Group Strategic Report. Report of the Directors anddovenbynoise.uk/wp-content/uploads/2019/12/MSport... · 2019-12-19 · turnover in 2016 from M-Sport Poland represents less than

'. . REGISTERED NUMBER: 02105112 (England and Wales)

Group Strategic Report. Report of the Directors and

Consolidated Financial Statements for the Year Ended 31 December 2016

for

M. Sport Limited

1I~""'I~fU'! IIIIII~ A11 27/1012017 #134

COMPANIES HOUSE

M. Sport Limited (Registered number: 02105112)

Contents of the Consolidated Financial Statements for the Year Ended 31 December 2016

Company Information

Page

Group Strategic Report 2

Report of the Directors 3

Report of the Independent Auditors 6

Consolidated Statement of Comprehensive Income . 8

Consolidated Statement of Financial Position 9

Company Statement of Financial Position 10

Consolidated Statement of Changes in Equity 11

Company Statement of Changes in Equity 12

Consolidated Statement of Cash Flows 13

Notes to the Consolidated Statement of Cash Flows 14

Notes to the Consolidated Financial Statements 15

M. Sport Limited

Company Information for the Year Ended 31 December 2016

DIRECTORS:

SECRETARY:

REGISTERED OFFICE:

REGISTERED NUMBER:

AUDITORS:

BANKERS:

M I Wilson Mrs E Wilson J Steele M J Wilson

Mrs E Wilson

Rowan Court Concord Business Park Threapwood Road Manchester M22 ORR

02105112 (England and Wales)

ASE Audit LLP Statutory Auditors & Chartered Accountants Rowan Court Concord Business Park Manchester Greater Manchester M22 ORR

Barclays Bank PLC Market Square Penrith Carlisle Cumbria CA117YB

Page 1


Group Strategic Report for the Year Ended 31 December 2016

The directors present their strategic report of the company and the group for the year ended 31 December 2016.

REVIEW OF BUSINESS Consolidated turnover of the group totalled £48.4m, an increase of 7.9% over 2015. Operating profit fell slightly to £1.8m from £2.0m, reflecting in part, the costs associated with developing new products.

In 2016 M-Sport came 3rd in the 2016 World Rally Championship, the flagship rally competition, an improvement on 4th the previous year.

The group had capital commitments at 31 December 2016 of £12.2m relating to the building of the M-Sport Evaluation Centre (MEC) at Dovenby due for completion in 2019. This will be funded from a combination of intemal resources, borrowings and grant funding.

M-Sport operates in Poland via a trading subsidiary, M-Sport Poland based in Krakow. Whilst the contribution to turnover in 2016 from M-Sport Poland represents less than 1 % of tumover, this will grow significantly in future years.

The group continues to develop new products for its key markets. In 2016 the company invested heavily in a new WRC rally car to compete in the 2017 WRC championship. Having a successful WRC programme is key to the group's general rally business. Other developments included a new rally cross vehicle and the further development of the Bentley Continental GT3 car.

As part of it's strategy to develop new products and new markets the group has embarked on a major investment in its facilities in Cumbria and Poland. In Cumbria the £19m MEC project will result in a 2.4 km test track, which together with a 9000m2 development centre will enable the group to develop new products and markets. Completion is scheduled for 2019.

In Poland, M-Sport Poland is constructing a £4m manufacturing facility in Krakow.This 4000m2 facility will give M-Sport a base nearer to its European customers and a presence in the key European market.

As the group seeks to capitalise on the value of the M-Sport brand it is developing several streams of licensing revenue which is expected to contribute Significantly in future years.

PRINCIPAL RISKS AND UNCERTAINTIES The group's operations expose it to a variety of financial risks that include the effects of changes in debt market prices, credit risk, liquidity risk and interest rate risk. The group has in place a risk management programme that seeks to limit the adverse effects on the financial performance of the group by monitoring levels of debt finance and related finance costs.

The group does not have a policy of maintaining 100% of its debt at a fixed rate. The cost of maintaining debt at a fixed rate would outweigh the benefits. The group does not use derivative financial instruments to manage interest rate costs and as such, no hedge accounting is applied.

Given the size of the group, the directors have not delegated the responsibility of monitoring financial risk management to a sub-committee of the board. The policies set by the board of directors are implemented by the group's finance department.

The group operates principally in the Motorsport sector which is regulated by organisations such as the FlA. As such a change in the regulations can result in additional costs to the group in order for its products to remain approved. The group liaises very closely with Industry regulators to manage this risk. Geographically the group operates in 49 countries. In 2016 61% of tumover was exported 39% to the EU.This geographical spread of customers gives M-Sport some protection against any economic factors which may adversely affect individual counties.

TRADING TO DATE 2017 The directors are satisfied with trading to date during 2017.

KEY PERFORMANCE INDICATORS We consider that our key financial performance indicators are those that communicate the financial performance and strength of the group as a whole, these being tumover, gross margin and retum on capital employed.

ON BEHALF OF THE BOARD:

~-= M I Wilson - Director

0:) f\-:Ja~ <2.<31--' Date: W ......................................... f

Page 2


Report of the Directors for the Year Ended 31 December 2016

The directors present their report with the financial statements of the company and the group for the year ended 31 December 2016.

PRINCIPAL ACTIVITIES The principal activities of the Group under review were those of the design, build and ongoing development of rally and other motorsport vehicles for competition entry, the provision of on-event support services during the competitions and the maintenance of vehicles between rally events. Services are provided for motor manufacturers and other motorsport customers.

BRANCHES OUTSIDE THE UK The Group has a branch in Poland, the results for the branch are consolidated within these accounts. In order to mitigate the risks associated with trading overseas the Group uses various financial instruments, which are detailed below.

DIVIDENDS No dividends will be distributed for the year ended 31 December 2016.

RESEARCH AND DEVELOPMENT The Group incurs significant research and development expenditure during the development of rally and other motorsport vehicles for competition entry.

All research and development expenditure is charged to the Statement of Comprehensive Income in the period incurred.

FUTURE DEVELOPMENTS The group has commenced work building the M-Sport Evaluation Centre (MEC) at its Dovenby headquarters. The MEC comprises a 2.5km test track and a 9000 m2 development centre. Scheduled for completion in 2019, this state of the art facility will be a springboard for the group to enable the development of new products and markets and will underpin future growth.

DIRECTORS The directors shown below have held office during the whole of the period from 1 January 2016 to the date of this report.

M I Wilson Mrs E Wilson J Steele M J Wilson

Page 3



FINANCIAL RISK MANAGEMENT The group uses various financial instruments including credit risk, interest risk and liquidity risk.

The existence of these financial instruments exposes the group to a number of financial risks, which are described in more detail below.

Price risk The Group is exposed to commodity price risk as a result of its operations. However, given the size of the Groups operations, the costs of managing exposure to commodity price risk exceed any potential benefits. The directors will revisit the appropriateness of this policy should the company's operations change in size or nature. The Group has no exposure to equity securities price risk as it holds no listed or other equity investments.

Credit risk The Group has implemented policies that require appropriate credit checks on potential customers before sales are made. The amount of exposure to any individual counterpart is subject to a limit, which is reassessed annually by the board.

Liquidity risk The Group actively maintains a mixture of long-term and short-term debt finance that is designed to ensure the Group has sufficient available funds for operations and planned expansions.

Interest rate cash flow risk The Group has both interest bearing assets and interest bearing liabilities. Interest bearing assets include only cash balances, all of which eam interest at variable rate. The Group does not have a policy of maintaining debt at fixed rate to ensure certainty of future interest cash flows. The directors will revisit the appropriateness of this policy should the Groups operations change in size or nature.

Exchange rate risk The Group purchases goods at values designated by foreign currencies and also has a Polish subsidiary with which it transacts. The Group does not adopt a policy of utilising hedge or forward pricing options unless the timescale for the payment can be accurately predicted. The directors review the validity of the policy adopted by the company based upon movements in the currency markets during the year.

POST BALANCE SHEET EVENTS On 10 May 2017 the group purchased a property located at Broughton Moor Lodge, total consideration amounted to £1,039,770.

DISABLED PERSONS Applications for employment by disabled persons are always fully conSidered, bearing in mind the respective aptitudes and abilities of the applicant concerned. In the event of members of staff becoming disabled, every effort is 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 a disabled person should, as far as possible, be identical to that of a person who does not suffer from a disability

EMPLOYEE INVOLVEMENT Consultation with employees or their representatives has continued at all levels, with the aim of ensuring that views are taken into account when decisions are made that are likely to affect their interests. All employees are aware of the financial and economic performance of their business units and of the Group as a whole. Communication with all employees continues through. the in-house newspaper and newsletters, briefing groups and the distribution of the annual report.

Page 4



STATEMENT OF DIRECTORS' RESPONSIBILITIES The directors are responsible for preparing the Group Strategic Report, the Report of the. Directors and the 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 United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). 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 and then apply them consistently; - make judgements and accounting estimates that are reasonable and prudent; - state whether applicable 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 company

will continue in business.

The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the company:s and the group's transactions and disclose with reasonable accuracy at any time the financial position of the company and the group and enable them to ensure that the financial statements comply with the Companies Act 2006. They 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.

STATEMENT AS TO DISCLOSURE OF INFORMATION TO AUDITORS So far as the directors are aware, there is no relevant audit information (as defined by Section 418 of the Companies Act 2006) of which the group's auditors are unaware, and each director has taken all the steps that he or she ought to have taken as a director in order to make himself or herself aware of any relevant audit information and to establish that the group's auditors are aware of that information.

AUDITORS The auditors, ASE Audit LLP, have indicated their willingness to continue in office.

ON BEHALF OF THE BOARD:

M I Wilson - Director

Date: 2-3..~.~.~ .. Z..9.J.7

Page 5

Report of the Independent Auditors to the Members of M. Sport Limited

We have audited the financial statements of M. Sport Limited for the year ended 31 December 2016 on pages eight to twenty seven. The financial reporting framework that has been applied in their preparation is 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'.

This report is made solely to the company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company's members those matters we are required to state to them in a Report of the Auditors 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.

Respective responsibilities of directors and auditors As explained more fully in the Statement of Directors' Responsibilities set out on page five, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and Intemational Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board's Ethical Standards for Auditors.

Scope of the audit of the financial statements An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free fro(ll material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the group's and the parent company's circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the directors; and the overall presentation of the financial statements. In addition, we read all the financial and non-financial information in the Group Strategic Report and the Report of the Directors to identify material inccinsistencie,s with the audited financial statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report.

Opinion on financial statements 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 2016 and

of the group's profit for the year then ended; - have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and - have been prepared in accordance with the requirements of the Companies Act 2006.

Emphasis of Matter - Contingent corporate tax liability. In forming our opinion on the financial statements, which is not modified, we have considered the adequacy of the disclosures made in note 20 to the financial statements concerning the potential tax liability associated with historic contributions paid into a Remuneration Trust (RT).

HMRC is enquiring into the RT previously set up by the company. The directors have taken advice and are of the opinion no such taxation is due. Due to changes in recent tax legislation, the outcome of the matter cannot presently be determined, and no provision for any liability that may result has been made in the financial statements.

Opinion on other matter prescribed by the Companies Act 2006 In our opinion, based on the work undertaken in the course of our audit, the information given in the Group StrategiC Report and the Report of the Directors for the financial year for which the financial statements are prepared is consistent with the financial statements, and has been prepared in accordance with applicable legal requirements. In the light of the knowledge and understanding of the group and the parent company and its environment, we have not identified any material misstatements in the Group Strategic Report or the Report of the Directors.

Page 6

Report of the Independent Auditors to the Members of M. Sport Limited

Matters on which we are required to report by exception We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion: - adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not

been received from branches not visited by us; or - the parent company financial statements are not in agreement with the accounting records and returns; or - certain disclosures of directors' remuneration specified by law are not made; or - we have not received all the information and explanatio"ns we require for our audit.

feb AvJd:1if Ian McMahon FCCA FMAAT (Senior Statutory Auditor) for and on behalf of ASE Audit LLP Statutory Auditors & Chartered Accountants Rowan Court Concord Business Park Manchester Greater Manchester

~::O~·I·\QIL7··

Page 7


Consolidated Statement of Comprehensive Income for the Year Ended 31 December 2016

Notes

TURNOVER 3

Cost of sales

GROSS PROFIT

Administrative expenses

Other operating income 4

OPERATING PROFIT 6

Interest payable and similar expenses 7

PROFIT BEFORE TAXATION

Tax on profit

PROFIT FOR THE FINANCIAL YEAR.

OTHER COMPREHENSIVE INCOME

TOTAL COMPREHENSIVE INCOME FOR THE YEAR

Profit attributable to: Owners of the parent

Total comprehensive income attributable to: Owners of the parent

8

2016 £

48,408,472

43,405,690

5,002,782

4,124,687

878,095

948,624

1,826,719

(121,301 )

1,948,020

(240,188)

2,188,208

2,188,208

2,188,208

2,188,208

The notes form part of these financial statements

Page 8

2015 £

44,849,796

38,281,784

6,568,012

5,502,887

1,065,125

975,526

2,040,651

(136,486 )

2,177,137

(240,820)

2,417,957

2,417,957

2,417,957

2,417,957.


Consolidated Statement of Financial Position 31 December 2016

FIXED ASSETS Tangible assets Investments Investment property

CURRENT ASSETS Stocks Debtors Cash at bank and in hand

CREDITORS

Notes

10 11 12

13 14

Amounts falling due within one year 15

NET CURRENT ASSETS

TOTAL ASSETS LESS CURRENT LIABILITIES

CREDITORS Amounts falling due after more than one year

NET ASSETS

CAPITAL AND RESERVES Called up share capital Retained eamings

SHAREHOLDERS'FUNDS

16

18 19

2016 £

13,929,573

4,606,863

18,536,436

14,573,285 9,436,216 7,397,122

31,406,623

(11,558,484 )

19,848,139

38,384,575

(2,401,500 )

35,983,075

100 35,982,975

35,983,075

2015 £

7,194,659

4,606,863

11,801,522

13,076,207 4,841,530

10,424,354

28,342,091

(6,348,746)

21,993,345

33,794,867

33,794,867

100 33,794,767

33,794,867

2..J.~~.9.~~.~ ... -2:~ .. ~ and were signed on

The notes form part of the;:;e financial statements

Page 9


FIXED ASSETS Tangible assets Investments Investment property

CURRENT ASSETS Stocks Debtors Cash at bank and in hand

CREDITORS Amounts falling due within one year

NET CURRENT ASSETS

TOTAL ASSETS LESS CURRENT LIABILITIES

CREDITORS

Company Statement of Financial Position 31 December 2016

2016 Notes £

10 12,363,604 11 95,805 12 4,606,863

17,066,272

13 13,087,720 14 12,847,169

6,444,184

32,379,073

15 (11,126,200)

21,252,873

38,319,145

Amounts falling due after more than one year 16 (2,401,500 )

NET ASSETS 35,917,645

CAPITAL AND RESERVES Called up share capital 18 100 Retained earnings 19 35,917,545

SHAREHOLDERS'FUNDS 35,917,645

Company's profit for the financial year 2,152,097

2015 £

7,010,971 95,805

4,606,863

11,713,639

13,068,049 4,964,237

10,330,672

28,362,958

(6,311,049 )

22,051,909

33,765,548

33,765,548

100 33,765,448

33,765,548

2,388,638

The financial statements were approved by the Board of Directors on .2;3~~ .. Q~ ... .g9. .. I.:-' and were signed its behalf by:

The notes fonn part of these financial statements

Page 10

on

Balance at 1 January 2015

Changes in equity Total comprehensive income

Balance at 31 December 2015




Consolidated Statement of Changes in Eauity for the Year Ended 31 December 2016

Called up share capital

£

100

100

100


Page 11

Retained earnings

£

31,376,810

2,417,957

33,794,767

2,188,208

35,982,975

Total equity

£

31,376,910

2,417,957

33,794,867

2,188,208

35,983,075

Balance at 1 January 2015'-






Company Statement of Changes in Equity for the Year Ended 31 December 2016

Called up share capital

£

100

100

100


Page 12

Retained earnings

£

31,376,810

2,388,638

33,765,448

2,152,097

35,917,545

Total equity

£

31,376,910

2,388,638

33,765,548

2,152,097

35,917,645


Consolidated Statement of Cash Flows for the Year Ended 31 December 2016

Cash flows from operating activities Cash generated from operations Interest paid Tax paid

Net cash from operating activities

Cash flows from investing activities Purchase of tangible fixed assets Sale of tangible fixed assets

Net cash from investing activities

Notes

(Decrease)/increase in cash and cash equivalents Cash and cash equivalents at beginning of year 2

Cash and cash equivalents at end of year 2

2016 £

2,730,530 121,301 240,188

3,092,019

(7,753,135) 1,633,884

(6,119,251 )

(3,027,232 )

10,424,354

7,397,122


Page 13

2015 £

3,370,643 136,486 240,820

3,747,949

(568,110) 43,126

(524,984 )

3,222,965

7,201,389

10,424,354


Notes to the Consolidated Statement of Cash Flows for the Year Ended 31 December 2016

1. RECONCILIATION OF PROFIT BEFORE TAXATION TO CASH GENERATED FROM OPERATIONS 2016 2015

£ £ Profit before taxation 1,948,020 2,177,137 Depreciation charges 640,345 750,355 Profit on disposal of fixed assets (1,256,008) (17,950) Finance costs (121,301 ) (136,486)

Increase in stocks (Increase)/decrease in trade and other debtors Increase/{decrease) in trade and other creditors

Cash generated from operations

2. CASH AND CASH EQUIVALENTS

1,211,056 (1,497,078) (4,594,686 ) 7,611,238

2,730,530

2,773,056 (1,198,340 ) 3,284,171

(1 ,488,244)

3,370,643

The amounts disclosed on the Consolidated Statement of Cash Flows in respect of cash and cash equivalents are in respect of these Statement of Financial Position amounts:

Year ended 31 December 2016

Cash and cash equivalents

Year ended 31 December 2015

Cash and cash equivalents


Page 14

31.12.16 £

7,397,122

31.12.15 £

10,424,354

1.1.16 £

10,424,354

1.1.15 £

7,201,389


Notes to the Consolidated Financial Statements for the Year Ended 31 December 2016

1. STATUTORY INFORMATION

M. Sport Limited is a private company, limited by shares, registered in England and Wales. The company's registered number and registered office address can be found on the General Information page.

The company's principal activity is disclosed in the Report of the Directors.

Both the functional and presentation currency is Pound Sterling (£).

2. ACCOUNTING POLICIES

Basis of preparing the financial statements The functional and presentational currency during the current and previous financial period of the Group was the Pound Sterling with the exception of the Polish Subsidiary whose functional currency is the Zloty. The Company's functional currency is also the Pound Sterling.

Basis of consolidation The consolidated financial statements present the results of Group and its own subsidiary ("the Group") as they formed 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 Statement of Financial Position, 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 Income Statement from the date on which control is obtained. They are deconsolidated from the date control ceases .

. Significant judgements and estimates 'The preparation of the financial statements requires management to make jUdgements, estimates and assumptions that affect the amounts reported for assets and liabilities at the balance sheet date and the amounts reported for revenues and expenses during the year. However, the nature of estimation means that actual outcomes could differ from those estimates. .

The following judgements have been made by the directors in applying the Groups accounting policies:

Property, plant and equipment At each reporting date property, plant and equipment is assessed for any indication of impairment. If such indication exists, the recoverable amount of the asset is determined based on value in use calculations which require estimates to be made of future cash flows. An impairment. loss is recognised where the carrying amount exceeds the recoverable amount.

Investment property . The valuation of the Group's property portfolio is inherently subjective due to, among other factors, the individual nature of each property, its location and the expected future rental revenues from that particular property. As a result, the valuations are subject to a degree of uncertainty and are made on the basis of assumptions which may not prove to be accurate, particularly in periods of volatility or low transaction flow in the property market.

Page 15 continued ...


Notes to the Consolidated Financial Statements - continued for the Year Ended 31 December 2016

2. ACCOUNTING POLICIES - continued

Turnover Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured. Revenue is measured as the fair value of the consideration received or receivable, excluding discounts, rebates, value added tax and other sales taxes. The following criteria must also be met before revenue is recognised:

Sale of goods Revenue from the sale of goods is recognised when all of the following conditions are satisfied:

- the Group has transferred the significant risks and rewards of ownership to the buyer; - the Group retains neither continuing managerial involvement to the degree usually associated with

ownership nor effective control over the goods sold; - the amount of revenue can be measured reliably; - it is probable that the Group will receive the consideration due under the transaction; and; - the costs incurred or to be incurred in respect of the transaction can be measured reliably.

Rendering of services Revenue from a contract to provide services is recognised in the period in which the services are provided in accordance with the stage of completion of the contract when all of the following conditions are satisfied:

- the amount of revenue can be measured reliably; - it is probable that the Group will receive the consideration due under the contract; - the stage of completion of the contract at the end of the reporting period can be measured reliably, and; - the costs incurred and the costs to complete the contract can be measured reliably.

Tangible fixed assets Depreciation is provided at the following annual rates in order to write off each asset over its estimated useful life. Freehold property Plant and machinery Helicopter Motor vehicles

- 2% on cost or valuation 10% - 50% variable

- 20% on reducing balance - 33% on reducing balance

For assets under construction no depreciation is provided until the asset is brought into use.

Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised within administration expenses in the Statement of Comprehensive Income.

Investment property Investment property is carried at fair value determined annually by extemal valuers or the directors and derived from the current market rents and investment property yields for comparable real estate, adjusted if necessary for any difference in the nature, location or condition of the specific asset. No depreciation is provided. Changes in fair value are recognised in the Statement of Comprehensive Income.

Stocks Stocks are valued at the lower of cost and net realisable value after making due allowance for obsolete and slow-moving stocks.

At each statement of financial position date, stocks are assessed for impairment. If stock is impaired, the carrying amount is reduced to its selling price less costs to complete and sell. The impairment loss is recognised immediately as an expense. .





Financial instruments The Group only enters into basic financial instruments transactions that result in the recognition of financial assets and liabilities like trade and other accounts receivable and payable, loans from banks and other third parties, loans to related parties and investments in non-puttable ordinary shares.

Debt instruments (other than those wholly repayable or receivable within one year), including loans and other accounts receivable and payable, are initially measured at present value of the future cash flows and subsequently at amortised cost using the effective interest method. Debt instruments that are payable or receivable within one year, typically trade payables or receivables, are measured, initially and subsequently, at the undiscounted amount of the cash or other consideration, expected to be paid or received. However if the arrangements of a short-term instrument constitute a financing transaction, like the payment of a trade debt deferred beyond normal business terms or financed at a rate of interest that is not a market rate or in case of an out-right short-term loan not at market rate, the financial asset or liability is measured, initially, at the present value of the future cash flow discounted at a market rate of interest for a similar debt instrument and subsequently at amortised cost.

Financial assets that are measured at cost and amortised cost are assessed at the end of each reporting period for objective evidence of impairment. If objective evidence of impairment is found, an impairment loss is recognised in the Income statement.

Taxation Taxation for the year comprises current and deferred tax. Tax is recognised in the Consolidated Statement of Comprehensive Income, except to the extent that it relates to items recognised in other comprehensive income or directly in equity.

Current tax is recognised at the amount of tax payable using the ta~ rates and laws that that have been enacted or substantively enacted by the statement of financial position date.

Deferred tax Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the statement of financial position date.

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 measured using tax rates and laws that have been enacted or substantively enacted by the year end and that are expected to apply to the reversal of the timing difference.

Unrelieved tax losses .and other deferred tax assets are recognised only to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits.

Current or deferred taxation assets and liabilities are not discounted.

Research and development In the research phase of an internal project it is not possible to demonstrate that the project will generate future economic benefits and hence all expenditure on research shall be recognised as an expense when it is incurred. Intangible assets are recognised from the development phase of a project if and only if certain specific criteria are met in order to demonstrate the asset will generate probable future economic benefits and that its cost can be reliably measured.

If it is not possible to distinguish between the research phase and the development phase of an internal project. The expenditure is treated as if it were all incurred in the research phase only.





Foreign currencies Transactions and balances

Foreign currency transactions are translated. into the functional currency using the spot exchange rates at the dates of the transactions.

At each period end foreign currency monetary items are translated using the closing rate. Non-monetary items . measured at historical cost are translated using the exchange rate at the date of the transaction and non-monetary items measured at fair value are· measured using the exchange rate when fair value was determined.

Foreign exchange gains and losses resulting from the settlement of transactions and from the translation at period-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the Income statement except when deferred in other comprehensive income as qualifying cash flow hedges.

Foreign exchange gains and losses that relate to borrowings and cash and cash equivalents are presented in the Income statement within 'finance income or costs'. All other foreign exchange gains and losses are presented in the Income statement within 'other operating income'.

Pension costs and other post-retirement benefits The group operates a defined contribution pension scheme. Contributions payable to the group's pension scheme are charged to profit or loss in the period to which they relate.

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.

Cash and cash equivalents Cash is represented by cash in hand and deposits with financial institutions repayable without penalty on notice of not more than 24 hours. Cash equivalents are highly liquid investments that mature in no more than three months from the date of acquisition and that are readily convertible to known amounts of cash with insignificant risk of change in value.

In the Statement of cash flows, cash and cash equivalents are shown net of bank overdrafts that are repayable on demand and form an integral part of the Groups cash management.

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.

Government grants . Grants are accounted under the accruals model as permitted by FRS 102. Grants relating to expenditure on tangible fixed assets are credited to the Income statement at the same rate as the depreciation on the assets to which the grant relates. The deferred element of grants is included in creditors as deferred income.

Grants of a revenue nature are recognised in the Income statement in the same period. as the related expenditure.

Page 18 continued",




Long-term contracts Profit on long-term contracts is taken as the work is carried out if the final outcome can be assessed with reasonable certainty, in reference to its stage of completion. The profit included is calculated on a prudent basis to reflect the proportion of the work carried out at the year end, by recording turnover and related costs as contract activity progresses. Revenue is calculated as that proportion of total contract value which costs incurred to date bear to total expected costs for that contract. Revenues derived from variations on contracts are recognised only when they have been accepted by the customer. Full provision is made for losses on all contracts in the year in which they are first foreseen.

On the Statement of Financial Position, within current assets or current liabilities, an amount receivable or payable under long term contra.cts is included if the applicable revenue to be recognised exceeds the receipts to date and vice versa.

Finance costs .. Finance costs are charged to the Statement of Comprehensive Income over the term of the debt using the effective interest method so that the amount charged is at a constant rate on the carrying amount. Issue costs are initially recognised as a reduction in the proceeds of the associated capital instrument.

Interest income Interest income is recognised in the Statement of Comprehensive Income using the effective interest method.

3. TURNOVER

The turnover and profit before taxation are attributable to the principal activities of the group.

An analysis of turnover by class of business is given below:

2016 2015 £ £

Rally income and related sales 32,752,223 25,744,708 Rendering of services 14,917,885 18,937,412 Royalties 738,364 167,676

48,408,472 44,849,796

An analysiS of turnover by geographical market is given below:

2016 2015 £ £

United Kingdom 17,143,395 14,335,772 Europe 19,059,941 20,277,172 Rest of the world 12,205,136 10,236,852

48,408,472 44,849,796

4. OTHER OPERATING INCOME 2016 2015

£ £ Rents received 609,359 613,248 Sundry receipts 133,517 119,364 Research and development 205,748 242,914

948,624 975,526

Page 19 continued ... ·



5. EMPLOYEES AND DIRECTORS

Wages and saiaries Social security costs Other pension costs

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

Administration and management Engineers and mechanics Directors

2016 £

6,546,838 608,567 181,000

7,336,405

2016

27 231

4

262 --

2015 £

5,673,734 535,175 363,651

6,572,560

2015

28 216

4

248 --

The average number of employees by undertakings that are proportionately consolidated during the year was 262.

Directors' remuneration

Information regarding the highest paid director is as follows:

Emoluments etc

2016 £

487,625

2016 £

196,242

Key management compensation is deemed to be only in relation to statutory directors.

6. OPERATING PROFIT

The operating profit is stated after charging/(crediting):

Depreciation - owned assets Profit on disposal of fixed assets Auditors' remuneration Auditors' remuneration for non audit work Foreign exchange differences

7. INTEREST PAYABLE AND SIMILAR EXPENSES

Other interest Other interest receivable Bank interest receivable

Page 20

2016 £

640,345 (1,256,008 )

10,384 2,596

(1,047)

2016 £

7,379 (51,769) (76,911 )

(121,301 )

2015 £

449,964

2015 £

153,940

2015 £

770,549 (17,950) 12,750

3,500 133

2015 £

9,875 (56,523) (89,838)

(136,486 )

continued ...

8. TAXATION



Analysis of the tax credit The tax credit on the profit for the year was as follows:

Current tax: UK corporation tax

Tax on profit

Reconciliation of total tax credit included in profit and loss

2016 £

(240,188)

(240,188)

2015 £

(240,820)

(240,820)

The tax assessed for the year is lower than the standard rate of corporation explained below:

tax in the UK. The difference

Profit before tax

Profit multiplied by the standard rate of corporation tax in the UK of 20% (2015 - 20.250%)

Effects of: Expenses not deductible for tax purposes Income not taxable for tax purposes Capital allowances in excess of depreciation Depreciation in excess of capital allowances Adjustments to tax charge in respect of previous periods Adjustment in R&D tax credit leading to an increase (decrease) in the tax charge

Total tax credit

2016 £

1,948,020

389,604

212,474 (259,634) (208,230)

(240,188)

(134,214)

(240,188)

2015 £

2,177,137

440,870

106,974

28,334 (174,744 )

(642,254 )

(240,820)

i~

The group has available to it losses and allowances of approximately £1,981,052 (2015: £1,909,537) to carry forward against future operating profits.

Factors affecting future tax

A reduction in the corporation tax rate from 20% to 19% from 1 April 2017 and to 17% from 1 April 2020 was substantively enacted on 18 November 2015 and 6 September 2016 respectively. Future tax liabilities will reduce accordingly.

Included within note 20 are details of a contingent tax liability, which may affect future tax.

9. INDIVIDUAL STATEMENT OF COMPREHENSIVE INCOME

As permitted by Section 408 of the Companies Act 2006, the Statement of Comprehensive Income of the parent company is not presented as part of these financial statements.




10. TANGIBLE FIXED ASSETS

Group Assets

Freehold under Plant and property construction machinery

£ £ £ COST At 1 January 2016 7,448,492' 68,755 8,296,001 Additions 7,257,252 156,353 Disposals (152,989) Reclassification/transfer (144,735) 144,735

At 31 December 2016 7,303,757 7,470,742 8,299,365

DEPRECIATION At 1 January 2016 1,658,499 7,730,817 Charge for year 140,603 280,458 Eliminated on disposal (126,354)

At 31 December 2016 1,799,102 7,884,921

NET BOOK VALUE At 31 December 2016 5,504,655 7,470,742 414,444

At 31 December 2015 5,789,993 68,755 565,184

Motor Helicopter vehicles Totals

£ £ £ COST At 1 January 2016 2,769,758 2,613,636 21,196,642 Additions 339,530 7,753,135 Disposals (2,769,758 ) (134,838) (3,057,585 )

At 31 December 2016 2,818,328 25,892,192

DEPRECIATION At 1 January 2016 2,436,533 2,176,134 14,001,983 Charge for year 219,284 640,345 Eliminated on disposal (2,436,533 ) (116,822) (2,679,709 )

At 31 December 2016 2,278,596 11,962,619

NET BOOK VALUE At 31 December 2016 539,732 13,929,573

At 31 December 2015 333,225 437,502 7,194,659

InCluded in cost of freehold property is freehold land of £815,090 (2015: £815,090) which is not depreciated.




10. TANGIBLE FIXED ASSETS - continued

Company Assets

Freehold under Plant and property construction machinery

£ £ £ COST At 1 January 2016 7,420,172 8,271,374 Additions 5,877,025 151,908 Disposals (152,989) Reclassification/transfer (144,735) 144,735

At 31 December 2016 7,275,437 6,021,760 8,270,293

DEPRECIATION At 1 January 2016 1,658,499 7,716,435 Charge for year 140,603 274,039 Eliminated on disposal (117,660)

At 31 December 2016 1,799,102 7,872,814

NET BOOK VALUE At 31 December 2016 5,476,335 6,021,760 397,479

At 31 December 2015 5,761,673 554,939

Motor Helicopter vehicles Totals

£ £ £ COST At 1 January 2016 2,769,758 2,467,051 20,928,355 Additions 311,996 6,340,929 Disposals (2,769,758) (113,540 ) (3,036,287 )

At 31 December 2016 2,665,507 24,232,997

DEPRECIATION At 1 January 2016 2,436,533 2,105,917 13,917,384 Charge for year 191,272 605,914 Eliminated on disposal (2,436,533 ) (99,712) (2,653,905 )

At 31 December 2016 2,197,477 11,869,393

NET BOOK VALUE At 31 December 2016 468,030 12,363,604

At 31 December 2015 333,225 361,134 7,010,971

No depreciation is provided on assets under construction until the respective asset is bought into use.

Included in freehold property is freehold land of £786,770 (2015: 786,770) which is not depreciated.


11.


Notes to the Consolidated Financial Statements - continued for the Year Ended 31 December'2016

FIXED ASSET INVESTMENTS

Company

COST At 1 January 2016 and 31 December 2016

NET BOOK VALUE At 31 December 2016

At 31 December 2015

Shares in group

undertakings £

95,805

95,805 ---95,805 ---

The group or the company's investments at the Statement of Financial Position date in the share capital of companies include the following:

Subsidiary

M Sport Poland Sp ZOO Registered office: ul. Cieplownicza 8,31-574 Krakow, Poland Nature of business: Development of rally and other motorsport vehicles

% Class of shares: Ordinary

holding 99,90

M I Wilson holds 100 shares of the 99,100 £1 nominal shares, The other 99,000 shares are owned by M Sport Limited directly.

12. INVESTMENT PROPERTY

Group

FAIR VALUE At 1 January 2016 and 31 December 2016

NET BOOK VALUE . At 31 December 2016

At 31 December 2015

Company

FAIR VALUE At 1 January 2016 and 31 December 2016

NET BOOK VALUE At 31 December 2016

At 31 December 2015

The 2016 valuations were made by the directors, on an open market value for existing use basis,

Page 24

Total £

4,606,863

4,606,863

4,606,863

Total £

4,606,863

4,606,863

4,606,863

continued ...



13. STOCKS

. 14.

Rally spares and vehicle kits

2016 £

14,573,285

Group 2015

£ 13,076,207

Company 2016 2015

£ £ 13,087,720 13,068,049

Stock recognised in cost of sales during the year as an expense was £31,850,143 (2015: £25,494,560).

An impairment loss of £1,171,545 was recongised in the current year (2015: £1,626,636 was reversed) in cost sales due to slow-moving and obsolete stock.

DEBTORS

Group Company 2016 2015 2016 20'15

£ £ £ £ Amounts falling due within one year: Trade debtors 7,929,341 2,581,176 7,835,191 2,514,945 Amounts owed by group undertakings 1,480,232 219,927 Other debtors 906,614 399,377 714,130 375,(j97 Prepayments 600,261 1,856,777 597,539 1,854,268

9,436,216 4,837,330 10,627,092 4,964,237

Amounts falling due after more than one year: Other debtors 4,200 2,220,077

Aggregate amounts 9,436,216 4,841,530 12,847,169 4,964,237

of

An impairment loss of £350,000 was recognised against trade debtors (2015: There was a reversal of impairment which amounted to £303,287).

15. CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR

Trade creditors Social security and other taxes Accruals and deferred income

2016 £

6,249,352 205,562

5,103,570

11,558,484

Group 2015

£ 2,901,885

144,666 3,302,195

6,348,746

16. CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR

Group 2016 2015

£ £ Other creditors 2,401,500

Page 25

Company 2016 2015

£ £. 5,867,930 2,873,997

189,691 134,857 5,068,579 3,302,195

11,126,200 6,311,049

Company 2016 2015

£ £ 2,401,500

continued ...



17. FINANCIAL INSTRUMENTS

Financial assets Financial assets that are debt instruments measured at amortised cost

Financial liabilities Financial liabilities measured at amortised cost

2016 £

15,326,463

2015 £

13,009,729

(13,754,422) (6,204,080 )

Financial assets measured at amortised cost comprise of trade and other debtors as well as items of accrued income included within prepayments.

Financial liabilities measured at amortised cost comprise of trade creditors, accruals where a cash settlement will take place, bank loans other loans and overdrafts.

18. CALLED UP SHARE CAPITAL

Allotted, issued and fully paid: Number: Class:

100 Ordinary

19. RESERVES

Retained Earnings

Nominal value:

£1

This reserve includes all current and prior period retained profits and losses.

20. CONTINGENT LIABILITIES

2016 £

100

2015 £

100

HMRC have raised various enquires into the Remuneration Trust set up by the company. The directors have formed the view, after taking advice, that the enquiries raised by HMRC are not justified and that as a consequence no additional taxation liabilities will arise to the company in respect of the Remuneration Trust contributions.

Specifically, during the years 1998 to 2004 the company has made contributions into the trust. The contributions were treated as expenditure wholly and exclusively for the purposes of the trade and therefore deductible for the purposes of determining the company liability to Corporation Tax.

HMRC have issued various determination notices indicating Corporation Tax due of £9.35m. If the tax were to be confirmed as due interest of £6.3m would also be payable. It is not possible at this stage to predict with any reasonable degree of certainty the likelihood of any further sums being payable, the amount of such sums or the date on which they could become payable.

As at the date of signature of these financial statements the Directors have advised that they are satisfied that sufficient cash or assets would be available to discharge any liability without an adverse impact on the company or its liquidity. As a consequence no provision for Corporation Tax has been made for any future economic outflows in this m"atter.

The Directors are aware that it may take several years before the position is finally determined and as such there remains a possibility, albeit one which the directors have assessed to be remote, that further taxation liabilities will arise.

The company has made certain Research & Development claims in relation to the accounting period ended 1998 - 2004 for which a tax repayment, plus interest, has been determined. HMRC have advised that the refund, £340,000 excluding interest, will not be repaid until the earlier year's corporation tax retums are determined by HMRC.




21. CAPITAL COMMITMENTS

Contracted but not provided for in the financial statements

22. RELATED PARTY DISCLOSURES

2016 £

12,249,370

2015 £

During the year, the company paid rent of £12,000 (2015: £12,000) to a director. As at the year end, there was no outstanding liability (2015: £Nil).

The group has taken advantage of exemption, under the terms of Financial Reporting Standard 102 'The Financial Reporting Standard applicable in the UK and Republic of Ireland', not to disclose related party transactions with wholly owned subsidiaries within the group.

23. ULTIMATE CONTROLLING PARTY

By virtue of its' ownership of 100% of the issued share capital, the directors consider the M Sport Limited Share Release Trust (formerly M Sport Limited Employee Benefit Trust and Shares Scheme) to be the ultimate controlling party. The trust is an English Law Trust.

Page 27

Documents

Group Strategic Report. Report of the Directors anddovenbynoise.uk/wp-content/uploads/2019/12/MSport... · 2019-12-19 · turnover in 2016 from M-Sport Poland represents less than