 40,000 kWh, therefore the exemption has been taken not to disclose the energy used during the period.
Mr S M Groom
Director
29 May 2024
MERLO UK LIMITED
DIRECTORS' REPORT
FOR THE YEAR ENDED 31 DECEMBER 2023
- 6 -
The directors present their annual report and financial statements for the year ended 31 December 2023.
Principal activities
The principal activity of the company continued to be that of distributor of agricultural equipment.
Business review
A review of the business and its principal risks and uncertainties is set out in the strategic report on pages 2 to 5 of these financial statements.
Results and dividends
The results for the year are set out on page 12.
Ordinary dividends were paid amounting to £1,931,200. The directors do not recommend payment of a further dividend.
Directors
The directors who held office during the year and up to the date of signature of the financial statements were as follows:
Mr S M Groom
Mr P Merlo
(Appointed 31 October 2023)
Auditor
In accordance with the company's articles, a resolution proposing that Azets Audit Services be reappointed as auditor of the company will be put at a General Meeting.
Strategic report
In accordance with section 414C(11) of the Companies Act 2006, information regarding financial risk management, objectives and policies, going concern, information on exposure to price risk, credit risk, liquidity risk and cashflow risks and future developments has been disclosed in the strategic report.
Directors' confirmations
In the case of each director in office at the date the directors' report is approved:
On behalf of the board
Mr S M Groom
Director
29 May 2024
MERLO UK LIMITED
DIRECTORS' RESPONSIBILITIES STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2023
- 7 -
The directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulation.
Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have prepared the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards, comprising FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland”, and applicable law).
Under company law, 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 the financial statements, the directors are required to:
select suitable accounting policies and then apply them consistently;
state whether applicable United Kingdom Accounting Standards, comprising FRS 102 have been followed, subject to any material departures disclosed and explained in the financial statements;
make judgements and accounting estimates that are reasonable and prudent; and
prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business.
The directors are responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The directors are also 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.
MERLO UK LIMITED
INDEPENDENT AUDITOR'S REPORT
TO THE MEMBERS OF MERLO UK LIMITED
- 8 -
Opinion
We have audited the financial statements of Merlo UK Limited (the 'company') for the year ended 31 December 2023 which comprise the profit and loss account, the balance sheet, the statement of changes in equity 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:
give a true and fair view of the state of the company's affairs as at 31 December 2023 and of its profit for the year then ended;
have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and
have been prepared in accordance with the requirements of the Companies Act 2006.
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.
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.
MERLO UK LIMITED
INDEPENDENT AUDITOR'S REPORT (CONTINUED)
TO THE MEMBERS OF MERLO UK LIMITED
- 9 -
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:
adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us; or
the financial statements are not in agreement with the accounting records and returns; or
certain disclosures of remuneration specified by law are not made; or
we have not received all the information and explanations we require for our audit.
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.
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.
MERLO UK LIMITED
INDEPENDENT AUDITOR'S REPORT (CONTINUED)
TO THE MEMBERS OF MERLO UK LIMITED
- 10 -
Extent to which the audit was considered capable of detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above and on the Financial Reporting Council’s website, to detect material misstatements in respect of irregularities, including fraud.
We obtain and update our understanding of the entity, its activities, its control environment, and likely future developments, including in relation to the legal and regulatory framework applicable and how the entity is complying with that framework. Based on this understanding, we identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. This includes consideration of the risk of acts by the entity that were contrary to applicable laws and regulations, including fraud.
In response to the risk of irregularities and non-compliance with laws and regulations, including fraud, we designed procedures which included:
Enquiry of management and those charged with governance around actual and potential litigation and claims as well as actual, suspected and alleged fraud;
Assessing the extent of compliance with the laws and regulations considered to have a direct material effect on the financial statements or the operations of the company through enquiry and inspection;
Reviewing financial statement disclosures and testing to supporting documentation to assess compliance with applicable laws and regulations;
Performing audit work over the risk of management bias and override of controls, including testing of journal entries and other adjustments for appropriateness, evaluating the business rationale of significant transactions outside the normal course of business and reviewing accounting estimates for indicators of potential bias.
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 of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
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 company through discussions with directors and other management, and from our commercial knowledge and experience of the supply of the agricultural and commercial vehicles 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 company, including the Companies Act 2006, taxation legislation and data protection, anti-bribery, 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 inspecting legal correspondence; 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.
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 judgments and assumptions made in determining the accounting estimates set out in the accounting policies were indicative of potential bias; and
investigated the rationale behind significant or unusual transactions.
MERLO UK LIMITED
INDEPENDENT AUDITOR'S REPORT (CONTINUED)
TO THE MEMBERS OF MERLO UK LIMITED
- 11 -
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.
Mr Andrew Singleton
Senior Statutory Auditor
For and on behalf of Azets Audit Services
30 May 2024
Chartered Accountants
Statutory Auditor
37 Commercial Road
Poole
Dorset
BH14 0HU
MERLO UK LIMITED
PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED 31 DECEMBER 2023
- 12 -
2023
2022
Notes
£
£
Turnover
3
59,617,538
55,437,899
Cost of sales
(52,934,640)
(49,408,080)
Gross profit
6,682,898
6,029,819
Administrative expenses
(3,571,194)
(3,671,221)
Other operating income
24,178
24,178
Operating profit
4
3,135,882
2,382,776
Interest receivable and similar income
38,100
Fair value gains and losses on foreign exchange contracts
(21,052)
44,640
Profit before taxation
3,114,830
2,465,516
Tax on profit
8
(769,430)
(533,591)
Profit for the financial year
2,345,400
1,931,925
The profit and loss account has been prepared on the basis that all operations are continuing operations.
The notes on pages 15 to 30 form part of these financial statements.
MERLO UK LIMITED
BALANCE SHEET
AS AT
31 DECEMBER 2023
31 December 2023
- 13 -
2023
2022
Notes
£
£
£
£
Fixed assets
Intangible assets
10
8,832
28,531
Tangible assets
11
1,647,654
1,551,570
1,656,486
1,580,101
Current assets
Stocks
13
14,390,444
6,523,507
Debtors
14
13,615,128
12,417,517
Cash at bank and in hand
901,234
2,875,847
28,906,806
21,816,871
Creditors: amounts falling due within one year
16
(19,813,803)
(13,058,569)
Net current assets
9,093,003
8,758,302
Total assets less current liabilities
10,749,489
10,338,403
Provisions for liabilities
Provisions
17
1,069,807
1,102,917
Deferred tax liability
18
225,456
195,460
(1,295,263)
(1,298,377)
Net assets
9,454,226
9,040,026
Capital and reserves
Called up share capital
20
80,000
80,000
Revaluation reserve
22
317,770
317,770
Profit and loss reserves
22
9,056,456
8,642,256
Total equity
9,454,226
9,040,026
The financial statements were approved by the board of directors and authorised for issue on 29 May 2024 and are signed on its behalf by:
Mr S M Groom
Director
Company Registration No. 02825605
MERLO UK LIMITED
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2023
- 14 -
Share capital
Revaluation reserve
Profit and loss reserves
Total
Notes
£
£
£
£
Balance at 1 January 2022
80,000
317,770
8,281,531
8,679,301
Year ended 31 December 2022:
Profit and total comprehensive income for the year
-
-
1,931,925
1,931,925
Dividends
9
-
-
(1,571,200)
(1,571,200)
Balance at 31 December 2022
80,000
317,770
8,642,256
9,040,026
Year ended 31 December 2023:
Profit and total comprehensive income for the year
-
-
2,345,400
2,345,400
Dividends
9
-
-
(1,931,200)
(1,931,200)
Balance at 31 December 2023
80,000
317,770
9,056,456
9,454,226
MERLO UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
- 15 -
1
Accounting policies
Company information
Merlo UK Limited is a private company limited by shares incorporated in England and Wales under the Companies Act 2006. The registered office is The Paddocks, Headlands Business Park, Salisbury Road, Ringwood, Hants, BH24 3PB.
1.1
Accounting convention
The preparation of financial statements in compliance with FRS 102 requires the use of certain critical accounting estimates. It also requires management to exercise judgment in applying the company's accounting policies (see note 2).
The presentational and functional currency of these financial statements is GBP. Values are rounded to the nearest pound.
The financial statements have been prepared under the historical cost convention, modified to include the revaluation of freehold properties and to include investment properties and certain financial instruments at fair value. The principal accounting policies adopted are set out below.
The following principal accounting policies have been applied:
This 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:
Section 7 ‘Statement of Cash Flows’: Presentation of a statement of cash flow and related notes and disclosures;
Section 3 'Financial statement Presentation paragraph'
Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instrument Issues’: Interest income/expense and net gains/losses for each category of financial instrument; 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 33 ‘Related Party Disclosures’: Compensation for key management personnel.
The financial statements of the company are consolidated in the financial statements of Merlo S.P.A as at 31 December 2023. These consolidated financial statements are available from Via Nazionale, 9, 12010 Cervasca.
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 to the fair value of the consideration received or receivable for the sale of agricultural and construction equipment and services provided on 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.
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.
MERLO UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
1
Accounting policies
(Continued)
- 16 -
Revenue from the provision of services, including warranties, is recognised on a straight line basis over the period the service is provided.
1.4
Intangible fixed assets other than goodwill
Intangible assets acquired separately from a business are recognised at cost and are subsequently measured at cost less accumulated amortisation and accumulated impairment losses.
Intangible assets acquired on business combinations are recognised separately from goodwill at the acquisition date where it is probable that the expected future economic benefits that are attributable to the asset will flow to the entity and the fair value of the asset can be measured reliably; the intangible asset arises from contractual or other legal rights; and the intangible asset is separable from the entity.
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:
Computer software
25% straight line
1.5
Tangible fixed assets
Tangible fixed assets are initially measured at cost and subsequently measured at cost or valuation, net of depreciation and any impairment losses. Historical cost includes expenditure that is directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management.
Depreciation is charged so as to allocate the cost of assets less their residual value over their estimated useful lives, using the straight-line method.
Buildings
3% straight line (Solar Panels 9% straight line)
Plant and machinery
20% straight line
Fixtures, fittings ad equipment
25% straight line
Motor vehicles
25% straight line
Office equipment
25% straight line
The assets' residual values, useful lives and depreciation methods are reviewed, and adjusted prospectively if appropriate, or if there is an indication of a significant change since the last reporting date.
Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised in the statement of comprehensive income.
1.6
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.
MERLO UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
1
Accounting policies
(Continued)
- 17 -
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.
Recognised impairment losses are reversed if, and only if, the reasons for the impairment loss have ceased to apply. Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.
1.7
Stocks
Stocks are stated at the lower of cost and estimated selling price less costs to complete and sell. Cost is determined using the weighted average cost method (AVCO).
At each reporting date, an assessment is made for impairment. Any excess of the carrying amount of stocks over its estimated selling price less costs to complete and sell is recognised as an impairment loss in profit or loss. Reversals of impairment losses are also recognised in profit or loss.
1.8
Cash and cash equivalents
Cash is represented by cash in hand and deposits with financial institutions repayable without penalty on notice of not more than 24 hours. Cash equivalents are highly liquid investments that mature in no more than three months from the date of acquisition and that are readily convertible to known
amounts of cash with insignificant risk of change in value.
1.9
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 trade and other debtors, amounts from fellow group companies 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 financial asset is measured at the present value of the future receipts discounted at a market rate of interest.
MERLO UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
1
Accounting policies
(Continued)
- 18 -
Other financial assets
Other financial assets, including investments in equity instruments which are not subsidiaries, associates or joint ventures, are initially measured at fair value, which is normally the transaction price. Such assets are subsequently carried at fair value and the changes in fair value are recognised in profit or loss, except that investments in equity instruments that are not publicly traded and whose fair values cannot be measured reliably are measured at cost less impairment.
Impairment of financial assets
Financial assets, other than those held at fair value through profit and loss, are assessed for indicators of impairment at each reporting end date.
Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows have been affected. If an asset is impaired, the impairment loss is the difference between the carrying amount and the present value of the estimated cash flows discounted at the asset's original effective interest rate. The impairment loss is recognised in profit or loss.
If there is a decrease in the impairment loss arising from an event occurring after the impairment was recognised, the impairment is reversed. The reversal is such that the current carrying amount does not exceed what the carrying amount would have been, had the impairment not previously been recognised. The impairment reversal is recognised in profit or loss.
Derecognition of financial assets
Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire or are settled, or when the company transfers the financial asset and substantially all the risks and rewards of ownership to another entity, or if some significant risks and rewards of ownership are retained but control of the asset has transferred to another party that is able to sell the asset in its entirety to an unrelated third party.
Classification of financial liabilities
Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the company after deducting all of its liabilities.
Basic financial liabilities
Basic financial liabilities, including trade and other creditors, and amounts to fellow group companies, are initially recognised at transaction price unless the arrangement constitutes a transaction, where the debt instrument is measured at the present value of the future payments discounted at a market rate of interest.
Debt instruments are subsequently carried at amortised cost, using the effective interest rate 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.
MERLO UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
1
Accounting policies
(Continued)
- 19 -
Derecognition of financial liabilities
Financial liabilities are derecognised when, and only when, the company’s contractual obligations are discharged, cancelled, or they expire.
1.10
Equity instruments
Equity instruments issued by the company are recorded at the fair value of proceeds received. net of direct issue costs. Dividends payable on equity instruments are recognised as liabilities once they are no longer at the discretion of the company.
1.11
Derivatives
Derivatives are initially recognised at fair value at the date a derivative contract is entered into and are subsequently remeasured to fair value at each reporting end date. The resulting gain or loss is recognised in profit or loss immediately unless the derivative is designated and effective as a hedging instrument, in which event the timing of the recognition in profit or loss depends on the nature of the hedge relationship.
A derivative with a positive fair value is recognised as a financial asset. whereas a derivative with a negative fair value is recognised as a financial liability.
1.12
Taxation
The tax expense for the year comprises current and deferred tax. Tax is recognised in the statement of comprehensive income, except that a charge attributable to an item of income and expense recognised as other comprehensive income or to an item recognised directly in equity is also recognised in other comprehensive income or directly in equity respectively.
Current tax
The current income tax charge is calculated on the basis of tax rates and laws that have been enacted or substantively enacted by the reporting date in the countries where the company operates and generates income.
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.
1.13
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.
MERLO UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
1
Accounting policies
(Continued)
- 20 -
1.14
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.
1.15
Retirement benefits
For defined contribution schemes the amount charged to profit or loss is the contributions payable in the year. Differences between contributions payable in the year and contributions actually paid are shown as either accruals or prepayments.
1.16
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.
1.17
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.
1.18
Foreign exchange
Transactions and balances
Foreign currency transactions are translated into the functional currency using the spot exchange rates at the dates of the transactions.
At each period end foreign currency monetary items are translated using the closing rate. Non-monetary items measured at historical cost are translated using the exchange rate at the date of the transaction and non-monetary items measured at fair value are measured using the exchange rate when fair value was determined.
Foreign exchange gains and losses resulting from the settlement of transactions and from the translation at period-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the statement of comprehensive income except when deferred in other comprehensive income as qualifying cash flow hedges.
Foreign exchange gains and losses that relate to borrowings and cash and cash equivalents are presented in the statement of comprehensive income within 'finance income or costs'. All other foreign exchange gains and losses are presented in the statement of comprehensive income within 'other operating income'.
1.19
Short term debtors are measured at transaction price, less any impairment. Loans receivable are measured initially at fair value, net of transaction costs, and are measured subsequently at amortised cost using the effective interest method, less any impairment.
MERLO UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
1
Accounting policies
(Continued)
- 21 -
1.20
Short term creditors are measured at the transaction price. Other financial liabilities, including bank loans, are measured initially at fair value, net of transaction costs, and are measured subsequently at amortised cost using the effective interest method.
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.
Key sources of estimation uncertainty
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.
Warranty provision
The directors have estimated the warranty provision based on the historic data of the warranty cost per machine sold and for claims‘ accepted by the company. Not covered by the parent company's warranty scheme.
In addition to the above, a further provision has been recognised within the financial statements to provide for future expenses on uninsured risks to machines that have been sold in the past where it is the companies responsibility to incur these additional expenses.
Stock provision
The directors have estimated the stock provision based on the historical data of prior year realisable values of stock items held for an extended period of time, this is agreed with the current group reporting guidelines. At 31 December 2023, the stock provision was £328,086 (2022: £131,302).
Bad debt provision
The directors have estimated the bad debt provision based on a rolling balance as per prior year balances and a specific percentage of current year aged debtors agreed as per the current group accounting guidelines.
3
Turnover and other revenue
2023
2022
£
£
Turnover analysed by class of business
Sale of goods
57,281,287
53,404,969
Warranty income
2,292,564
2,016,306
Other revenue
43,687
16,624
59,617,538
55,437,899
MERLO UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
3
Turnover and other revenue
(Continued)
- 22 -
2023
2022
£
£
Turnover analysed by geographical market
United Kingdom
59,617,538
55,437,899
2023
2022
£
£
Other revenue
Interest income
-
38,100
Grants received
24,178
24,178
4
Operating profit
2023
2022
Operating profit for the year is stated after charging/(crediting):
£
£
Exchange losses
(179,778)
338,841
Government grants
(24,178)
(24,178)
Depreciation of owned tangible fixed assets
135,428
129,884
Profit on disposal of tangible fixed assets
(18,250)
(45,000)
Amortisation of intangible assets
19,699
19,699
Cost of stocks recognised as an expense
52,549,381
49,133,672
Operating lease charges
162,851
154,131
5
Auditor's remuneration
2023
2022
Fees payable to the company's auditor and associates:
£
£
For audit services
Audit of the financial statements of the company
17,100
16,000
For other services
Taxation compliance services
2,400
2,150
All other non-audit services
3,500
3,350
5,900
5,500
MERLO UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 23 -
6
Employees
The average monthly number of persons (including directors) employed by the company during the year was:
2023
2022
Number
Number
Directors
2
2
General & Administration
3
3
Sales
9
9
Marketing
2
1
After sales
8
8
Parts
6
4
Total
30
27
Their aggregate remuneration comprised:
2023
2022
£
£
Wages and salaries
1,176,663
1,238,091
Social security costs
139,917
153,255
Pension costs
134,151
193,002
1,450,731
1,584,348
7
Directors' remuneration
2023
2022
£
£
Remuneration for qualifying services
138,659
132,500
Company pension contributions to defined contribution schemes
15,167
14,350
153,826
146,850
8
Taxation
2023
2022
£
£
Current tax
UK corporation tax on profits for the current period
739,434
462,227
Deferred tax
Origination and reversal of timing differences
29,996
71,364
Total tax charge
769,430
533,591
MERLO UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
8
Taxation
(Continued)
- 24 -
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:
2023
2022
£
£
Profit before taxation
3,114,830
2,465,516
Expected tax charge based on the standard rate of corporation tax in the UK of 23.50% (2022: 19.00%)
731,985
468,448
Tax effect of expenses that are not deductible in determining taxable profit
27,205
19,771
Permanent capital allowances in excess of depreciation
(19,756)
(25,992)
Origination & Reversal of Timing Differences
29,996
71,364
Taxation charge for the year
769,430
533,591
9
Dividends
2023
2022
£
£
Final paid
1,931,200
1,571,200
10
Intangible fixed assets
Computer software
Total
£
£
Cost
At 1 January 2023 and 31 December 2023
78,795
78,795
Amortisation and impairment
At 1 January 2023
50,264
50,264
Amortisation charged for the year
19,699
19,699
At 31 December 2023
69,963
69,963
Carrying amount
At 31 December 2023
8,832
8,832
At 31 December 2022
28,531
28,531
MERLO UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 25 -
11
Tangible fixed assets
Buildings
Plant and machinery
Fixtures, fittings ad equipment
Motor vehicles
Office equipment
Total
£
£
£
£
£
£
Cost or valuation
At 1 January 2023
1,618,407
177,453
86,757
222,438
252,580
2,357,635
Additions
47,046
17,431
42,469
119,922
4,644
231,512
Disposals
(8,800)
(40,746)
(49,546)
At 31 December 2023
1,665,453
186,084
88,480
342,360
257,224
2,539,601
Depreciation and impairment
At 1 January 2023
286,070
145,180
83,778
98,261
192,776
806,065
Depreciation charged in the year
36,433
12,013
10,190
47,698
29,094
135,428
Eliminated in respect of disposals
(8,800)
(40,746)
(49,546)
At 31 December 2023
322,503
148,393
53,222
145,959
221,870
891,947
Carrying amount
At 31 December 2023
1,342,950
37,691
35,258
196,401
35,354
1,647,654
At 31 December 2022
1,332,337
32,273
2,979
124,177
59,804
1,551,570
The gross book value of the "Buildings" includes £1,162,478 (2022: £1,115,432) of depreciable assets.
The following assets are carried at valuation. If the assets were measured using the cost model, the carrying amounts would be as follows:
2023
2022
£
£
Cost
1,252,654
1,206,662
Accumulated depreciation
(283,928)
(252,123)
Carrying value
968,726
954,539
MERLO UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 26 -
12
Financial instruments
2023
2022
£
£
Carrying amount of financial assets measured at amortised cost
Trade debtors
11,106,449
10,084,016
Amounts owed by group companies
577,800
693,160
11,684,249
10,777,176
Carrying amount of financial assets
Instruments measured at fair value through profit or loss
-
21,052
Carrying amount of financial liabilities at amortised cost
Trade creditors
464,529
387,053
Amounts owed to group companies
13,213,898
8,031,317
Other creditors
9,593
33,772
Accruals
4,489,527
2,270,799
18,177,547
10,722,941
Foreign exchange forward contracts
The company make the majority of it's purchases from the European Union. As a consequence the company uses foreign currency forward contracts to manage the foreign exchange risk of future transactions and cash flows.
The contracts are valued based on available market data. The company does not adopt hedge accounting for forward exchange contracts and, consequently, fair value gains and losses are recognised in profit or loss.
At the year end, the total carrying amount of outstanding foreign exchange forward contracts that the company has committed to are €nil (2022: €2,050,000).
13
Stocks
2023
2022
£
£
Finished goods and goods for resale
14,390,444
6,523,507
14
Debtors
2023
2022
Amounts falling due within one year:
£
£
Trade debtors
11,106,449
10,084,016
Amounts owed by group undertakings
577,800
693,160
Derivative financial instruments
-
21,052
Prepayments and accrued income
1,930,879
1,619,289
13,615,128
12,417,517
MERLO UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 27 -
15
Cash at bank and in hand
2023
2022
£
£
Current account balance - GBP
901,116
2,875,589
Current account balance - EURO
28
74
Petty cash
90
184
901,234
2,875,847
16
Creditors: amounts falling due within one year
2023
2022
£
£
Trade creditors
464,529
387,053
Amounts owed to group undertakings
13,213,898
8,031,317
Corporation tax
226,503
207,069
Other taxation and social security
1,409,753
2,128,559
Other creditors
9,593
33,772
Accruals and deferred income
4,489,527
2,270,799
19,813,803
13,058,569
17
Provisions for liabilities
2023
2022
Notes
£
£
Warranty provision
595,079
692,077
Uninsured risk provision
385,840
385,840
Legal expenses provision
25,000
25,000
Machine upgrade provision
63,888
-
1,069,807
1,102,917
Deferred tax liabilities
18
225,456
195,460
1,295,263
1,298,377
MERLO UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
17
Provisions for liabilities
(Continued)
- 28 -
Movements on provisions apart from deferred tax liabilities:
Total
Warranty
Uninsured
Legal expenses
Machine upgrade
provision
provision
provision
provision
£
£
£
£
£
At 1 January 2023
692,077
385,840
25,000
-
1,102,917
Additional provisions in the year
-
-
-
63,888
63,888
Utilisation of provision
(96,998)
-
-
-
(96,998)
At 31 December 2023
595,079
385,840
25,000
63,888
1,069,807
The company provides warranty on all machines sold with an option to purchase further warranties at a later date. The warranty provision is for future potential warranty costs for machines sold before the year end. The provision is based on experience of the cost of claims made in previous years.
In addition to the above, a further provision has been recognised within the financial statements to provide for future expenses on uninsured risks to machines that have been sold in the past where it is the companies responsibility to incur these additional expenses.
Also, the company has identified a number of machines in inventory that should be upgraded to improve performance, reliability and to meet customers expectation.
18
Deferred taxation
The following are the major deferred tax liabilities and assets recognised by the company and movements thereon:
Liabilities
Liabilities
2023
2022
Balances:
£
£
Accelerated capital allowances
162,321
147,477
Revaluations
63,135
47,983
225,456
195,460
2023
Movements in the year:
£
Liability at 1 January 2023
195,460
Charge to profit or loss
29,996
Liability at 31 December 2023
225,456
MERLO UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 29 -
19
Retirement benefit schemes
2023
2022
Defined contribution schemes
£
£
Charge to profit or loss in respect of defined contribution schemes
134,151
193,002
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 totalling £nil (2022: £nil) were payable to the fund at the reporting date and are included in creditors.
20
Share capital
2023
2022
2023
2022
Ordinary share capital
Number
Number
£
£
Issued and fully paid
Ordinary A shares of £1 each
40,800
40,800
40,800
40,800
Ordinary B shares of £1 each
39,200
39,200
39,200
39,200
80,000
80,000
80,000
80,000
The company's ordinary shares, which carry no right to fixed income, each carry the right to one vote at the general meetings of the company.
21
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:
2023
2022
£
£
Within one year
34,033
39,586
Between two and five years
29,279
22,888
63,312
62,474
22
Reserves
Reserves
The company's capital and reserves are as follows:
Called up share capital
Called up share capital represents the nominal value of shares issued.
Revaluation reserve
The cumulative revaluation gains or losses in respect of land and buildings.
Profit and loss account
The profit and loss account represents cumulative profits or losses, net of dividends paid and other adjustments.
MERLO UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
- 30 -
23
Related party transactions
The company has taken advantage of the exemption available in Section 33.1A of FRS 102 whereby it has not disclosed transactions with the ultimate parent company or any wholly owned subsidiary undertaking of the group.
Related party
(Related by common director)
During the year, Merlo UK Limited made purchases of £30,644 (2022: £33,160) to a related party outside of the group. At the balance sheet date the amount due to the related party was £nil (2022: £2,570).
24
Ultimate controlling party
The directors consider the ultimate parent undertaking to be Merlo S.P.A, a company incorporated in Italy. This entity is also the smallest and largest company for which consolidated accounts including Merlo UK Limited are prepared. The consolidated accounts of Merlo S.P.A are available from its registered office, Via Nazionale, 9, 12010 Cervasca.
Merlo S.P.A is the immediate parent.
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