VOC SPARES COMPANY LTD ACCOUNTS #1

In May 2010, Vincent HRD Owners Club member John Smith Daye wrote to the Secretary of the club, Andrew Everett, querying the draft VOC Spares Company Ltd accounts just published in the club's monthly journal MPH. According to the VOCSC Ltd's accounts, reported turnover as at 31.10.2009 was £391,959 as opposed to its reported 2008 turnover of £294,187. 

The VOC Spares Company Limited

Accounts for the year ended 31^st October 2009

Queries from John Smith-DAYE FCA, on behalf of the Suffolk Section of the VOC (a shareholder)

1. Stock write off

The accounts extract published in the VOC magazine “MPH” alluded to a stock write off in the sum of £10,000, covering slow moving and obsolete items. In view of the fact that the major product that is being served by the supplies of the VOC Spares Co is normally more than 55 years old (the Vincent motorcycle), I would like to know more detail of the items written down in this manner as I fail to understand from the information so far given what could be considered as obsolete. If there is indeed stock that is slow moving, perhaps it should be marketed at a discount to VOC members to realise whatever value it may have.

2 Gross profit margin

It is pleasing to note that the turnover for the year has increased by 33%, but not so pleasing to see that the margin has slipped from 39% to 27%. I would ask that the directors offer an explanation for the dramatic change in this margin.

3. Other income £14,198

Until I had sight of the full accounts, I was not aware what this item covered – it transpires that this has been shown as “previous year’s adjustments”. This is unusual, as it should be reflected through a restatement of the preceding year’s figures and an explanation given in the notes to the financial statements. In any event, I would expect some explanation to be given in the notes of the reasons behind the adjustments even though they have been put through the current year. A “PYA” is normally effected if there has been a change in accounting policy, or the correction of a fundamental accounting error. The figures adjusted is material in the context of the accounts as presented – without the addition of this income, the accounts reflect a significant loss in the year under review. Further explanations are needed for the reasons behind this adjustment, and indeed the reasons behind the apparent loss for this year.

4. Trade debtors

The figure has increased from £14604 (2008) to £69533 (2009). A simple calculation suggests that this represents 56 days of sales (2009) against 15days (2008). This is an extremely unusual variance, particularly given the nature of the trade. An explanation for this would be appreciated.

5 Creditors – VOC loan £15000

Although this is separately disclosed in note 8 to the financial statements, in my opinion there should be further disclosure concerning the nature and terms of the loan, given that the VOC is a major shareholder in this company and the directors of this company are I believe mainly members of the VOC. A “Related Party” disclosure is therefore relevant.

6 Directors report – business review

“The directors are satisfied with the results of the year” is hardly an adequate review of the business, given the nature of the queries above, and the major change in trading conditions following the physical move of the trading base. Although the detailed profit and loss account records factory alterations and moving costs totalling £7603, this is not highlighted in the statutory financial statements anywhere.

7 Related party trading

No separate clear disclosure is shown of the trading and balances due to the VOC in respect of regalia sales, whereby I believe there is an arrangement for a percentage of the profits from this area to be returned to the VOC. Is this perhaps the “commission paid” figure in the detailed P & L account?

8 Other creditors and reserves £8350

It would be interesting to know what is included within this sum, as it is unusual in my opinion in accounts such as these.

JSD

5.5.2010

Mr Smith Daye is a chartered accountant and this was not the first occasion on which he had raised questions about the accounts of the company, set up by the Vincent HRD Owners Club in 1975 to produce spare parts for Vincent H.R.D. and Vincent motorcycles. Mr Smith-Daye and others had noticed an anomaly that has never been explained by any of the directors of the VCSC Ltd. The draft accounts had been presented, signed off by the company’s accountants on 7.4.2009 and by VOCSC Managing Director George Spence on 8.4.2010. The accounts were amended and the record shows amended accounts lodged at Companies House in July and, strangely, August 2010, indicating two sets of amended accounts. However, the accounts available from Companies House are those signed off by the VOCSC accountants and by the firm’s MD on 7.4.2010 and 8.4.2010 respectively. Had Mr Spence, who is also Vice-President of the Vincent HRD Owners Club, already amended the VOCSC accounts when he signed them on 8.4.2010, thereby rendering Mr Smith-Daye’s query about the Other Income entry a month later redundant? If so, why did none of the firm’s other directors – Messrs Meadowcroft, Alexander, Kinley, Wheeldon, Savage (appointed 18.4.2009) and Hewitt (resigned 18.4.2009) - seem aware of such an amendment when the matter was discussed at the AGM on 15.5.2010?

VOCSC Director and VOC Vice-President George Spence (right)

Were the draft accounts presented at the AGM different to the set intended for Companies House? After all, the Managing Director of the VOCSC Ltd would surely not have amended the accounts after signing them. Nor would he have backdated his signature. Yet the VOCSC Board of Directors had agreed in response to John Smith-Daye’s concerns to look into his queries and make any amendments necessary. So either the firm’s MD had carried out these amendments prior to signing the accounts on 8.4.2010 or the dating of accounts lodged at Companies House was wrong. 

Although VOC official Arthur Farrow, appointed to the VOCSC Ltd's Board of Directors on 23.8.2010 is now Chairman of the Board of the VOCSC Ltd, with Ian Savage installed as Managing Director in 2009, George Spence remains a director of the firm. There were fourteen applicants for the position of Managing Director, some of whom were highly qualified for the job. However, just one applicant was interviewed and appointed: Ian Savage. The VOCSC Director who handled Mr Savage's appointment was Vincent HRD Owners Club senior executive and Spares Liaison Officer Dick Wheeldon, who was also quite busy at the time with The John Lumley Motorcycle Collection.