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Company Registration Number 12434702























HIGHLY MARELLI UK LIMITED





FINANCIAL STATEMENTS





 31 DECEMBER 2023


























img1cf0.png

 
HIGHLY MARELLI UK LIMITED
 

COMPANY INFORMATION


Director
Mr K Kikuchi (appointed 12 October 2023)




Company secretary
LDC Nominee Secretary Limited



Registered number
12434702



Registered office
Highly Marelli UK Limited Units 2 And 3 Stephenson Road
Stephenson Industrial Estate

Washington

Tyne And Wear

NE37 3HR




Independent auditor
Armstrong Watson Audit Limited
Chartered Accountants & Statutory Auditors

First Floor

One Strawberry Lane

Newcastle Upon Tyne

NE1 4BX




Bankers
JP Morgan Chase Bank
25 Bank Street

Canary Wharf

London

E14 5JP




Solicitors
Eversheds
1 Callaghan Square

Cardiff

CF10 5BT





 
HIGHLY MARELLI UK LIMITED
 

CONTENTS



Page
Group strategic report
 
1 - 5
Directors' report
 
6 - 9
Independent auditor's report
 
10 - 13
Consolidated statement of comprehensive income
 
14
Consolidated balance sheet
 
15
Company balance sheet
 
16
Consolidated statement of changes in equity
 
17
Company statement of changes in equity
 
18 - 19
Notes to the financial statements
 
20 - 43


 
HIGHLY MARELLI UK LIMITED
 

GROUP STRATEGIC REPORT
FOR THE YEAR ENDED 31 DECEMBER 2023

Introduction
 
The director presents his strategic report for the period ended 31 December 2023.

Principal activities

The principal activity of the company is the design, manufacture, process and assembly of heating and air conditioning (HVAC) units for the automotive industry. The company operates from its main production facility and offices in Sunderland, Tyne & Wear along with an R&D design facility in Llanelli, Wales. The company also operates a small branch office covering R&D and Sales in Guyancourt, France. The US entity operates from its main production facility and offices in Shelbyville, Tennessee. 

Business review
 
The company was incorporated on 31 January 2020 as a subsidiary of Marelli Automotive Systems UK Limited. The company was incorporated to acquire the heating, ventilation and air conditioning business of Marelli Automotive Systems UK Limited during the period ended 31 December 2020, prior to its disposal to Highly Marelli Shanghai on 31 January 2021, a joint venture owned 40% by Marelli Holdings Limited (a company incorporated in Japan) and 60% by Highly Shanghai (a company incorporated in China). 
The company commenced trading on 1 December 2020. These accounts reflect twelve months of operations for the new standalone business as a subsidiary of Marelli Automotive Systems UK Limited. 
In the run up to the transfer of the HVAC business from Marelli Automotive Systems UK Limited and the commencement of trading activities of the company, major activity centred around the carve out of the standalone entity. This included sales and purchase contracts (including those of a service nature such as banking), an employee TUPE process, hiring additional employees and establishing long term and temporary service agreements with Marelli to cover a transitional period.

Principal risks and uncertainties
 
The principal risk for the company is the dependence upon one major customer, although this is mitigated by a long term contract agreement and further opportunities to expand to new customer business through the strategy of the joint venture. 
The company considers the individual company’s exposure to price risk, credit risk, liquidity risk and cash flow risk to be low given the support of the Highly Marelli Parent organisation and the Joint Venture owners. It also considers information relating to the company's financial risk management objectives and policies to.be immaterial for the assessment of assets, liabilities, financial position and profit and loss of the company. The BREXIT transition period ended in December 2020, has brought with it, additional red tape and import costs in the supply chain used in the UK business. 
The company has been impacted in the twelve months of trading and the following financial period by continued difficulties within the automotive industry as a result of declining Sales demand within the EU.  The company also has the added problem of operating as a standalone company with the teething problems that this can bring. However, the director is confident that these issues can be overcome where opportunities are maximised and risks are mitigated where possible. 

Page 1

 
HIGHLY MARELLI UK LIMITED
 

GROUP STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023

Financial key performance indicators
 
The principal KPI’s for 2023 relate to turnover, gross profit and operating profit, as disclosed in the financial statements. 
The company measures its performance with particular focus on a number of financial and non-financial KPI's, progress is assessed by comparing KPI’s with the company’s strategy, it’s budget for the year and historic performance.  
Turnover has increased in 2023 by over 25% as Volumes increase following the COVID pandemic, however the company has continued to experience lower than usual production levels as a result of continued difficulties within the automotive industry as a result of declining Sales demand within the EU. Cost increases in the raw material components and Inbound Freight has negatively impacted the gross profit for the period. Commercial discussions are on-going with our customers in relation to the high level of costs experienced. Operating profit has improved in 2023 despite the increase in raw material and freight costs.
Turnover per head and overall total headcount has improved in 2023 as the increase in volumes has enabled production efficiency improvements with a stable production environment.
Non-financial KPI’s include staff utilisation, attrition and diversity, the volume of accidents and reportable safety incidents. 
The company places great emphasis on the non-financial KPI’s that relate to health and safety including accident rates, reportable incidents, lost production time and hazard spotting.     

The likely consequences of any decision in the long term

The director has a duty to act in good faith, in a way that is most likely to promote the success of the company for the benefit of its members as a whole, having regard to the likely consequences of decisions for the long term, the interests of the company's employees, the need to foster relationships with other key stakeholders, the impact on the community and the environment, maintaining a reputation for high standards of business conduct, and the need to act fairly as between members of the company. 
Key decisions made by the director during the financial period, concerned the successful carve out of the former Marelli HVAC business unit to become the standalone entity of Highly Marelli UK Limited (HMUK). As per the business review section, this has included sales and purchase contracts (including those of a service nature such as banking), an employee TUPE process, hiring additional employees and establishing long term and temporary service agreements with Marelli to cover a transitional period. HMUK has also moved into dedicated offices and workspace under a long term rental agreement with Marelli. Actions were taken to also move HMUK dedicated staff from the Nissan plant into the dedicated workspace to allow focus on automation of processes and operating to its own shift patterns. 
Additionally, the director has ensured that the company operates under the successful operating process of Marelli, ensuring established trading and supply routes are maintained and business continuity is not impacted by the joint venture carve out process. This being at the same time as beginning a process of operating under the strategic guidance of new ownership and managing the expectations that are emerging.
The director has a unique understanding of the business being a former established senior leader within the Marelli group. The company also continues to leverage expertise from the wider group in order to achieve its objectives.

Page 2

 
HIGHLY MARELLI UK LIMITED
 

GROUP STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023

The interests of the company’s employees

The company successfully ran a TUPE process to transition the HVAC business unit employees of Marelli Automotive Systems UK Limited into the new organisation. Formal consultation took place with no major issues encountered. Ongoing consultation has taken place also since operating day 1. The senior management team communicate key issues affecting the company via a weekly communication brief and also a works council. Global monthly ‘Town Hall' meetings take place to cover the wider group. There are a full range of company policies and procedures available for employees to consult. Under the new joint venture arrangement, these are being developed to suit the needs of the new organisation.

The need to foster the company’s relationship with suppliers, customers and others

Apart from the joint venture shareholding and the company employees, the company's main stakeholder is Nissan for which it has several commercial agreements across much of their range produced from the Sunderland and Shelbyville plants. The company will continue to supply parts to Nissan both directly and indirectly, including Nissan's recent model update to the highly successful Qashqai. The focus for the standalone entity is to maintain an established and excellent working relationship with the Nissan group. 
As a company in a key supply chain area within the automotive sector, the director ensures that the business acts ethically towards its customers, suppliers and employees. The move to a dedicated workspace and backing of new part owners has allowed the company to invest in equipment to operate more effectively and in accordance with the requirements of the Nissan site.

The impact of the company’s operations on the community and the environment

The company is aware of the importance in the community and the ability to hire staff locally providing opportunities to the local area. It fully supports local charities and community programmes by engaging in dedicated fund-raising activities to support these. The company is also committed to managing the wider impacts of its operations and protecting the environment and natural resources. Projects in the foreseeable include the installation of Solar panels and going fully paperless now that the business is stand-alone from Marelli and also driving a reduction in energy consumption by improving energy efficiency in key production processes. The company also participates in the Salary Sacrifice Cycle to Work scheme offering the opportunity to all employees.

The desirability of the company to maintain a reputation for high standards of business conduct

The company is committed to complying with all applicable regulations and requires every employee to undertake various training courses including code of conduct and ethics as issued by the parent company. A strong compliance culture is encouraged with annual reviews, the company has also invested in GDPR activities to educate and inform the workforce of this topic.

The need to act fairly between members of the company

The Company regularly engages with its parent company to ensure Company plans are fully aligned with those of the group. This includes approval of annual budgets, medium term plans and new business opportunities.

Shareholders

Following the incorporation of the company as a subsidiary of Marelli Automotive Systems UK Ltd, the company engages extensively with the shareholders. This engagement has focussed on defining the strategic objectives of the company and it’s medium and long-term plans to deliver the desired outcomes. The relationship with the shareholders is governed by a framework document which sets out, amongst other things, the basis on which the performance of the company shall be monitored.  

Page 3

 
HIGHLY MARELLI UK LIMITED
 

GROUP STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023

Principal risks

The company is exposed to a number of risks, a proactive approach is taken to identify and mitigate these risks where possible. Risks and their impacts are communicated with shareholders to reduce the impact on the company and recovery plans made with the customer where possible.
• 
Covid-19 Pandemic  
The company noted how the Covid-19 pandemic disrupted the global economy and consider the potential impact on the current and future years. The company identify that there is a threat to the continuing operation if there are further major outbreaks of Covid. Many restrictions put in place to mitigate this risk have now been lifted but are available to be put back on place if the risk escalates. Whilst the threat from the virus has receded, the company continues to monitor the situation at a local and national level.
• 
Economic conditions
The company is affected by national and international economic factors outside of its control, including an economic slowdown, changes in the fiscal and monetary policies of Government, exchange rate fluctuations, commodity price fluctuations, inflation, interest rate increases and banking sector conditions.
Increases in the costs base for the company have are evident, to mitigate the risks the company operate strict procurement policies that emphasise value for money requirements and adjust commercial pricing to recover increasing costs as far as possible.
• 
Market risk
The Covid-19 pandemic has significantly impacted demand from key commercial markets, including Automotive. Whilst initial signs of recovery have been noted, the reduced demand for Electric vehicles and also component shortages within the industry have caused further economic disruption and instability. To mitigate the risk, the company remains actively engaged with the impacted customers, has proactively sought new customers in existing markets and seeks to diversify its exposure by developing our presence further down the supply chain building on our technical expertise and utilising available capacity in injection moulding.  
• 
Exchange rate risk
Exchange rate risk is the risk that fluctuations in exchange rates could adversely impact the financial performance of the group or its ability to meet its obligations. The company’s policy is to manage its exposure to exchange rate fluctuations by selling and purchasing in the same currency where possible.

Future developments

The director considers that the primary focus of the business is still to focus on the relationship with its main customer, but also ensure that the company intensifies its efforts to seek further opportunities and drive further efficiency improvements as the effects of global supply chain issues and the Covid 19 pandemic are reduced. The expectation is to continue to develop as a standalone entity and become less reliant on Marelli support. New business was awarded during 2023 which will start production in 2025, this will increase volume and revenue for Highly Marelli UK Limited.
On the 13th of July 2021, the company changed its name from Marelli Cabin Comfort UK Limited to Highly Marelli UK Limited, along with the transfer of ownership. The company has since continued to experience lower than usual production volumes subsequent to the end of the financial period as a result of declining Sales demand within the EU.

Page 4

 
HIGHLY MARELLI UK LIMITED
 

GROUP STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023


This report was approved by the board and signed on its behalf.



KOJI KIKUCHI
Mr K Kikuchi
Director

Date: 14 April 2025

Page 5

 
HIGHLY MARELLI UK LIMITED
 

 
DIRECTORS' REPORT
FOR THE YEAR ENDED 31 DECEMBER 2023

The directors present their report and the financial statements for the year ended 31 December 2023.

Directors' responsibilities statement

The directors are responsible for preparing the Group strategic report, the Directors' report and the consolidated financial statements in accordance with applicable law and regulations.
 
Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have elected to prepare the financial statements in accordance with applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice), including Financial Reporting Standard 102 ‘The Financial Reporting Standard applicable in the UK and Republic of Ireland'. Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and the Group and of the profit or loss of the Group for that period.

 In preparing these financial statements, the directors are required to:


select suitable accounting policies for the Group's financial statements and then apply them consistently;

make judgments and accounting estimates that are reasonable and prudent;

state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements;

prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group will continue in business.

The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and the Group and to enable them to ensure that the financial statements comply with the Companies Act 2006They are also responsible for safeguarding the assets of the Company and the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

Dividends

The director does not recommend the payment of a dividend in respect of the period ended 31 December 2023.

Directors

The directors who served during the year were:

Mr K Miyanaga (appointed 20 September 2021, resigned 30 September 2023)
Mr K Kikuchi (appointed 12 October 2023)

Political donations
No contributions to political organisations were made during the year (2022: £nil).

Future developments

The company experienced lower sales volume against budget as a result of the continued difficulties within the automotive industry as a result of declining Sales demand within the EU, which has had a significant impact on the short term profitability of the company. The director is confident that the level of demand will be restored by the end of 2024 once volumes return to expected levels. 
On the 13th July 21, the company changed its name from Marelli Cabin Comfort UK Limited to Highly Marelli UK Limited, The company has since continued to experience lower than usual production volumes subsequent to the end of the financial period because of continued difficulties within the automotive industry as a result of declining Sales demand within the EU. 

Page 6

 
HIGHLY MARELLI UK LIMITED
 

 
DIRECTORS' REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023

Significant events

The company was incorporated on 31 January 2020 and the company was dormant until 1 December 2020 when it acquired the heating, ventilation and air conditioning business of its parent company, Marelli Automotive Systems UK Limited. The shares in the company were then transferred to Marelli Corporation on 1 December 2020 as part of a restructuring within the group. 
The company has also impaired the value of its investment in subsidiaries in the year to £nil, following an assessment of the performance of the subsidiaries during the year and subsequent to the year end, along with forecasts of future performance. 

Research and development

The company is committed to a policy of research and development and continues to undertake investment in such activities in order to maintain and promote its position in the market for its products. The company also continues to benefit from the strong commitment of the Marelli worldwide group to research and development in order to improve product design, manufacturing processes, cost and quality.

Going concern

The company meets its day to day working capital requirements through funding from its parent company. The company is therefore heavily dependent on the funding in place for the global group, a letter of support is currently available. Whilst this creates a material uncertainty which casts significant doubt on the company’s ability to continue as a going concern, the director expects that the group will continue to provide this support for a period of one year from signing the financial statements. The company therefore continues to adopt the going concern basis in preparing its financial statements. 
Despite the losses for the financial year, the company holds a vital position in the group, since it’s incorporation it has experienced significant volume reductions and supply issues as previouslymentioned. Once the expected level of volume returns, coupled with new business wins for future Nissan models, the company will be a significant contributor for the future success of the group, and also for the region.

Employees

Details of the number of employees and related costs can be found in note 8 to the financial statements. 
The company's policy is to consult and discuss with employees, through employee meetings, on matters likely to affect employees’ interests. Information on matters of concern to employees is given through informal bulletins, reports and team briefings which seek to achieve a common awareness on the part of all employees of the financial and economic factors affecting the group’s performance. 
The company regards the occupational health and safety of all employees, contractors and visitors as a fundamental concern for all levels of management. It is therefore, the company’s primary objective to identify and eliminate, insofar as is reasonably possible, all occupational health and safety hazards.
The company is committed to providing training that enables all staff to do their job effectively and develop their full potential as employees. 
The company is committed to providing equal treatment for all employees. All job applicants and employees whether temporary, permanent or agency workers will receive equal treatment regardless of race, colour, ethnic or national origins, religion, sex, marital status, age, sexual orientation or disability.

Page 7

 
HIGHLY MARELLI UK LIMITED
 

 
DIRECTORS' REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023

Employment of disabled persons

Applications for employment by disabled persons are always fully considered, bearing in mind, the abilities of the applicant concerned. In the event of members of staff becoming disabled every effort will be made to ensure that their employment with the company continues and the appropriate training is arranged. It is the policy of the company that the training, career development and promotion of disabled persons should, as far as possible, be identical to that of other employees. During the period there were no disabled persons employed in the company.

Suppliers

The company’s purchasing department works to guarantee that the suppliers process of selection, certification and evaluation are homogenous in all of the countries in which the company operates in. Working collaboratively with suppliers to build long-term, mutually beneficial relationships with trading partners who share our corporate philosophy of honesty, integrity, and ethical business practices. The company endeavours to enter into clear and fair contracts with its suppliers.
Ongoing communication with the company’s suppliers to develop deeper relationships with companies in the supply chains as well as develop strategic relationships with key suppliers. The company perceive our global supplier network as a major contribution to value creation, quality and innovation and also to our success. Our collaboration with our suppliers I based on a mutual understanding of product and production quality, security of supplies, competitive prices and innovation. 

Customers

The company engages extensively with its customers to foster long-term relationships of value to both 
parties, fostering positive and open relationships with these customers and recognises the importance 
of the governance regime they have adopted in monitoring performance. This includes attending regular 
meetings with senior representatives of these customers and reviewing operational information on a 
regular basis.
The company also interacts with customers in a structured manner to gather feedback on performance 
in meeting their requirements on-time and on-quality. These relationships are led by our Sales director 
and supported by key management personnel as and when required.   

Environment

The company recognises the importance of its environmental responsibilities and has clearly identified  environmental issues as an integral part of its corporate business strategy for the design and manufacture of automotive systems and components. 
The company will continue to take action to conserve resources through the use of recycled or recyclable material, the elimination or minimisation of waste at source, and the implementation of viable recycling opportunities. In addition, the company is fully committed to the prevention of pollution and to achieving continual improvement in overall environmental performance.
GHG emissions, Energy consumption & energy efficiency
During the year, the business operated within the Marelli facility under a long-term agreement with fixed charges in place for energy consumption. Therefore, the energy and carbon information for electricity, gas and consumption of fuel for the purpose of transport is not practical to obtain. This information will be provided when the business is fully operational in a stand-alone facility and full year data is available.  
 

Page 8

 
HIGHLY MARELLI UK LIMITED
 

 
DIRECTORS' REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023

Disclosure of information to auditor

Each of the persons who are directors at the time when this Directors' report is approved has confirmed that:
 
so far as the director is aware, there is no relevant audit information of which the Company and the Group's auditor is unaware, and

the director has taken all steps that ought to be taken as a director in order to be aware of any relevant audit information and to establish that the Company and the Group's auditor is aware of that information.

Post balance sheet events

As noted above, the company has continued to experience lower than usual production levels subsequent to the end of the financial period as a result of continued difficulties within the automotive industry as a result of declining Sales demand within the EU. The director is confident that volumes will improve during the year ending 31 December 2024. 
Whilst the volume reduction has had a significant impact on the financial results of the company, with a continued reduction in both sales and profitability post period end, as mentioned, volumes are expected to improve during the year ending 31 December 2024 onwards, with significant expansion expected in future years following the award of significant business in recent years. 

Auditor

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

This report was approved by the board and signed on its behalf.
 





KOJI KIKUCHI
Mr K Kikuchi
Director

Date: 14 April 2025

Page 9

 
HIGHLY MARELLI UK LIMITED
 

 
INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF HIGHLY MARELLI UK LIMITED
 

Qualified opinion on the group and company financial statements


We have audited the financial statements of Highly Marelli UK Limited (the 'parent Company') and its subsidiaries (the 'Group') for the year ended 31 December 2023, which comprise the Consolidated statement of comprehensive income, the Consolidated balance sheet, the Company balance sheet, the Consolidated statement of changes in equity, the Company statement of changes in equity and the related notes, including a summary of significant accounting policiesThe 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).


Except for the possible effects of the matters described in the basis for qualified opinion section of our report, in our opinion the financial statements:


give a true and fair view of the state of the Group's and of the parent Company's affairs as at 31 December 2023 and of the Group's loss 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.


Qualified opinion in respect of the comparative information in relation to stock quantities


We were not appointed as auditor of the company until after 31 December 2022 and thus did not observe the counting of physical stocks at the end of the previous year. We were unable to satisfy ourselves by alternative means concerning the quantities of stocks held at 31 December 2022, which are included as a prior year comparative in the statement of financial position at £22,829k, by using other audit procedures. Consequently we were unable to determine whether any adjustment to this amount was necessary.


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 in accordance with the ethical requirements that are relevant to our audit of the financial statements in the United Kingdom, including the Financial Reporting Council'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 Group's or the parent 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.


Page 10

 
HIGHLY MARELLI UK LIMITED
 

 
INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF HIGHLY MARELLI UK LIMITED (CONTINUED)


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 ReportOur 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.


Opinion on other matters prescribed by the Companies Act 2006
 

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


the information given in the Group 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 Group strategic report and the Directors' report have been prepared in accordance with applicable legal requirements.


Our opinion is also qualified in respect of the Directors' report due to the exclusion of Streamlined Energy and Carbon Reporting, which is required under the The Companies (Directors’ Report) and Limited Liability Partnerships (Energy and Carbon Report) Regulations 2018. 


Matters on which we are required to report by exception
 

In the light of the knowledge and understanding of the Group and the parent Company and its environment obtained in the course of the audit, we have not identified material misstatements in the Group strategic report or the Directors' report.


Arising from the limitation of our work referred to in the qualified opinion on the group and parent company financial statements we have not obtained all of the information and explanations we consider necessary for the purpose of our audit.  
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 in, in our opinion:
 - Streamlined Energy and Carbon Reporting, which is required under the The Companies (Directors’ Report) and Limited Liability Partnerships (Energy and Carbon Report) Regulations 2018.

 
Responsibilities of directors
 

As explained more fully in the Directors' responsibilities statement set out on page 6, 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 Group's and 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 Group or the parent Company or to cease operations, or have no realistic alternative but to do so.


Page 11

 
HIGHLY MARELLI UK LIMITED
 

 
INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF HIGHLY MARELLI UK LIMITED (CONTINUED)


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 Group financial statements.


Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below:

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 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, including the Companies Act 2006, and taxation    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.
We assessed the susceptibility of the company’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; and
• considering the internal controls in place to mitigate risks of fraud and non-compliance with laws and    regulations.
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 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;
 
Page 12

 
HIGHLY MARELLI UK LIMITED
 

 
INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF HIGHLY MARELLI UK LIMITED (CONTINUED)



• reading the minutes of meetings of those charged with governance;
• reviewed correspondence and filings in relation to the parent company's Operator License; and
• enquiring of management as to actual and potential litigation and claims.
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.
We draw your attention to matters described in the basis for adverse opinion section of this report, which describes certain elements of non-compliance with the Companies Act 2006 and FRS102. 
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.


A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council's website at: 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 2006Our 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.





Simon Turner (Senior statutory auditor)
for and on behalf of
Armstrong Watson Audit Limited
Chartered Accountants & Statutory Auditors
Newcastle upon Tyne

15 April 2025
Page 13

 
HIGHLY MARELLI UK LIMITED
 

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2023

2023
2022
Note
£000
£000

  

Turnover
 5 
131,771
105,082

Cost of sales
  
(136,279)
(121,313)

Gross loss
  
(4,508)
(16,231)

Administrative expenses
  
(23,026)
(15,855)

Exceptional Expenses
  
-
(12)

Operating loss
 6 
(27,534)
(32,098)

Interest receivable and similar income
 8 
13
10

Interest payable and similar expenses
 9 
(1,743)
(400)

Loss before tax
  
(29,264)
(32,488)

Tax on loss
 10 
(138)
(533)

Loss for the financial year
  
(29,402)
(33,021)

Profit for the year attributable to:
  

Owners of the parent company
  
29,402
33,021

  
29,402
33,021

Total comprehensive income attributable to:
  

The notes on pages 20 to 43 form part of these financial statements.

Page 14

 
HIGHLY MARELLI UK LIMITED
REGISTERED NUMBER: 12434702

CONSOLIDATED BALANCE SHEET
AS AT 31 DECEMBER 2023

2023
2022
Note
£000
£000

Fixed assets
  

Intangible assets
 11 
2,387
5,276

Tangible assets
 12 
15,366
17,613

  
17,753
22,889

Current assets
  

Stocks
 14 
16,797
22,829

Debtors: amounts falling due within one year
 15 
24,216
12,448

Cash at bank and in hand
 16 
10,274
4,263

  
51,287
39,540

Creditors: amounts falling due within one year
 17 
(132,079)
(99,066)

Net current liabilities
  
 
 
(80,792)
 
 
(59,526)

Total assets less current liabilities
  
(63,039)
(36,637)

Creditors: amounts falling due after more than one year
 18 
(2,008)
(1,967)

Provisions for liabilities
  

Deferred tax
 19 
(321)
(565)

Other provisions
 20 
(2,256)
(1,499)

  
 
 
(2,577)
 
 
(2,064)

Net liabilities
  
(67,624)
(40,668)


Capital and reserves
  

Called up share capital 
 21 
-
-

Share premium account
 22 
19,645
19,645

Profit and loss account
 22 
(87,269)
(60,313)

  
(67,624)
(40,668)


The financial statements were approved and authorised for issue by the board and were signed on its behalf by 


KOJI KIKUCHI
Mr K Kikuchi
Director

Date: 14 April 2025

The notes on pages 20 to 43 form part of these financial statements.

Page 15

 
HIGHLY MARELLI UK LIMITED
REGISTERED NUMBER: 12434702

COMPANY BALANCE SHEET
AS AT 31 DECEMBER 2023

2023
2022
Note
£000
£000

Fixed assets
  

Tangible assets
 12 
5,924
5,162

  
5,924
5,162

Current assets
  

Stocks
  
2,945
3,037

Debtors: amounts falling due within one year
 15 
9,703
6,672

Cash at bank and in hand
  
2,527
1,961

  
15,175
11,670

Creditors: amounts falling due within one year
  
(36,643)
(23,097)

Net current liabilities
  
 
 
(21,468)
 
 
(11,427)

Total assets less current liabilities
  
(15,544)
(6,265)

  

Creditors: amounts falling due after more than one year
  
(2,008)
(1,971)

Provisions for liabilities
  

Other provisions
 20 
(737)
(137)

  
 
 
(737)
 
 
(137)

Net assets excluding pension asset
  
(18,289)
(8,373)

Net liabilities
  
(18,289)
(8,373)


Capital and reserves
  

Share premium account
 22 
19,645
19,645

Profit and loss account brought forward
  
(28,018)
(21,035)

Loss for the year
  
(9,916)
(6,983)

Profit and loss account carried forward
  
(37,934)
(28,018)

  
(18,289)
(8,373)


The financial statements were approved and authorised for issue by the board and were signed on its behalf by 


KOJI KIKUCHI
Mr K Kikuchi
Director

Date: 14 April 2025

The notes on pages 20 to 43 form part of these financial statements.

Page 16

 
HIGHLY MARELLI UK LIMITED
 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2023


Called up share capital
Share premium account
Profit and loss account
Equity attributable to owners of parent Company
Total equity

£000
£000
£000
£000
£000

At 1 January 2023
-
19,645
(60,313)
(40,668)
(40,668)


Comprehensive income for the year

Loss for the year
-
-
(29,402)
(29,402)
(29,402)

Currency translation differences
-
-
2,446
2,446
2,446
Total comprehensive income for the year
-
-
(26,956)
(26,956)
(26,956)


At 31 December 2023
-
19,645
(87,269)
(67,624)
(67,624)



CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2022


Share premium account
Profit and loss account
Equity attributable to owners of parent Company
Total equity

£000
£000
£000
£000

At 1 January 2022
19,645
(25,544)
(5,899)
(5,899)


Comprehensive income for the year

Loss for the year
-
(33,021)
(33,021)
(33,021)

Currency translation differences
-
(1,748)
(1,748)
(1,748)
Total comprehensive income for the year
-
(34,769)
(34,769)
(34,769)


At 31 December 2022
19,645
(60,313)
(40,668)
(40,668)


The notes on pages 20 to 43 form part of these financial statements.

Page 17

 
HIGHLY MARELLI UK LIMITED
 

COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2023


Share premium account
Profit and loss account
Total equity

£000
£000
£000

At 1 January 2023
19,645
(28,018)
(8,373)


Comprehensive income for the year

Loss for the year

-
(9,916)
(9,916)


Other comprehensive income for the year
-
-
-


Total comprehensive income for the year
-
(9,916)
(9,916)


Total transactions with owners
-
-
-


At 31 December 2023
19,645
(37,934)
(18,289)


The notes on pages 20 to 43 form part of these financial statements.

Page 18

 
HIGHLY MARELLI UK LIMITED
 

COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2022


Share premium account
Profit and loss account
Total equity

£000
£000
£000

At 1 January 2022
19,645
(21,035)
(1,390)


Comprehensive income for the year

Loss for the year

-
(6,983)
(6,983)


Other comprehensive income for the year
-
-
-


Total comprehensive income for the year
-
(6,983)
(6,983)


Total transactions with owners
-
-
-


At 31 December 2022
19,645
(28,018)
(8,373)


The notes on pages 20 to 43 form part of these financial statements.

Page 19

 
HIGHLY MARELLI UK LIMITED
 

 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023

1.


General information

The company undertakes the design, manufacture, and sale of Heating Ventilation and Air Conditioning products for the automotive industry. 
The company is a private limited company, incorporated in the United Kingdom and its registered office address is Highly Marelli UK Limited Units 2 And 3 Stephenson Road, Stephenson Industrial Estate, Washington, Tyne And Wear, United Kingdom, NE37 3HR. 


2.


Statement of compliance

The financial statements of the company have been prepared in compliance with United Kingdom Accounting Standards, including Financial Reporting Standard 102, “The Financial Reporting Standard applicable in the United Kingdom and the Republic of Ireland” (‘FRS 102") and the Companies Act 2006. 

3.Accounting policies

The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently applied to all the periods presented, unless otherwise stated.

 
3.1

Basis of preparation of financial statements

The financial statements are prepared under the historical cost convention, on a going concern basis, and in accordance with applicable accounting standards. The financial statements are prepared in sterling, which is the functional currency of the company and rounded to the nearest £'000. 
The preparation of financial statements in conformity with FRS102 requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the company's accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in note 4. 

 
3.2

Financial Reporting Standard 102 - reduced disclosure exemptions

The Parent Company has taken advantage of the following disclosure exemptions in preparing these financial statements, as permitted by the FRS 102 "The Financial Reporting Standard applicable in the UK and Republic of Ireland":
the requirements of Section 7 Statement of Cash Flows;
the requirements of Section 3 Financial Statement Presentation paragraph 3.17(d);
the requirements of Section 11 Financial Instruments paragraphs 11.42, 11.44 to 11.45, 11.47, 11.48(a)(iii), 11.48(a)(iv), 11.48(b) and 11.48(c);
the requirements of Section 12 Other Financial Instruments paragraphs 12.26 to 12.27, 12.29(a), 12.29(b) and 12.29A;
the requirements of Section 26 Share-based Payment paragraphs 26.18(b), 26.19 to 26.21 and 26.23;
the requirements of Section 33 Related Party Disclosures paragraph 33.7.

This information is included in the consolidated financial statements of Marelli Holdings Co Limited as at 31 March 2023 and these financial statements may be obtained from www.marellimotori.com/annual-report-accounts-2023/.

Page 20

 
HIGHLY MARELLI UK LIMITED
 

 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023

3.Accounting policies (continued)

 
3.3

Basis of consolidation

The consolidated financial statements present the results of the Company and its own subsidiaries ("the Group") as if they form a single entity. Intercompany transactions and balances between group companies are therefore eliminated in full.
The consolidated financial statements incorporate the results of business combinations using the purchase method. In the Balance sheet, the acquiree's identifiable assets, liabilities and contingent liabilities are initially recognised at their fair values at the acquisition date. The results of acquired operations are included in the Consolidated statement of comprehensive income from the date on which control is obtained. They are deconsolidated from the date control ceases.
In accordance with the transitional exemption available in FRS 102, the Group has chosen not to retrospectively apply the standard to business combinations that occurred before the date of transition to FRS 102, being 01 January 2022.

 
3.4

Going concern

The group had net liabilities of £64,619k at the year end, and net current liabilities of £80,784k following a loss in the year of £29,396k. 
The company meets its day-to-day working capital requirements through funding from its parent company. A letter of support has been obtained from its parent company, and the director is satisfied that its parent is able and willing to continue to provide the necessary support to enable the company to continue as a going concern. This support includes amounts owed to fellow group undertakings which would not be called in were this to endanger the company's ability to continue as a going concern, and also the provision of further funds where required. 

 
3.5

Foreign currency

a) Functional and presentation currency 
The company's functional and presentation currency is the pound sterling. 
b) Transactions and balances 
Transactions denominated in foreign currencies are translated into sterling at the actual exchange rates at the date of the transaction. Assets and liabilities in foreign currencies have been translated into sterling at rates of exchange ruling at the end of the financial period. Any gain or loss arising from a change in exchange rates subsequent to the date of the transaction is taken to the profit and loss account.

Page 21

 
HIGHLY MARELLI UK LIMITED
 

 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023

3.Accounting policies (continued)

 
3.6

Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable and represents the amount receivable for goods supplied or services rendered, net of returns, discounts and rebates allowed by the company and value added taxes. 
The company bases its estimate of discounts, taking into consideration each specific customer, the type of transaction and the specific contractual arrangements in place. 
The company recognises revenue when (a) the significant risks and rewards of ownership have been transferred to the buyer; (b) the company retains no continuing involvement or control over the goods; (c) the amount of revenue can be measured reliably; (d) it is probable that future economic benefits will flow to the company. 
Tooling contracts 
Turnover is recognised on tooling contracts when the tools have been completed and accepted by the customer, this is deemed to be when the company obtains the right to consideration. Profit on tooling contracts is recognised when the final outcome of the contract can be assessed with reasonable certainty, which is also normally deemed to be when the tools are complete and accepted by the customer. 
Tooling contract balances included in inventories comprise costs incurred on tooling contracts, net of amounts transferred to cost of sales, after deducting foreseeable losses and related payments on account. Costs include all direct material and labour costs incurred in bringing a contract to its state of completion at the period end. Provisions for estimated losses on contracts are made in the period in which such losses are foreseen. The amount by which provisions for foreseeable losses exceed costs incurred, after transfer to cost of sales are included with provisions for liabilities and charges.

 
3.7

Finance and operating leases

Costs in respect of operating leases are charged on a straight line basis over the lease term. 
Leasing agreements which transfer to the company substantially all the benefits and risks of ownership of an asset are treated as if the asset had been purchased outright. The assets are included in fixed assets and the capital element of the leasing commitments is shown as obligations under finance leases. The lease rentals are treated as consisting of capital and interest elements. The capital element is applied to reduce the outstanding obligations and the interest element is charged against profit in proportion to the reducing capital element outstanding. Assets held under finance leases are depreciated over the shorter of the lease terms and the useful lives of equivalent owned assets. 

  
3.8

Share capital

Ordinary shares are classified as equity. 

 
3.9

Research and development

Expenditure on research and development is expensed as incurred, in accordance with the policy choice available under FRS102.  

 
3.10

Interest income

Interest income is recognised in profit or loss using the effective interest method.

Page 22

 
HIGHLY MARELLI UK LIMITED
 

 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023

3.Accounting policies (continued)

 
3.11

Borrowing costs

All borrowing costs are recognised in profit or loss in the year in which they are incurred.

 
3.12

Employee benefits

The company 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. 
The company also provides a range of other benefits to employees, including a salary sacrifice scheme, paid holiday arrangements and a number of other short term benefits. 

 
3.13

Current and deferred taxation

Taxation expense for the period comprises current and deferred tax recognised in the reporting period. Tax is recognised in the profit and loss account, to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case tax is also recognised in other comprehensive income or directly in equity respectively. 
Current or deferred taxation assets and liabilities are not discounted: 
a) Current tax 
Current tax is the amount of income tax payable in respect of the taxable profit for the period or prior periods. Tax is calculated on the basis of tax rates and laws that have been enacted or substantively enacted by the period end. 
Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities. 
b) Deferred tax 
Deferred tax arises from timing differences that are differences between taxable profits and total 
comprehensive income as stated in the financial statements. These timing differences arise from the 
inclusion of income and expenses in tax assessments in periods different from those in which they are recognised in financial statements. 
Deferred tax is recognised on all timing differences at the reporting date except for certain exceptions. Unrelieved tax losses and other deferred tax assets are only recognised when it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits. 
Deferred tax is measured using tax rates and laws that have been enacted or substantively enacted by the period end and that are expected to apply to the reversal of the timing difference.

 
3.14

Exceptional items

The company classifies certain one-off charges or credits that have a material impact on the company's financial results as ‘exceptional items’. These items are disclosed separately to provide further understanding of the financial performance of the company.

Page 23

 
HIGHLY MARELLI UK LIMITED
 

 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023

3.Accounting policies (continued)

 
3.15

Goodwill

Goodwill represents the difference between the consideration payable for the purchase of the trade and assets and liabilities of the business and the fair value of the underlying assets and liabilities acquired. The fair values used by the company in the valuation were based on a professional third party consultant valuation at the date of the acquisition, Goodwill is typically amortised to the profit and loss account over a period of 10 years, representing the estimated useful economic life of the assets acquired. However, in 2020 the goodwill value was fully amortised following an impairment review. 

 
3.16

Development costs

Management undertake an annual review of development costs. Where it meets the following criteria and the entity can demonstrate as such, it is capitalised as an intangible asset on the balance sheet:
- The technical feasibility of completing the intangible asset so that it will be available for use of sale
- Its intention to complete the intangible asset to use or sell it
- Its ability to use or sell the intangible asset
- How the intangible asset will generate probable future economic benefits.

 
3.17

Tangible fixed assets

Tangible assets are stated at cost or valuation less accumulated depreciation and accumulated impairment losses. Cost includes the original purchase price, costs directly attributable to bringing the asset to its working condition for its intended use, dismantling and restoration costs and borrowing costs capitalised. The fixed assets acquired as part of the acquisition of the company's trade are stated at the values assigned to the assets as part of the fair value exercise performed as part of the legal transfer. 
a) Plant and machinery and fixtures, fittings, tools and equipment 
Plant and machinery and fixtures, fittings, tools and equipment are stated at cost or valuation less accumulated depreciation and accumulated impairment losses. 

Page 24

 
HIGHLY MARELLI UK LIMITED
 

 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023

3.Accounting policies (continued)


3.17
Tangible fixed assets (continued)

b) Depreciation and residual values 
Depreciation on tangible fixed assets is calculated so as to write off the cost, or valuation, on a straight line basis over the expected useful economic lives of the assets. The principal annual rates used for this purpose are: 


Freehold property
-
Long-term leasehold property
-
2%
Plant and machinery
-
10% - 33%
Fixtures and fittings
-
10% - 20%

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. 
c) Subsequent additions and major components 
Subsequent costs, including major inspections, are included in the assets carrying amount or recognised as a separate asset, as appropriate, only when it is probable that economic benefits associated with the item will flow to the company and the cost can be measured reliably. 
The carrying amount of any replaced component is derecognised. Major components are treated as a separate asset where they have significantly different patterns of consumption of economic benefits and are depreciated separately over its useful life. 
Repairs, maintenance and minor inspection costs are expensed as incurred. 
d) Assets not yet in use 
Assets in the course of construction are stated at cost. These assets are not depreciated until they are available for use.  
e) De-recognition 
Tangible assets are de-recognised on disposal or when no future economic benefits are expected. On disposal, the difference between the net disposal proceeds and the carrying amount is recognised in profit or loss and included in ‘Other operating (losses)/gains’.
f) Impairment of fixed assets
Impairment is calculated as the difference between the carrying value (being the depreciated cost) of fixed assets and their recoverable value. Recoverable value is the higher of the net realisable value and the value in use of the assets. Value in use represents the present value of expected future cash flows discounted on a pre-tax basis. If incurred, impairment is recognised in the profit and loss account.

Page 25

 
HIGHLY MARELLI UK LIMITED
 

 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023

3.Accounting policies (continued)

 
3.18

Fixed asset investments

Fixed asset investments are included at cost less accumulated impairment losses. 
The company evaluates its investments on an annual basis for indicators of impairment, reflecting the financial performance of the subsidiary undertakings and future profitability forecasts. Impairment is calculated as the difference between the carrying value (being historical cost) of fixed asset investments and their recoverable value. Recoverable value is the higher of the net realisable value and the value in use of the assets. Value in use represents the present value of expected future cash flows discounted on a pre-tax basis. If incurred, impairment is recognised in the profit and loss account as an exceptional item. 

 
3.19

Inventories

Inventories are stated at the lower of cost and net realisable value. In general, cost is determined on a first in first out basis and includes transport and handling costs. In the case of manufactured products, cost includes all direct expenditure and production overheads based on the normal level of activity. Where necessary, provision is made for obsolete, slow moving and defective stocks. 
Inventory on consignment and their related obligations are recognised in current assets and current liabilities respectively on acceptance of the consignment inventory when the risks and rewards of ownership pass to the company. 
At the end of each reporting period inventories are assessed for impairment. If an item of inventory is impaired, the identified inventory is reduced to its selling price less costs to complete and sell and an impairment charge is recognised in the profit and loss account. Where a reversal of the impairment is recognised the impairment charge is reversed, to the original impairment loss, and is recognised as a credit in the profit and loss account. 

 
3.20

Debtors

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.

 
3.21

Cash and cash equivalents

Cash and cash equivalents includes cash in hand, deposits held at call with banks, other short-term highly liquid investments with original maturities of three months or less and bank overdrafts. 

 
3.22

Creditors

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.

Page 26

 
HIGHLY MARELLI UK LIMITED
 

 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023

3.Accounting policies (continued)

 
3.23

Provisions and contingencies

a) Provisions 
Provisions are recognised when the company has a present legal or constructive obligation as a result of past events; it is probable that an outflow of resources will be required to settle the obligation; and the amount of the obligation can be estimated reliably. 
Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognised even if the likelihood of an outflow with respect to any other item included in the same class of obligations may be small. 
In particular: 
i.  Provision is made for customer warranty claims based on historical claim data and with     reference to the relevant warranty period for each specific customer. 
ii. Restructuring provisions are recognised when the company has a detailed, formal plan for     the restructuring and has raised a valid expectation in those affected by either starting to     implement the plan or announcing its main features to those affected and therefore has a     legal or constructive obligation to carry out the restructuring; and 
iii. Provision is not made for future operating losses. 
Provisions are measured at the present value of the expenditure expected to be required to settle the obligation using a pre-tax rate that reflects current markets assessments of the time value of money and the risks specific to the obligation. The increase in the provision due to the passage of time is recognised as a finance cost. 
b) Contingencies 
Contingent liabilities are not recognised. Contingent liabilities arise as a result of past events when (i) it is not probable that there will be an outflow of resources of that the amount cannot be reliably measured at the reporting date or (i) when the existence will be confirmed by the occurrence or non-occurrence of uncertain future events not wholly within the company’s control. Contingent liabilities are disclosed in the financial statements unless the probability of an outflow of resources is remote. 
Contingent assets are not recognised unless certain. Contingent assets are disclosed in the financial statements when an inflow of economic benefits is probable. 

Provisions are recognised when an event has taken place that gives rise to a legal or constructive obligation, a transfer of economic benefits is probable and a reliable estimate can be made.
Provisions are measured as the best estimate of the amount required to settle the obligation, taking into account the related risks and uncertainties.
 
Increases in provisions are generally charged as an expense to profit or loss.
Page 27

 
HIGHLY MARELLI UK LIMITED
 

 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023

3.Accounting policies (continued)

 
3.24

Financial instruments

The company has chosen to adopt the Sections 11 and 12 of FRS 102 in respect of financial instruments. 
a) Financial assets 
Basic financial assets, including trade and other receivables, cash and bank balances, amounts owed by group undertakings and investments in commercial paper, are initially recognised at transaction price, 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. 
Such assets are subsequently carried at amortised cost using the effective interest method. 
At the end of each reporting period financial assets measured at amortised cost are assessed for objective evidence of impairment. 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 when (a) the contractual rights to the cash flows from the asset expire or are settled, or (b) substantially all the risks and rewards of the ownership of the asset are transferred to another party or (c) control of the asset has been transferred to another party who has the practical ability to unilaterally sell the asset to an unrelated third party without imposing additional restrictions. 
b) Financial liabilities 
Basic financial liabilities, including trade and other payables, bank loans and loans from fellow group companies 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. 
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. Accounts 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 liability is extinguished, that is when the contractual obligation is discharged, cancelled or expires. 
c) Offsetting 
Financial assets and liabilities are offset and 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. 

Page 28

 
HIGHLY MARELLI UK LIMITED
 

 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023

4.


Critical accounting judgements and estimation uncertainty

Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. 
a) Critical accounting estimates and assumptions 
The company makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial period are outlined below: 
Provision for warranties for products 
Provision is made for the estimated liability arising on all known warranty claims. Provision is also made, using past experience, for potential warranty claims on all sales up to the balance sheet date. 
Inventory provisions 
When calculating the inventory provision, management considers the nature and condition of the inventory, as well as applying assumptions around anticipated saleability of finished goods and future usage of raw materials. Provisions for inventory are updated each period by management and updated for changes in the economic environment in which the company operates. 
Impairment of investments in subsidiaries
Due to losses incurred by the company's subsidiary both during the year and after the year end, the investment in that subsidiary has been impaired to nil. 
Accounting for fixed asset addition acquired under a long term lease
During the year the company acquired a leasehold asset in exchange for consideration taking the form of a long term loan payable to the company's parent. The directors have assessed that the useful life of this asset is substantially covered by the term of the lease, being 20 years, and have therefore accounted for the asset as a finance lease. 

Page 29

 
HIGHLY MARELLI UK LIMITED
 

 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023

5.


Turnover

2023
2022
£000
£000

United Kingdom
29,115
21,841

Rest of the world
102,656
83,241

131,771
105,082



6.


Operating loss

The operating loss is stated after charging:

2023
2022
£000
£000

Foreign exchange loss
433
286

Research & development expenditure
1,693
625

Auditors' remuneration for audit services
42
19

Impairment of inventory
915
465

Operating lease charges
391
418

Page 30

 
HIGHLY MARELLI UK LIMITED
 

 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023

7.


Employees

Staff costs were as follows:


Group
Group
Company
Company
2023
2022
2023
2022
£000
£000
£000
£000


Wages and salaries
27,299
24,530
4,443
3,947

Social security costs
3,220
1,398
340
370

Cost of defined contribution scheme
168
202
168
202

30,687
26,130
4,951
4,519


Remuneration paid to key management personnel in the group during the year was £1,313k (2022: £1,121k).

The average monthly number of employees, including the directors, during the year was as follows:



Group
Group
Company
Company
        2023
        2022
        2023
        2022
            No.
            No.
            No.
            No.









Manufacturing
418
368
75
76



Design and development
25
96
9
10



Administration
52
66
11
13

495
530
95
99

Directors 
The emoluments of the Directors are paid by Marelli Automotive Systems UK Ltd (MSUK). The Directors services to the Company and to a number of fellow subsidiaries below the ultimate parent company are of a non-executive nature and their emoluments and retirement benefits are deemed to be wholly attributable to their services to MSUK and the Group. Services directly attributable to the Company are a negligible proportion of those provided to the Group, accordingly no emoluments or retirement benefits are disclosed in these financial statements.


8.


Interest receivable

2023
2022
£000
£000


Other interest receivable
13
10

13
10

Page 31

 
HIGHLY MARELLI UK LIMITED
 

 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023

9.


Interest payable and similar charges

2023
2022
£000
£000


Other interest payable
-
2

Interest on lease liabilities
1,593
313

On intercompany loans
150
85

1,743
400


10.


Taxation income

(a) Tax income included in profit or loss 



2023
2022
£000
£000

Corporation tax


Current tax on profits for the year
138
533


138
533

Corporation tax for the period

Total current tax expense
138
533

Deferred tax


Impact of change in tax rate
-
-

Total deferred tax
-
-

Total tax
 
138
 
533
Page 32

 
HIGHLY MARELLI UK LIMITED
 

 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
 
10.Taxation income (continued)


(b) Factors affecting tax charge for the year/period

The tax assessed for the year is higher than (2022 - the same as) the standard rate of corporation tax in the UK of 25% (2022 - 19%). The differences are explained below:

2023
2022
£000
£000


Loss on ordinary activities before tax
(29,264)
(32,488)


Loss on ordinary activities multiplied by standard rate of corporation tax in the UK of 25% (2022 - 19%)
(7,316)
(6,173)

Effects of:


Movement in deferred tax asset not recognised
7,454
6,706

Total tax charge for the year
138
533

(c) Tax rate changes 
Following the Chancellor's budget in March 2021 the rate of UK corporation tax remained at 19% until April 2023 and thereafter increased to 25%. These changes were substantively enacted on 24 May 2021 as result any deferred tax assets and liabilities have been remeasured to the rate at which they are expected to crystallise. These changes are considered non-underlying due to it arising from a material legislative change, and its treatment is consistent with that applied in relation to previous corporation tax rate changes 
(d) Deferred tax asset 
At 31 December 2023, the company had a deferred tax asset of £4,905k (2022: £2,649k) relating to tax losses. The director has reviewed future forecasts and considered the recoverability of the deferred tax asset. Despite more positive performance after the year end, there remains doubt over the recoverability of this asset and as such it has not been recognised.

Page 33

 
HIGHLY MARELLI UK LIMITED
 

 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023

11.


Intangible assets

Group





Development expenditure
Goodwill
Total

£000
£000
£000



Cost


At 1 January 2023
5,996
7,112
13,108


Disposals
(2,300)
-
(2,300)



At 31 December 2023

3,696
7,112
10,808



Amortisation


At 1 January 2023
720
7,112
7,832


Charge for the year on owned assets
589
-
589



At 31 December 2023

1,309
7,112
8,421



Net book value



At 31 December 2023
2,387
-
2,387



At 31 December 2022
5,276
-
5,276





Page 34

 
HIGHLY MARELLI UK LIMITED
 

 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
 
           11.Intangible assets (continued)

Company




Goodwill

£000



Cost


At 1 January 2023
7,112



At 31 December 2023

7,112



Amortisation


At 1 January 2023
7,112



At 31 December 2023

7,112



Net book value



At 31 December 2023
-



At 31 December 2022
-

Page 35

 
HIGHLY MARELLI UK LIMITED
 

 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023

12.


Tangible fixed assets

Group






Long-term leasehold property
Plant and machinery
Motor vehicles
Fixtures and fittings
Computer equipment
Assets not yet in use

£000
£000
£000
£000
£000
£000



Cost or valuation


At 1 January 2023
2,803
21,668
21
1,699
24
269


Additions
782
-
-
19
-
1,399


Disposals
-
65
(1)
-
(4)
-


Transfers between classes
-
287
-
1,111
-
(1,398)



At 31 December 2023

3,585
22,020
20
2,829
20
270



Depreciation


At 1 January 2023
364
7,651
-
843
13
-


Charge for the year on owned assets
1,861
2,579
6
392
6
-


Disposals
-
(335)
-
-
(2)
-



At 31 December 2023

2,225
9,895
6
1,235
17
-



Net book value



At 31 December 2023
1,360
12,125
14
1,594
3
270



At 31 December 2022
2,439
14,017
21
856
11
269
Page 36

 
HIGHLY MARELLI UK LIMITED
 

 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023

           12.Tangible fixed assets (continued)


Total

£000



Cost or valuation


At 1 January 2023
26,484


Additions
2,200


Disposals
60


Transfers between classes
-



At 31 December 2023

28,744



Depreciation


At 1 January 2023
8,871


Charge for the year on owned assets
4,844


Disposals
(337)



At 31 December 2023

13,378



Net book value



At 31 December 2023
15,366



At 31 December 2022
17,613

Page 37

 
HIGHLY MARELLI UK LIMITED
 

 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023

           12.Tangible fixed assets (continued)


Company






Long-term leasehold property
Plant and machinery
Fixtures and fittings
Other fixed assets
Total

£000
£000
£000
£000
£000

Cost or valuation


At 1 January 2023
1,978
4,210
29
269
6,486


Additions
-
-
-
1,399
1,399


Transfers between classes
-
287
1,111
(1,398)
-



At 31 December 2023

1,978
4,497
1,140
270
7,885



Depreciation


At 1 January 2023
199
1,101
24
-
1,324


Charge for the year on owned assets
98
483
56
-
637



At 31 December 2023

297
1,584
80
-
1,961



Net book value



At 31 December 2023
1,681
2,913
1,060
270
5,924



At 31 December 2022
1,779
3,109
5
269
5,162






Page 38

 
HIGHLY MARELLI UK LIMITED
 

 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023

13.


Fixed asset investments



Company





Investments in subsidiary companies

£000









Net book value



At 31 December 2023
-



At 31 December 2022
-


14.


Stocks

Group
Group
Company
Company
2023
2022
2023
2022
£000
£000
£000
£000

Raw materials and consumables
14,246
20,956
1,807
2,797

Work in progress (goods to be sold)
1,150
549
873
121

Finished goods and goods for resale
1,401
1,324
265
119

16,797
22,829
2,945
3,037


The difference between purchase price or production cost of stocks and their replacement cost is not material.

Page 39

 
HIGHLY MARELLI UK LIMITED
 

 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023

15.


Debtors

Group
Group
Company
Company
2023
2022
2023
2022
£000
£000
£000
£000


Trade debtors
13,025
9,206
432
4,969

Amounts owed by group undertakings
4,864
66
4,864
71

Other debtors
3,147
791
3,147
791

Prepayments and accrued income
3,180
2,385
1,260
841

24,216
12,448
9,703
6,672



16.


Cash and cash equivalents

Group
Group
Company
Company
2023
2022
2023
2022
£000
£000
£000
£000

Cash at bank and in hand
10,274
4,263
2,527
1,961

10,274
4,263
2,527
1,961



17.


Creditors: Amounts falling due within one year

Group
Group
Company
Company
2023
2022
2023
2022
£000
£000
£000
£000

Other loans
78,809
20,411
-
-

Trade creditors
22,489
61,639
12,735
10,141

Amounts owed to group undertakings
16,913
5,237
16,913
5,300

Corporation tax
30
33
-
-

Other taxation and social security
855
803
855
803

Other creditors
3,869
2,950
163
120

Accruals and deferred income
9,114
7,993
5,977
6,733

132,079
99,066
36,643
23,097


Page 40

 
HIGHLY MARELLI UK LIMITED
 

 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023

18.


Creditors: Amounts falling due after more than one year

Group
Group
Company
Company
2023
2022
2023
2022
£000
£000
£000
£000

Amounts owed to group undertakings
2,008
1,967
2,008
1,971

2,008
1,967
2,008
1,971





19.


Deferred taxation


Group



2023


£000






At beginning of year
(565)


Charged to profit or loss
244



At end of year
(321)

Company


2023






At end of year
-
Group
Group
2023
2022
£000
£000

Accelerated capital allowances
(321)
(565)

(321)
(565)

Page 41

 
HIGHLY MARELLI UK LIMITED
 

 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023

20.


Provisions for liabilities and charges


Group



Warranty

£000





At 1 January 2023
1,499


Charged to profit or loss
600


Utilised in year
157



At 31 December 2023
2,256

(a) Provision for warranty claims 
The company's products are sold with a warranty period of 3 to 5 years. The warranty provision represents the expected cost of warranty claims for sales made prior to 31 December 2023. The provision is expected to be utilised in the next five years. 

Company


Warranty
Total

£000
£000





At 1 January 2023
137
137


Charged to profit or loss
600
600



At 31 December 2023
737
737

Page 42

 
HIGHLY MARELLI UK LIMITED
 

 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023

21.


Called up share capital

2023
2022
£000
£000
Allotted, called up and fully paid



7 (2022 - 7) Ordinary shares of £1.00 each
-
-



22.


Reserves

Share premium account

Following the incorporation of the company, the Company issued additional £1 ordinary shares in exchange for the transfer of various assets and liabilities from Marelli group entities giving rise to a share premium account.


23.


Commitments under operating leases

At 31 December 2023 the Group and the Company had future minimum lease payments due under non-cancellable operating leases for each of the following periods:


Group
Group
Company
Company
2023
2022
2023
2022
£000
£000
£000
£000


Not later than 1 year
1,099
810
378
36

Later than 1 year and not later than 5 years
1,402
1,721
496
77

2,501
2,531
874
113

The company had no other off-balance sheet arrangements.


24.


Related party transactions

The company has taken the exemption under FRS102 not to disclose transactions with related parties that are within the Marelli worldwide group, which are at arm’s length. 


25.


Ultimate parent undertaking

The immediate parent undertaking at 31 December 2023 was Marelli Holdings Co Limited
 
In the opinion of the director there is no ultimate controlling party. 


Page 43