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Company No: 06393340 (England and Wales)

ARKONIK LIMITED

Annual Report and Unaudited Financial Statements
For the financial year ended 31 March 2024
Pages for filing with the registrar

ARKONIK LIMITED

Annual Report and Unaudited Financial Statements

For the financial year ended 31 March 2024

Contents

ARKONIK LIMITED

DIRECTORS' REPORT

For the financial year ended 31 March 2024
ARKONIK LIMITED

DIRECTORS' REPORT (continued)

For the financial year ended 31 March 2024

The directors present their annual report and the unaudited financial statements of the Company for the financial year ended 31 March 2024.

PRINCIPAL ACTIVITIES

The principal activity of the Company during the financial year was the sale and maintenance of motor vehicles.

ADDENDUM TO ACCOUNTS

Summary of Financial Challenges and Strategic Actions

The financial years 2023 and 2024 presented significant challenges for the business, resulting in considerable losses. These challenges stemmed primarily from regulatory changes, economic headwinds, and the subsequent impacts on operations and cash flow. Below, we outline the key factors contributing to these results and the decisive actions taken to address them.

Impact of US Customs Regulation Changes

A critical hurdle in recent years was a substantial shift in US customs enforcement regulations. These changes necessitated a complete overhaul of our business model, particularly affecting our export operations. To comply with the new rules, we were required to deconstruct over 40 completed vehicles and ship their components separately. This led to the establishment of new processes where vehicles are now constructed to different standards in the UK, followed by a secondary build phase in the US.

In response, we invested heavily in building a facility and assembling a team in Charleston, USA, to manage the fitment of accessories and modern drivetrains. While this adaptation has enabled us to comply with the revised regulations, the process incurred significant costs and operational disruption. Although this pivot began in 2021, its financial impact continued to affect our business performance during this period.

Ongoing Financial Strain from CBILS Loan

The CBILS loan, which provided crucial support during earlier periods, remains a substantial financial burden. However, it is scheduled for completion in Q4 FY 2025/26, which will markedly improve our cash flow and alleviate financial pressures.

Economic Challenges in 2024

In 2024, we faced reduced demand for new sales due to the broader economic challenges experienced in key markets, particularly the USA. This downturn was consistent with trends across the automotive industry, with many companies filing for administration during this period. As a result, progress on our order book slowed, which disrupted our stage payment model and further compounded cash flow difficulties.

Decisive Actions and Path to Recovery

In response to these challenges, we have implemented decisive measures to mitigate their effects and position the business for recovery:

1. Resizing and Cost Management: We have resized the business and significantly reduced expenses to align with current demand levels.
2. Operational Efficiency: Structural changes have improved the efficiency of our operations, ensuring a more sustainable cost base moving forward.
3. Signs of Market Recovery: We are beginning to see signs of recovery as evidenced in our most recent management accounts, with increased demand for new orders indicating a positive trajectory for FY 2024/25.

Outlook

Despite the difficulties faced, the measures we have undertaken leave us well-positioned for future growth. We anticipate that the business will emerge more resilient and efficient, with improved financial results expected in the coming years. The actions taken in 2024 have laid a solid foundation for stability and recovery as we adapt to evolving market conditions.

DIRECTORS

The directors, who served during the financial year and to the date of this report except as noted, were as follows:

Mr A Hayes
Mr T Parry
Mr G Spicer

This Directors' Report has been prepared in accordance with the provisions applicable to companies entitled to the small companies' exemption provided by section 415A of the Companies Act 2006.



Approved by the Board of Directors and signed on its behalf by:

Mr G Spicer
Director

30 January 2025

ARKONIK LIMITED

BALANCE SHEET

As at 31 March 2024
ARKONIK LIMITED

BALANCE SHEET (continued)

As at 31 March 2024
Note 2024 2023
£ £
Fixed assets
Intangible assets 3 849,095 1,474,878
Tangible assets 4 289,637 387,380
Investments 5 1 1
1,138,733 1,862,259
Current assets
Stocks 277,481 309,005
Debtors 6 788,184 1,187,479
Cash at bank and in hand 50,386 195,784
1,116,051 1,692,268
Creditors: amounts falling due within one year 7 ( 4,783,600) ( 3,100,944)
Net current liabilities (3,667,549) (1,408,676)
Total assets less current liabilities (2,528,816) 453,583
Creditors: amounts falling due after more than one year 8 ( 521,883) ( 858,846)
Provision for liabilities ( 146,074) ( 25,859)
Net liabilities ( 3,196,773) ( 431,122)
Capital and reserves
Called-up share capital 9 100 100
Profit and loss account ( 3,196,873 ) ( 431,222 )
Total shareholder's deficit ( 3,196,773) ( 431,122)

For the financial year ending 31 March 2024 the Company was entitled to exemption from audit under section 477 of the Companies Act 2006 relating to small companies.

Directors' responsibilities:

These financial statements have been prepared in accordance with the provisions of FRS 102 Section 1A – small entities. The financial statements of Arkonik Limited (registered number: 06393340) were approved and authorised for issue by the Board of Directors on 30 January 2025. They were signed on its behalf by:

Mr G Spicer
Director
ARKONIK LIMITED

NOTES TO THE FINANCIAL STATEMENTS

For the financial year ended 31 March 2024
ARKONIK LIMITED

NOTES TO THE FINANCIAL STATEMENTS

For the financial year ended 31 March 2024
1. Accounting policies

The principal accounting policies are summarised below. They have all been applied consistently throughout the financial year and to the preceding financial year, unless otherwise stated.

General information and basis of accounting

Arkonik Limited (the Company) is a private company, limited by shares, incorporated in the United Kingdom under the Companies Act 2006 and is registered in England and Wales. The address of the Company's registered office is C/O Francis Clark Llp Melville Building East, Royal William Yard, Plymouth, PL1 3RP, United Kingdom.

The financial statements have been prepared under the historical cost convention, modified to include certain items at fair value, and in accordance with Section 1A of Financial Reporting Standard 102 (FRS 102) ‘The Financial Reporting Standard applicable in the UK and Republic of Ireland’ issued by the Financial Reporting Council and the requirements of the Companies Act 2006 as applicable to companies subject to the small companies regime.

The financial statements are presented in pounds sterling which is the functional currency of the Company and rounded to the nearest £.

Going concern

The directors have assessed the Balance Sheet and likely future cash flows at the date of approving these financial statements. The directors have a reasonable expectation that the Company has adequate resources to continue in operational existence and to meet its financial obligations as they fall due for at least 12 months from the date of signing these financial statements. Accordingly, they continue to adopt the going concern basis in preparing the financial statements.

Foreign currency

Transactions in foreign currencies are recorded at the rate of exchange at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the Balance Sheet date are reported at the rates of exchange prevailing at that date.

Turnover

Turnover is stated net of VAT and trade discounts and is recognised in a phased manner based on the percentage of work completed, with any advanced balances received classified as deferred income.

Taxation

Current tax
Current tax is provided at amounts expected to be paid (or recoverable) using the tax rates and laws that have been enacted or substantively enacted at the Balance Sheet date.

Deferred tax
Deferred tax arises as a result of including items of income and expenditure in taxation computations in periods different from those in which they are included in the Company's financial statements. Deferred tax is provided in full on timing differences which result in an obligation to pay more or less tax at a future date, at the average tax rates that are expected to apply when the timing differences reverse, based on tax rates and laws substantively enacted at the balance sheet date. Deferred tax assets and liabilities are not discounted.

Intangible assets

Intangible assets are stated at cost or valuation, net of amortisation and any provision for impairment. Amortisation is provided on all intangible assets at rates to write off the cost or valuation of each asset over its expected useful life as follows:

Development costs 5 years straight line
Tangible fixed assets

Tangible fixed assets are stated at cost or valuation, net of depreciation and any provision for impairment. Depreciation is provided on all tangible fixed assets, other than investment property and freehold land, at rates calculated to write off the cost or valuation, less estimated residual value, of each asset on a reducing balance basis over its expected useful life, as follows:

Plant and machinery 25 % reducing balance
Vehicles 25 % reducing balance
Fixtures and fittings 25 % reducing balance
Office equipment 25 % reducing balance

Residual value represents the estimated amount which would currently be obtained from disposal of an asset, after deducting estimated costs of disposal, if the asset were already of the age and in the condition expected at the end of its useful life.

Leases

The Company as lessee
Assets held under finance leases, hire purchase contracts and other similar arrangements, which confer rights and obligations similar to those attached to owned assets, are capitalised as tangible fixed assets at the fair value of the leased asset (or, if lower, the present value of the minimum lease payments as determined at the inception of the lease) and are depreciated over the shorter of the lease terms and their useful lives. The capital elements of future lease obligations are recorded as liabilities, while the interest elements are charged to the Profit and Loss Account over the period of the leases to produce a constant periodic rate of interest on the remaining balance of the liability.

Rentals under operating leases are charged on a straight-line basis over the lease term, even if the payments are not made on such a basis. Benefits received and receivable as an incentive to sign an operating lease are similarly spread on a straight-line basis over the lease term.

Stocks

Stocks are stated at the lower of cost and estimated selling price less costs to sell, which is equivalent to the net realisable value. Cost is calculated using the FIFO (first-in, first-out) method. Provision is made for obsolete, slow-moving or defective items where appropriate.

Financial instruments

Financial assets and financial liabilities are recognised when the Company becomes a party to the contractual provisions of the instrument.

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.

Financial assets and liabilities are only offset in the Balance Sheet when, and only when there exists a legally enforceable right to set off the recognised amounts and the Company intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.

Basic financial assets
Basic financial assets receivable within one year, such as trade debtors and bank balances, are measured at transaction price less any impairment.

Basic financial assets receivable within more than one year are measured at amortised cost less any impairment.

Financial assets are derecognised when and only when the contractual rights to the cash flows from the financial asset expire or are settled, or the Company transfers to another party substantially all of the risks and rewards of ownership of the financial asset, or the Company, despite having retained some, but not all, significant risks and rewards of ownership, has transferred control of the asset to another party.

Basic financial liabilities
Basic financial liabilities that have no stated interest rate and are payable within one year, such as trade creditors, are measured at transaction price.

Other basic financial liabilities are measured at amortised cost.

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

Provisions

Provisions are recognised when the Company has a present obligation (legal or constructive) 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 Balance Sheet date, taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows (when the effect of the time value of money is material).

When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, a receivable is recognised as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably.

2. Employees

2024 2023
Number Number
Monthly average number of persons employed by the Company during the year, including directors 44 62

3. Intangible assets

Development costs Total
£ £
Cost
At 01 April 2023 4,971,015 4,971,015
At 31 March 2024 4,971,015 4,971,015
Accumulated amortisation
At 01 April 2023 3,496,137 3,496,137
Charge for the financial year 625,783 625,783
At 31 March 2024 4,121,920 4,121,920
Net book value
At 31 March 2024 849,095 849,095
At 31 March 2023 1,474,878 1,474,878

4. Tangible assets

Plant and machinery Vehicles Fixtures and fittings Office equipment Total
£ £ £ £ £
Cost
At 01 April 2023 130,163 532,403 107,065 42,203 811,834
Additions 8,000 0 0 10,331 18,331
Disposals 0 ( 80,214) 0 0 ( 80,214)
At 31 March 2024 138,163 452,189 107,065 52,534 749,951
Accumulated depreciation
At 01 April 2023 112,280 213,044 64,836 34,294 424,454
Charge for the financial year 4,640 73,863 10,559 3,083 92,145
Disposals 0 ( 56,285) 0 0 ( 56,285)
At 31 March 2024 116,920 230,622 75,395 37,377 460,314
Net book value
At 31 March 2024 21,243 221,567 31,670 15,157 289,637
At 31 March 2023 17,883 319,359 42,229 7,909 387,380

5. Fixed asset investments

Investments in subsidiaries

2024
£
Cost
At 01 April 2023 1
At 31 March 2024 1
Carrying value at 31 March 2024 1
Carrying value at 31 March 2023 1

6. Debtors

2024 2023
£ £
Amounts owed by Group undertakings 43,055 647
Corporation tax 0 64,500
Other debtors 745,129 1,122,332
788,184 1,187,479

7. Creditors: amounts falling due within one year

2024 2023
£ £
Bank loans 433,032 368,077
Trade creditors 1,260,297 969,465
Accruals and deferred income 2,842,535 1,477,604
Other taxation and social security 167,889 214,988
Obligations under finance leases and hire purchase contracts 8,170 0
Other creditors 71,677 70,810
4,783,600 3,100,944

8. Creditors: amounts falling due after more than one year

2024 2023
£ £
Bank loans 505,204 858,846
Obligations under finance leases and hire purchase contracts 16,679 0
521,883 858,846

There are no amounts included above in respect of which any security has been given by the small entity.

9. Called-up share capital

2024 2023
£ £
Allotted, called-up and fully-paid
100 Ordinary shares of £ 1.00 each 100 100

10. Related party transactions

Transactions with the entity's directors

2024 2023
£ £
As at 1 April 10,522 (48,153)
Advances 3,596 58,675
Repayments 0 0
As at 31 March 14,118 10,522

Interest is charged on the above balance at the official rate.