The 600 Group PLC
Annual Report and Accounts 2014
Contents
Chairman’s Statement
Strategic report
Report of the directors
Statement of Directors’ responsibilities
Remuneration report
Independent auditor’s report
Consolidated income statement
Consolidated statement of comprehensive income
Consolidated statement of financial position
Consolidated statement of changes in equity
Consolidated cash flow statement
Group accounting policies
Notes relating to the consolidated financial statements
Company balance sheet
Company accounting policies
Notes relating to the company financial statements
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Chairman’s statement
I am pleased to report much improved underlying earnings for the year ended 29 March 2014, further strengthening of our market
position and product offering in each of our key business segments, and progress towards the implementation of a programme of
accelerating growth of the Group’s businesses by acquisition.
Strategy
Management aims to develop the Group’s key strengths in machine tools and precision engineered components, and laser marking
equipment. In each of these activities, Group businesses have strong products and brands, significant market share, diverse
geographical spread, efficient manufacturing and supply chains, and reliable distribution partners.
Financial Overview
Revenue from continuing operations was virtually unchanged at £41.71m (2013: £41.79m). Current year revenue would have
increased by 0.7% to £42.18m at constant rates of exchange prevailing in the previous financial year.
Net operating profit from continuing operations (before special items and share based payment charge) increased by 141% to
£2.35m (2013: £0.97m).
The charge for taxation in the year was £0.62m, representing an effective tax rate of 25% of profit before taxation. In the prior year,
a net credit of £1.75m was recognised, arising on the recognition of deferred taxation recoverable in the US.
After taking account of interest, pensions, taxation, discontinued activities, special items and share based payment charge, the
Group profit for the financial year was £1.85m (2013: £2.06m).
Underlying earnings (from continuing operations before special items, share based payment charge, pensions interest and
shareholder loan amortisation) amounted to 1.90 pence per share (2013: 0.59p) and total earnings were 2.19 pence per share
(2013: 2.75p).
At the end of the financial year, group net indebtedness stood at £5.31m (2013: £5.41m), and gearing was 23.5% (2013: 25.0%).
The group had financial headroom on existing borrowing facilities of £2.72m and was in full compliance with all financial covenants.
Dividends
The board currently consider that the retention of earnings for redeployment in the business continues to be the most appropriate
use of available financial resources in the short term, and accordingly do not recommend the payment of any dividend in respect of
the current financial year.
A resolution will be put to shareholders at the forthcoming Annual General Meeting to apply to the Courts for a reorganisation of the
Group’s capital structure to facilitate the distribution of a proportion of profits should these circumstances alter in future.
Corporate Activity
On 11 September 2013, we announced that the Company had received an approach from Qingdao D&D Investment Group Co. Ltd
(“D&D”) that may or may not lead to a cash offer being made for the Company. The board engaged in extensive discussions with
the management and principal shareholder of D&D to determine whether D&D were in a position to either confirm such an offer at a
level likely to be acceptable to shareholders, or complete the purchase of all or part of the business and assets of the Group at an
acceptable price.
On 12 February 2014, a further announcement was made confirming that D&D had failed to make progress and accordingly the
directors of the Company had terminated these discussions. Throughout this process, every care was taken to avoid management
from becoming distracted from the effective operation of Group businesses. Much of the negotiation and due diligence process
was managed in house, and accordingly abortive deal costs were contained to an aggregate of £0.13m which are dealt with under
Special Items during the year.
Inevitably, Group senior management resource which would otherwise have been engaged in the identification and negotiation of
suitable acquisition opportunities was redeployed to manage the possible sale process throughout the second half of the financial
year. This important activity recommenced on termination of discussions with D&D.
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Chairman’s statement
Corporate Social Responsibility
Maintaining the highest ethical and professional standards and accepting social responsibility is fundamental to the way we operate
throughout The 600 Group PLC. We strive to run our businesses with honesty, integrity and transparency at all levels.
The development of our people is a core value throughout the Group and we see it as our duty to be a responsible employer. We
are committed to the creation of training opportunities to support our employees in reaching their full potential. The Group operates
a global policy on equality and we are committed to providing a working environment with a culture of respect towards the diversity
of our people. We are committed to offering equal opportunities to all people without discrimination as to race, sex, nationality,
ethnic or national origin, language, age, marital status, sexual orientation, religion or disability.
A comprehensive health and safety policy is in place to ensure a safe working environment at all times. The health and safety
policy also demonstrates our additional responsibility to customers, suppliers and contractors and we maintain communication of
the policy at all levels throughout the Company. We encourage two-way and open lines of communication throughout the Group
and are committed to continuous dialogue with local and global stakeholders to create trust, opportunity and long term sustainable
value.
On behalf of the Board I would like to thank all our employees for their ongoing support, commitment and dedication to The 600
Group.
Current trading and outlook
Group order intake for the financial year was 13.7% ahead of the prior year, and has demonstrated increased momentum with
quarter on quarter growth throughout the year. Trading and order intake in the first quarter of the current financial year are ahead
of the corresponding period last year.
Market conditions are expected to continue to improve, with industry forecasts anticipating worldwide growth in machine tool
consumption of 7%, led by North America (9%) and Europe (13%). The Australian market is also forecasting a sharp recovery from
the low level of industrial investment experienced in 2013.
Accordingly, the board considers the prospects for further organic growth to be positive, whilst also evaluating opportunities to
accelerate the development of group activities through carefully selected acquisitions.
Paul Dupee
Chairman
26 June 2014
2
Strategic Report
Our business
The 600 Group PLC ("the Group") is a leading engineering group with a world class reputation in the design and distribution of
machine tools, and the design, manufacture and distribution of precision engineered components and laser marking systems. The
Group operates these businesses from locations in Europe, North America and Australia selling into more than 180 countries
worldwide.
Macroeconomic and industry trends
Machine tools are used to mould, cut, shape and fabricate materials in the process of manufacturing virtually all products in
common use. The machine tool industry will experience a steady demand over time as long as there is a need for manufactured
durable goods such as motor vehicles, aeroplanes, energy and extractive industrial equipment, and defence equipment.
The worldwide machine tool industry is determined by the investment intentions of manufacturers, and is therefore sensitive to
changes in the economic and financial climate. Aggregate demand responds to economic trends and typically lags the main cycle
of the economy, and has greater amplitude.
Gardner Research publishes an authoritative analysis of the machine tool industry entitled “World Machine-Tool Output &
Consumption Survey”. The February 2014 issue identified the largest five producer countries of machine tools to be Germany,
Japan, PRC, Italy and South Korea. The largest five countries ranked by the consumption of machine tools are PRC, USA,
Germany, South Korea and Japan. The UK ranks eleventh as a producer nation, and sixteenth in order of consumption.
The same publication identified that the global consumption of machine tools reduced by approximately 9% during 2013, with
significantly reduced consumption in PRC (12%), USA (9%), Japan (13%), India (33%) and most of Europe. The UK reduced by
9%. The extent of this global reduction had not previously been forecast.
The worldwide consumption of machine tools is forecast to grow by 7% in 2014, led by USA (16%), Germany (13%), and South
Korea (14%). Europe is forecast to experience more modest growth during a sustained recovery, and consumption in the UK is
forecast to grow by 14%.
The process of laser marking is used in a wide variety of industries for the permanent change of the surface characteristics of
material (usually metal or plastic) for decorative or identification purposes. The industry has experienced growth above that
experienced by the machine tool sector as a whole, due mainly to increased government and corporate regulations for traceability
in the supply chain.
Industry trends in the use of industrial laser equipment are monitored by regular reports published in Industrial Laser Solutions
(“ILS”). In the January/February 2014 edition, the market for laser marking equipment was identified to have experienced growth of
7% in 2013, and a further 7% increase was forecast in 2014.
Our aims and objectives
Our businesses have excellent products, and unrivalled brand heritage. We aim to report consistent year on year growth in annual
revenues and profitability by increasing our market share, regardless of cyclical factors affecting our industry as a whole.
We will achieve this by:
consistently delivering against lead times and quality standards that meet or exceed the requirements of our end-user
customers,
winning and retaining the right to be the producer of choice for our distributors by being easy to deal with,
undertaking design-led cost reduction activity to maintain or improve our competitiveness,
pursuing a dynamic approach to new product development,
recruiting, retaining and developing a talented and committed workforce, and,
fostering lasting relationships with our chosen supply chain partners.
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Strategic Report
Machine tools and precision engineered components
Group companies design and develop metal cutting machine tools sold under the brand names Colchester and Harrison and
design and manufacture precision engineering components under the brand names Pratt Burnerd and Gamet. These are sold
worldwide, with direct sales operations in North America (“Clausing”), Europe, and Australia and a network of distributors in all
other key end-user markets. Clausing is a customer service led distribution business and, in addition to branded Group products,
carries a broad range of other machine tools, spares and accessories to serve the North American market.
The financial results of these activities before special items were as follows:
Revenues
Operating profit
Operating margin
2014
£ 000
34,431
3,005
8.7%
2013
£ 000
34,906
2,145
6.1%
2012
£ 000
31,114
1,468
4.7%
Revenues reduced by 1.4% to £34.43m, although at constant rates of exchange the underlying activity level was only down 0.2%.
Revenues in local currency in North American operations reduced by 5.7%, but profit margins increased due to improved product
mix and reduced buying prices from third party suppliers.
European revenues increased by 21.4% as product availability, lead times and customer service all returned to normalised levels.
There has been a marked increase in distributor confidence and signs of renewed vigour in marketing efforts to support our
products. The site compression project at Heckmondwike was completed in September 2013, and has delivered substantial
overhead cost savings on occupancy, energy and other related expenses. These actions have contributed to a significant
improvement in efficiency and operating margin.
Revenue in local currency contracted by more than 33.8% in Australia, where market conditions were especially challenging due to
political uncertainty, austerity measures, and major fluctuations in currency and interest rates. During the second half of the year,
our staff accepted a need for short time working in order to weather these conditions, and the business secured a break even result
for the year. Conditions improved during the final quarter, and Australia was able to return to normal working with effect from the
start of the new financial year.
During the year, product development programmes were completed on the new EL range of Tornado CNC machines, and also the
Pratt Burnerd Gripfast chuck, with both products manufactured at Heckmondwike. In North America, a range of drill products has
been introduced that have been sourced locally, and have met with significant success. There are further development plans
anticipated in the current financial year including the updating of the conventional range of centre lathes along with saws and mills
sourced in North America.
Our Australian operation also made new inroads into developing markets in South East Asia, and aim to build on their success this
year.
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Strategic Report
Laser marking
Electrox designs, develops and manufactures equipment for the permanent marking of a wide variety of materials using lasers from
its operations at Letchworth Garden City. These can be sold as a custom product for integration into automated production lines, or
already fitted into a range of standard and custom workstations built at our own facility. This equipment is then sold by di rect sales
operations in the UK and North America, and through an established network of distributor partners throughout Europe and
beyond.
Results for the financial year before special items were as follows:
Revenues
Operating profit
Operating margin
2014
£ 000
7,572
421
5.6%
2013
£ 000
7,013
213
3.0%
2012
£ 000
6,651
316
4.8%
Revenues increased by 8.0% to £7.57m including a 19.2% increase in the second half compared with the first. This coincided with
the launch in September 2013 of new products, including the latest range of EMS workstations, which have been very well
received. These offer greater flexibility, ergonomics and production efficiency for the end user, whilst facilitating shorter delivery
lead times and reduced inventory commitment for our distributor network.
The launch was supported by increased marketing activity including an updated website, greater presence at key trade shows, and
recruitment of additional sales resource.
Further product improvements were achieved as a consequence of redesign, utilising updated componentry and advanced
manufacturing techniques. These changes ensure that our products are easier to build, and are based around standardised
modular assemblies across the core range. In the current year, we aim to extend this activity to update the FLEXYZ and Dial Index
products at the higher end of the range.
Operating margins increased to 5.6% of revenues, as the benefits of these activities began to flow. It remains our belief that there
are further operational gearing opportunities in the business as we strive to fill ample available production capacity.
Routes to market and customers
By product category
Approximately 36% of Group revenues derived from the sale of metal turning machine tools, and a further 16% from other machine
tools. The sale of precision engineered components for use in metal turning contributed approximately 16%, and laser marking
equipment approximately 17%. The remainder of Group revenues, amounting to approximately 15%, derived from aftersales
support in spare parts and services.
By industry sector (including customer concentration)
Group businesses serve customers across a very broad range of industry sectors, from niche markets for technical education of
young engineering apprentices through to high volume production of automotive, aerospace and defence equipment. A high
proportion of revenues are derived from sales via third party distribution channels, in respect of which it is more difficult to track the
industry dispersion of end-user customers.
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Strategic Report
The Group benefits from a high degree of loyalty and repeat business via established distributors in many countries and territories.
In the year ended 29 March 2014 the largest single customer, a distributor, contributed approximately 5% of Group revenues. The
top 20, of which 10 were distributors, contributed less than 30% of revenues.
By geographical territory of destination
Revenues are generated across many diverse geographical territories, with the principal markets in:
Percentage of worldwide revenues (by
destination)
United States of America
United Kingdom
Europe (excluding UK)
Rest of the World
Total
2014
%
54
20
15
11
100
2013
%
55
15
15
15
100
During the financial year, market conditions were relatively buoyant in the UK, at an early stage of recovery in North America and
Europe, and suffered a sharp downturn in Australia.
Key performance indicators (KPI’s)
The Group monitors performance against key financial objectives that the directors judge to be effective in measuring the delivery
of strategic aims, and managing and controlling the business. These focus at Group level on profit, together with its associated
earnings per share, forward order book and cash generation.
At individual business unit level, KPI’s also include working capital control, and customer related performance measures such as
on-time delivery, minimisation of warranty concerns, and measured levels of overall customer satisfaction.
These key performance indicators are measured and reviewed on a regular basis and enable the business to set and communicate
its performance targets and monitor its performance against these targets.
The Group’s recent performance against financial KPI’s is set out as follows:
KPI
Revenue (annual growth rate)
Book-to-bill ratio
Order book (months)
Gross margin (%of revenue)
EBIT margin (% of revenue)
Working capital (% of revenue)
Inventory turns
Receivables (days)
Benchmark
Target
>10%
>110%
2.0 - 3.0
>33%
>7.5%
<25%
>3.5 x
< 60
2014
2013
2012
-0.2%
101.8%
1.9
33.2%
5.6%
20.0%
3.3x
54
11.2%
89.4%
2.0
31.7%
2.3%
21.5%
2.8x
55
4.2%
n/a
3.9
32.3%
0.6%
20.7%
2.8x
63
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Strategic Report
Key business risks
The board of directors has identified the main categories of business risk in relation to the implementation of the Group’s strategic
aims and objectives, and has considered reasonable steps to prevent, mitigate or manage these risks.
The principal areas noted during this review are summarised as follows:
Macro-economic – the Group’s businesses are active in markets which can be cyclical in nature as the overall level of market
demand is dependent upon capital investment intentions. Economic or financial market conditions determine global demand and
could adversely affect our customers, distributors, operations, suppliers, and other parties with whom we transact. The directors
seek to ensure that our overall risk is mitigated by avoiding excessive concentration of exposure to any given geographical or
industry segment, or to any individual customer. Market conditions, lead indicators and industry forecasts are monitored for any
early warning signs of changes in overall market demand, and measures to exploit opportunities or manage elevated risks are
taken as appropriate.
Production and supply chain – the continuity of the Group’s business activities is dependent upon the cost effective supply of
products for sale from our own facilities, and those of our key vendors. Supply can be disrupted by a variety of factors including
raw material shortages, labour disputes and unplanned machine down time. In particular, the directors are mindful that a small
number of key manufacturing outsource partners are located in relatively close proximity to each other in Taiwan.
Taiwan is ranked by Gardner Research as the seventh largest producer nation of machine tools, with global production valued at
almost US$5 billion. Taiwanese suppliers represent approximately one third of the total cost of sales for the Group. Group
businesses mitigate against such risk by carefully selecting high quality vendors, and maintaining long term constructive and open
relationships. The effectiveness of such mitigation would be limited, however, in certain catastrophic circumstances (for example,
extreme weather or seismic activity in the vicinity), against which the Group carries appropriate insurance.
Laws and regulations – Group businesses may unknowingly fail to comply with all relevant laws and regulations in the countries in
which it operates and contracts business. There is a risk of breach of legal, safety, environmental or ethical standards which can
be more difficult to identify, comprehend, or monitor in certain territories than others. The directors have taken all reasonable steps
to ensure that operations are conducted to high ethical, environmental and health and safety standards. Controls are in place to
keep regulatory and other requirements under careful review, and scrutinise any identified instances of elevated risk.
Information Technology (“IT”) – The Groups IT systems and the information they contain are subject to security risks including
the unexpected loss of continuity from virus or other issues, and the deliberate breach of security controls for commercial gain or
mischief. Any such occurrences could have a significant detrimental effect on the Group’s business activities. These risks are
mitigated by the utilisation of physical and embedded security systems, regular back-ups and comprehensive disaster recovery
plans.
Results
Revenue and order intake
Revenue from continuing operations decreased by 0.2% to £41.71m (2013: £41.79m). There was an underlying increase in
revenue of 0.7%, which was offset by the effect of translation into Sterling of revenues generated by Group operations in North
America and Australia at less favourable rates of exchange than those prevailing in the previous financial year.
Order intake during the year amounted to £42.47m at a book-to-bill ratio of 101.8%. This was a marked improvement on the
previous financial year, in which order intake was £37.37m at a book-to-bill ratio of 89.4%. The year-end order book stood at
£7.02m, slightly ahead of the corresponding figure of £6.87m last year.
Costs and margins (before special items)
Gross margins increased by 150 basis points to 33.2% (2013: 31.7%), primarily as a result of management initiatives to reduce
direct costs through modifications to product specification, renegotiation of sources of supply, and greater throughput of products
against a relatively fixed production cost base.
Group operating expenses reduced by almost 6% to £11.64m (2013: £12.36m), as a result of the full year effect of reductions
achieved during the implementation of the strategic review in 2012 including the savings in the second half of the year from the site
compression in Heckmondwike. Additional savings were made in the second half of the year in the Australian operation in response
to market conditions.
Operating margins in the Machine Tools segment of the business increased from 6.1% to 8.7%, and in Laser Marking from 3.0% to
5.6%. Unallocated group costs were 2.5% of group revenue (2013: 3.3%), and hence the overall Group margin increased from
2.3% to 5.6% of revenue.
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Strategic Report
Development expenditure
During the financial year the Group incurred aggregate expenditure on the development of new products and software of £0.57m,
of which £0.06m was expensed as incurred, and £0.51m was capitalised and will be amortised over the estimated economic life of
the associated products. The corresponding amounts in the previous financial year were £nil of revenue expense, and £0.53m of
capitalised costs.
The amortisation charge to income in the current year in respect of development expenditure previously capitalised was £0.03m
(2013: £0.09m).
Profit before taxation
Group operating profit before special items and share based payment costs amounted to £2.35m; an increase of 141% on the
corresponding figure last year of £0.97m.
Net financial income was £0.31m (2013: £0.04m) comprising net financial expense in respect of bank and other borrowings of
£0.39m (2013: £0.47m) and net financial income relating to pensions and the amortisation of shareholder loan costs of £0.69m
(2013: £0.50m).
Profit before taxation, special items and share based payment cost was £2.66m (£2013: £1.01m).
Special items and share based based payment cost
During the financial year the Company incurred expenditure which was, in the opinion of the directors, non-recurring in nature. This
amounted to £0.13m, which related to the professional costs associated with the possible bid approach.
In the previous financial year, the Company incurred special items resulting in a net credit of £0.80m before taxation, comprising
costs relating to re-organisation, redundancy and inventory impairments of £1.60m and a credit in respect of pensions curtailment
gain amounting to £2.40m.
It is considered unlikely that the Company will incur any non-recurring items in the current financial year.
Share based payment charges do not represent a cash cost to the Company and amounted to £0.06m (2013 £0.10m)
Taxation
The current year charge for taxation amounted to £0.62m representing 25% of the profit before taxation. In the prior year, the credit
for taxation of £1.50m (before special items) comprised a normalised charge of approximately 34% of profit before taxation, and a
credit of £1.75m relating to the recognition for the first time of deferred taxation in respect of prior years’ losses and timing
differences in North America.
The company incurred significant trading and capital losses in prior years in the UK and accordingly has no liability for taxation in
the UK. In North America prior tax losses have now been utilised and the current year Group charge is principally in respect of
taxation of profits in North America. Taxation will be payable going forward on profits in North America and tax continues to be paid
in Australia on profits made there.
Net profit and earnings per share
The total profit attributable to equity holders of the parent for the current financial year amounted to £1.85m (2013: £2.06m).
Underlying earnings from continuing operations before pension and equity adjustments, special items and share based payment
charge and US deferred tax prior years credit were 1.90 pence per share (2013: 0.59 pence).
Total earnings amounted to 2.19 pence per share (2013: 2.75 pence).
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Strategic Report
Financial position and utilisation of resources
Cash flow
Cash generated from operations before working capital movements was £2.71m (2013: £1.10m) The working capital movement
included a £1.14m reduction in the level of stockholding as a result of better controls across all operating businesses. Trade and
other payables decreased by £1.24m as trading terms with creditors returned to normal levels.
£0.37m was paid during the period in relation to the settlement of an onerous lease exited following the 2012 Strategic Review, with
a further £0.15m to be paid in FY15. The net cash ouflow from working capital and provision movements was £0.73m (2013:
outflow of £2.82m).
Taxation paid of £0.50m during the year all related to the US operations where previous losses have now all been utilised. Plant
and equipment purchases during the year amounted to £0.55m against the depreciation charge of £0.47m.
Development expenditure on the laser marking new products and software of £0.51m were capitalised during the year but will begin
full amortisation in the next financial year following completion of the projects.
Net borrowings
Group net debt at 29 March 2014 stood at £5.31m (2013: £5.41m) comprising net bank and finance lease indebtedness of £3.02m
(2013: £3.25m) and the amount outstanding on shareholder loans of £2.50m net of unamortised costs of £0.21m in the current
financial year, and £0.34m in the prior year.
Headroom on bank facilities was £2.72m at the year-end (2013: £3.20m) and all financial covenants had been met in full.
In May 2014, the Group’s primary UK banking facilities were increased and extended, resulting in aggregate facilities worldwide of
£6.75m, the majority of which is committed until no earlier than May 2017.
Shareholder loans amounting to £2.50m are due to be refinanced in August 2015, either through extension for a further period,
repayment from other cash resources within the Group, or exercise of associated share warrants at a price of 20 pence per share
expiring in August 2015.
Aggregate borrowings comprised a multiple of approximately 1.68 times the EBITDA for the year (2013: 3.21 times) and gearing
amounted to 23.5% of aggregate net assets (2013: 25.0%), or 53.3% (2013: 54.7%) after excluding the net surplus on the UK
pension fund.
Going concern
In accordance with FRC guidelines, the Board has assessed the Group’s funding and liquidity position and further details can be
found in the basis of preparation accounting policy note. The Directors confirm that, after having made appropriate enquiries, they
have a reasonable expectation that the Group and the Company have adequate resources to continue operations for the
foreseeable future. Accordingly, the directors continue to adopt the going concern basis in preparation of the financial statements.
Retirement Benefits
The accounting surplus on the UK final salary scheme is arrived at on a best estimate basis and included on the Group Statement
of Financial Position as the scheme rules allow the requirements on surplus recognition within IFRIC 14 to be applied. The
accounting surplus at 29 March 2014 was £19.90m (2013: £19.46m). In accordance with the current legislation on taxation of
pension surplus returns to a company, deferred taxation has been provided for on the pension entries at 35% as opposed to the
normal 20% rate.
In October 2013 the Company reached agreement with the Trustee of the scheme regarding the funding position on a more
prudent Technical Provisions basis as at 31 March 2013 which indicated a funding deficit of £25.4m at that date, and estimate d a
deficit on a full buy-out basis of £51.1m.
It was further agreed that the Technical Provisions deficit would be resolved by an outperformance of the investment returns on the
scheme assets of 1% above the return on UK gilts, and that no cash contributions would be required until the next funding valuation
due as at 31 March 2016.
At 29 March 2014, the subsequent performance of the scheme assets and changes in the underlying market conditions in respect
of the fund liabilities indicate that the deficit on a Technical Provisions basis had reduced to £14.7m and on a buy-out basis to
£35.5m.
The directors and the Trustee work together on a collaborative basis to continue to monitor investment performance and market
conditions closely, to mitigate the risk of mis-matching assets and liabilities to a tactically appropriate level, and to pursue
opportunities to secure a full or partial buy-out of UK pension liabilities when conditions permit.
The US retiree health scheme and pension fund deficits reduced during the year due to changes in actuarial assumptions to
£0.91m (2013: £1.36m.)
9
Strategic Report
Treasury and risk management
Financial risks
The main financial risks faced by the Group are credit risk, foreign currency risk, interest rate risk and liquidity risk. The directors
regularly review and agree policies for managing these risks.
Credit risk is managed by monitoring limits and payment performance of counterparties. The directors consider the level of general
credit risk in current market conditions to be higher than normal. Where a customer is deemed to represent an unacceptable level
of credit risk, terms of trade are modified to limit the Group’s exposure.
Foreign currency risk is managed by matching payments and receipts in foreign currency to minimise exposure. Foreign currency is
bought to match liabilities as they fall due where currency receipts are insufficient to match the liability. The results of 600 Inc and
600 Australia Pty Limited are reported in United States dollars and Australian dollars respectively and translated into Sterling, and
as a result of this the Group’s Statement of Financial Position and trading results can be affected by movements in these
currencies. Part of this exposure is hedged by entering into working capital facilities denominated in US dollars.
Liquidity risk is managed by the Group maintaining undrawn revolving credit and overdraft facilities in order to provide short term
flexibility.
Interest rate risk is managed by holding a mixture of cash and borrowings in Sterling, US dollars and Australian dollars at floating
rates of interest.
Market risks
The Group’s main exposure to market risk arises from increases in input costs in so far as it is unable to pass them on to customers
through price increases. The Group does not undertake any hedging activity in this area and all materials and utilities are
purchased in spot markets. The Group seeks to mitigate increases in input costs through a combination of continuous improvement
activities to minimise increases in input costs and passing cost increases on to customers, where this is commercially viable.
The Group is also aware of market risk in relation to the dependence upon a relatively small number of key vendors in its supply
chain. This risk could be manifest in the event of a commercial or natural event leading to reduced or curtailed supply. The Group
seeks to mitigate these risks by maintaining transparent and constructive relationships with key vendors, sharing long term plans
and forecasts, and encouraging effective disaster recovery planning.
The Group is also exposed to the risk of a downturn in its customers’ end markets leading to reduced levels of activity for the
Group. The directors seek to ensure that the Group’s activities are not significantly concentrated in sales to either one individual
customer or into a single market sector in order to mitigate the exposure to a downturn in activity levels. The directors consider that
the current level of market risk is normal.
Other principal risks and uncertainties
The remaining main risks faced by the Group are its exposure to pension funding and the risk to its reputation of a significant failure
to comply with accepted standards of ethical and environmental behaviour.
Pension funding risk arises from the Group’s operation of a defined benefit pension scheme which gives rise to fluctuations
between the value of its projected liabilities and the value of the assets the scheme holds in order to discharge those liabilities. The
amount of any surplus or deficit may be adversely affected by such factors as lower than expected investment returns, changes in
long term interest rates and inflation expectations, and increases in the forecast longevity of members. The directors regularly
review the performance of the pension scheme and any recovery plan. Proactive steps are taken to identify and implement cost
effective activities to mitigate the pension scheme deficit.
The directors have taken steps to ensure that all of the Group’s global operations are conducted to the highest ethical and
environmental standards. Regulatory requirements are kept under review, and key suppliers are vetted in order to minimise the risk
of the Group being associated with a company that commits a significant breach of applicable regulations.
10
Report of the directors
Paul Dupee*
Appointed to the Board as a non-executive Director on 2 February 2011 and appointed Chairman on 14 September 2011. A private
investor and currently Managing Partner of Haddeo Partners LLP.
Nigel Rogers
Appointed to the Board as Chief Executive Officer on 26 March 2012. Previously Chief Executive Officer of Stadium Group Plc
Neil Carrick
Appointed to the Board as Group Finance Director on 3 October 2011. Previously Group Finance Director and Company Secretary of
Cosalt plc.
Stephen Rutherford*
A non-executive Director since 1 October 2007. Managing Director of Neofil Limited.
Derek Zissman*
Appointed to the Board as a non-executive Director on 2 February 2011. Currently a non-executive director of GFI Software S.a.r.l.
Previously vice-chairman, KPMG LLP.
* Non-executive Director and member of the Audit Committee and member of the Remuneration Committee.
SECRETARY
Neil Carrick
REGISTERED OFFICE
1 Union Works
Union Street
Heckmondwike
West Yorkshire
WF16 0HL
REGISTERED NUMBER
196730
REGISTRARS
Capita Registrars
34 Beckenham Road
Beckenham
Kent
BR3 4TU
AUDITOR
KPMG Audit LLP
BANKERS
Santander Plc
NOMINATED ADVISOR AND BROKER
Finncap
FINANCIAL ADVISORS
Spark Advisory Partners
11
Report of the directors
The Directors present their report to the members, together with the audited financial statements for the 52 week period ended 29
March 2014, which should be read in conjunction with the Chairman’s Statement on the affairs of the Group (pages 1 to 2), and the
Strategic Report (pages 3 to 10) . The Consolidated Financial Statements incorporate financial statements, prepared to the Saturday
nearest to the Group’s accounting reference date of 31 March, of the Company and all subsidiary undertakings (the Group). The results for
2014 are for the 52-week period ended 29 March 2014. The results for 2013 are for the 52-week period ended 30 March 2013.
ACTIVITIES OF THE GROUP
The Group is principally engaged in the manufacture and distribution of machine tools, precision engineered components and laser
marking equipment. The group has subsidiary companies in overseas locations but does not have any overseas branches.
RESULT
The result for the period is shown in the Consolidated Income Statement on page 20.
BUSINESS REVIEW
A balanced and comprehensive analysis of development and performance of the Group is contained in the Chairman’s Statement and
the Stategic Report on pages 1 to 10. This analysis includes comments on the position of the Group at the end of the financial period,
consideration of the principal risks and uncertainties facing the business and the key performance indicators which are monitored in
relation to the achievement of the strategy of the business.
RESEARCH AND DEVELOPMENT
Group policy is to design and develop products that will enable it to retain and improve its market position.
INTERESTS IN SHARE CAPITAL
At 5 June 2014, the Directors had been informed of the following interests in shares of 3% or more of the issued ordinary share capital
of the Company:
Haddeo Partners
Mr A Perloff and the Maland Pension Fund Trustees
Henderson Volantis Capital
Schroder Investment Management
CriSeren Investments Limited
Percentage
of issued
ordinary
share
capital
Number
22,792,535
26.98
6,100,000
3,901,197
3,671,320
3,548,811
7.22
4.62
4.35
4.20
The Directors have not been notified that any other person had a declarable interest in the nominal value of the ordinary share capital
amounting to 3% or more.
On 3 August 2010 an arrangement was entered into with Haddeo Partners LLP to advance £2.5m to the Group over a five year term
which also involved the issue of 12.5m warrants. These warrants can be used by the holders to either convert the loan into shares or to
purchase shares for a cash consideration. 700,000 warrants have been exercised for cash leaving 11,595,000 warrants outstanding
which expire in August 2015.
Haddeo Partners LLP, in addition to their shareholding above, currently hold 5,050,000 of these warrants.
PURCHASE OF OWN SHARES
Authority granting the Company the option to purchase 8,449,189 of its own ordinary shares in accordance with the Companies Act
2006 was given by shareholders at the Annual General Meeting of the Company on 23 September 2013. This authority remains valid
until the conclusion of the next Annual General Meeting.
12
Report of the directors
DIRECTORS
Details of the current Directors of the Company are shown on page 10.
The directors retiring by rotation are Mr D Zissman and Mr P Dupee who, being eligible, offer themselves for re-election, D Zissman
and P R Dupee do not have rolling service contracts with the Company.
The beneficial interests of the Directors in the share capital of the Company at 29 March 2014 are shown in the Remuneration Report
on pages 15 to 18.
No Director has a beneficial interest in the shares or debentures of any other Group undertaking.
ENVIRONMENTAL POLICY
It is the Group’s policy to seek continually to eliminate and, where this is not practicable, to minimise negative environmental impacts
from the pursuit of its various business interests whilst continuing to produce high quality products to its customers’ requirements.
It is the Group’s policy to comply with all statutory environmental legislation as a minimum and to aim to improve upon the standards
set by the local regulatory authorities.
To this end, each subsidiary is audited by the Group’s internal health, safety and environment manager to:
• benchmark performances across the Group;
• help sites identify and prioritise issues for improvement; and
• ensure legal compliance.
The results of audits are communicated directly to the Directors and to all subsidiary boards and appropriate action is taken.
It is the Group’s policy to foster an informed and responsible approach to all environmental concerns and it encourages the involvement
of employees, customers and suppliers. Regulatory authorities are consulted and informed at all appropriate times. The Group
continues to support long-term strategies to minimise, re-use and recycle packaging.
FINANCIAL INSTRUMENTS
An indication of the financial risk management objectives and policies and the exposure of the Group to price risk, credit risk, liquidity
risk and cash flow risk is provided in Note 26 to the financial statements.
PROVISION OF INFORMATION TO AUDITOR
All of the current Directors have taken all steps that they ought to have taken to make themselves aware of any information needed by
the Company’s auditor for the purposes of their audit and to establish that the auditor is aware of that information. The Directors are not
aware of any relevant audit information of which the auditor is unaware.
QUALIFYING THIRD PARTY INDEMNITY
The Company has provided an indemnity for the benefit of its current Directors which is a qualifying third party indemnity pr ovision for
the purpose of the Companies Act 2006.
On behalf of the Board
NEIL CARRICK
DIRECTOR
26 JUNE 2014
13
STATEMENT OF DIRECTORS’ RESPONSIBILITIES IN RESPECT OF THE STRATEGIC REPORT, THE DIRECTORS’ REPORT AND
THE FINANCIAL STATEMENTS
The directors are responsible for preparing the Strategic Report, the Directors’ Report and the group and parent company financial
statements in accordance with applicable law and regulations.
Company law requires the directors to prepare group and parent company financial statements for each financial year. As required by the
AIM Rules of the London Stock Exchange they are required to prepare the group financial statements in accordance with IFRSs as
adopted by the EU and applicable law and have elected to prepare the parent company financial statements in accordance with UK
Accounting Standards and applicable law (UK Generally Accepted Accounting Practice).
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 group and parent company and of their profit or loss for that period. In preparing each of the group and parent
company financial statements, the directors are required to:
select suitable accounting policies and then apply them consistently;
make judgements and estimates that are reasonable and prudent;
for the group financial statements, state whether they have been prepared in accordance with IFRSs as adopted by the EU;
for the parent company financial statements, state whether applicable UK Accounting Standards have been followed, subject to any
material departures disclosed and explained in the financial statements; and
prepare the financial statements on the going concern basis unless it is inappropriate to presume that the group and the parent
company will continue in business.
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the parent company’s
transactions and disclose with reasonable accuracy at any time the financial position of the parent company and enable them to ensure
that its financial statements comply with the Companies Act 2006. They have general responsibility for taking such steps as are
reasonably open to them to safeguard the assets of the group and to prevent and detect fraud and other irregularities.
The directors are responsible for the maintenance and integrity of the corporate and financial information included on the company’s
website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other
jurisdictions.
NEIL CARRICK
DIRECTOR
26 JUNE 2014
14
Remuneration report
As an AIM listed company The 600 Group plc is not required to prepare a remuneration report in accordance with Directors Repo rt
Regulations of the Companies Act 2006, however the Directors recognise the importance and support the principles of the Regul ations.
The Auditor is not required to report to the shareholders on the remuneration report.
THE REMUNERATION COMMITTEE
The Remuneration Committee (the Committee) is responsible for determining the salary and benefits of Executive Directors. It currently
consists of three non-Executive Directors. The members of the Committee during the year have been:
S J Rutherford (Committee Chairman)
D Zissman
P Dupee
The Committee held two meetings during the year. The most significant matters discussed by the Committee at its formal meetings this
year were:
• the operation of a bonus scheme.
• the formal grant of awards under the share plans; and
• a review of Directors’ salaries.
No Director was present when his own remuneration arrangements were being discussed.
EXECUTIVE DIRECTORS’ REMUNERATION
POLICY
The Company aims to attract, motivate and retain the most able Executives in the industry by ensuring that the Executive Directors are
fairly rewarded for their individual contributions to the Group’s overall performance, to the interests of the shareholders and to the
ongoing financial and commercial health of the Group. The Committee feels that including equity incentives in the total remuneration
package encourages alignment of the interests of the Executive Directors and senior management with those of the shareholders. The
Company’s strategy is to reward Executive Directors and key senior employees on both a long-term and short-term basis.
SALARIES
Salaries are established on the basis of market comparisons with positions of similar responsibility and scope in companies of a similar
size in comparable industries. Individual salaries of Directors are reviewed annually by the Committee and adjusted by reference to
individual performance and market factors. With the approval of the Chairman, Executive Directors may take up appointments as non-
Executive Directors and retain payments from sources outside the Group, provided that there is no conflict of interest with their duties
and responsibilities with the Group.
BONUS SCHEME
Executive Directors currently participate in a discretionary bonus scheme linked to the achievement of annual financial and personal
performance targets.
LONG-TERM INCENTIVE PLANS
THE 600 GROUP PLC 2012 DEFERRED SHARE PLAN (THE DSP)
A new scheme was introduced on 18 January 2012 which provided for deferred shares to be issued to Directors and senior Executive’s
Options were granted on 19 November 2012 which are exercisable at 10p between three and ten years after grant date and further
options excercisable at 17p were issued on 7 April 2014.
BENEFITS IN KIND
Executive Directors’ benefits include a car allowance and medical insurance for self and family.
15
Remuneration report
SERVICE CONTRACTS
Mr N R Carrick has a service contract dated 3 October 2011 with a notice period of twelve months. Mr. N F Rogers has a servic e
contract dated 26 March 2012 with a notice period of twelve months. In the case of early termination, the Company would negotiate
compensation on an individual basis taking into account salary and other benefits as set out in the audited part of this report and the
twelve month notice period.
NON-EXECUTIVE DIRECTORS’ REMUNERATION
Fees for non-executive Directors are determined by the Board on the basis of market comparisons with positions of similar
responsibilities and scope in companies of a similar size in comparable industries.
Non-executive Directors do not have contracts of service and are not eligible for pension benefits.
FIVE YEAR TOTAL SHAREHOLDER RETURN
This graph shows the Total Shareholder Return (TSR) of the Company from 1 April 2009 to 29 March 2014 compared with the AIM
Index, rebased to 100. The TSR is defined as share price growth plus dividends reinvested. As the Company has been a constituent of
this index since 14 July 2011, the Board considers that this is now the most appropriate index against which the TSR of the Company
should be measured.
300.0
250.0
200.0
150.0
100.0
50.0
0.0
Apr 09
Apr 10
Apr 11
Apr 12
Apr 13
Apr 14
The 600
Group Plc
AIM Index
16
Remuneration report
DIRECTORS’ INTERESTS IN SHARES
The interests of Directors holding office at 29 March 2014 in the ordinary shares of the Company were as follows:
P R Dupee
N F Rogers
S J Rutherford
N R Carrick
D Zissman
At
At
29 March
30 March
2014
Number
2013
Number
22,792,535 22,792,535
1,209,728
1,036,667
20,000
62,734
20,000
—
150,000
150,000
P R Dupee’s interest in the 22.8m shares arises from his position as Managing Partner of Haddeo Partners LLP, which owns these
shares.In addition, Haddeo Partners LLP holds 5,050,000 warrants which can be used to either convert their share of the shareholder
loan into shares or to purchase shares for a cash consideration.
On 7 April 2014 D Zissman increased his shareholding with the purchase of 150,000 ordinary shares taking his holding to 300,0 00
ordinary shares.
DIRECTORS’ EMOLUMENTS
P R Dupee
N F Rogers
N R Carrick
D Zissman
S J Rutherford
Total
.
1 Bonus after tax used to subscribe for new shares
Bonus
Bonus
All
benefits
Total
Total
Salary
Fees
Pension
Shares[1]
Cash
in kind
2014
£
£
£
£
£
£
£
2013
£
—
60,000
200,000
145,000
—
—
—
—
—
—
—
60,000
60,000
60,000
40,000
1,387
301,387
380,537
13,050
21,750
43,500
12,987
236,287
229,903
—
—
33,000
33,000
—
—
—
—
—
—
—
—
33,000
33,000
33,000
33,000
345,000 126,000
13,050
81,750
83,500
14,374
663,674
736,440
17
Remuneration report
DIRECTORS’ SHARE OPTIONS
Details of share options at 29 March 2014 and 30 March 2013 for each Director who held office during the year are as follows:
N R Carrick
N F Rogers
Number of
options at
30 March
2013
1,750,0001
2,750,0001
Granted
Exercised
Lapsed/
forfeited
Number of
options at
29 March
2014
—
—
—
—
—
—
1,750,000
2,750,000
1 4,500,000 options with an exercise price of 10p were granted under The 600 Group PLC Deferred Share Plan on 19 November 2012
and are exercisable between 3 and 10 years from the grant date.
The charge to the Income Statement in respect of share based payments was £57,000 (2013: £100,000).
On 7 April 2014 5,400,000 options with an exercise price of 17p were granted under the 600 Group PLC Deferred Share Plan
exercisable between 3 and 10 years from the date of grant. 2,000,000 options were granted to Mr N Rogers, 1,400,000 options to Mr N
Carrick, 1,000,000 to Mr P Dupee, 500,000 to Mr D Zissman and 500,000 to Mr S Rutherford.
The share price at 29 March 2014 was 16p and the highest and lowest prices during the period were 21.5p and 10.75p, respectively.
On behalf of the Board
NEIL CARRICK
DIRECTOR
26 JUNE 2014
18
Independent auditor’s report
To the members of The 600 Group PLC
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF THE 600 GROUP PLC
We have audited the financial statements of The 600 Group PLC for the 52 weeks ended 29 March 2014 set out on pages 20 to 69. The
financial reporting framework that has been applied in the preparation of the group financial statements is applicable law and International
Financial Reporting Standards (IFRSs) as adopted by the EU. The financial reporting framework that has been applied in the preparation
of the parent company financial statements is applicable law and UK Accounting Standards (UK Generally Accepted Accounting Practice).
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our
audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an
auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other
than the company and the company’s members, as a body, for our audit work, for this report, or for the opinions we have formed.
Respective responsibilities of directors and auditor
As explained more fully in the Directors’ Responsibilities Statement set out on page 14, 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 International 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
A description of the scope of an audit of financial statements is provided on the Financial Reporting Council’s website at
www.frc.org.uk/auditscopeukprivate.
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 29 March 2014
and of the group’s profit for the 52 weeks then ended;
the group financial statements have been properly prepared in accordance with IFRSs as adopted by the EU;
the parent company financial statements have been properly prepared in accordance with UK Generally Accepted Accounting
Practice;
the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
Opinion on other matter prescribed by the Companies Act 2006
In our opinion the information given in the Strategic Report and the Directors’ Report for the financial year for which the f inancial
statements are prepared is consistent with the financial statements.
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 explanations we require for our audit.
David Morritt (Senior Statutory Auditor)
for and on behalf of KPMG LLP, Statutory Auditor
Chartered Accountants
1 The Embankment
Neville Street
Leeds
LS1 4DW
26 June 2014
19
Consolidated income statement
For the 52-week period ended 29 March 2014
Company Number 00196730
20
BeforeAfterBeforeAfterSpecial items^Special items^Special items^Special items^Special items^Special items^& share-based& share-based& share-based& share-based& share-based& share-basedpaymentspaymentspaymentspaymentspaymentspayments52 weeks52 weeks52 weeks52 weeks 52 weeks 52 weeks endedendedendedendedendedended29 March29 March29 March30 March30 March30 March201420142014201320132013Note£'000£'000£'000£'000£'000£'000ContinuingRevenue141,707 -41,707 41,788 -41,788 Cost of sales (27,850) - (27,850) (28,538) (600) (29,138)Gross profit13,857 -13,857 13,250 (600)12,650 Other operating income2134 -134 79 -79 Net operating expenses2 (11,643) (185) (11,828) (12,356)1,298 (11,058)Operating profit/(loss)42,348 (185)2,163 973 698 1,671 Bank and other interest7 7 7 7 Interest on pension surplus827 827 618 618 Financial income 6834 -834 625 -625 Bank and other interest (388) (388) (469) (469)Amortisation of shareholder loan expenses (134) (134) (117) (117)Financial expense6 (522) - (522) (586) - (586)Profit/(loss) before tax2,660 (185)2,475 1,012 698 1,710 Income tax (charge)/credit7 (623) - (623)1,496 (850)646 Profit/(loss) for the period from continuing operations2,037 (185)1,852 2,508 (152)2,356 Post tax loss of discontinued operations1 - - - (295) - (295)Total profit/(loss) for the financial year attributable to Equity holders of the parent2,037 (185)1,852 2,213 (152)2,061 Basic earnings/(loss) per share9 - continuing2.41p (0.22)p2.19p 3.34p(0.20)p3.14p - discontinued - - -(0.39)p -(0.39)p - Total2.41p (0.22)p2.19p 2.95p(0.20)p2.75pDiluted earnings/(loss) per share9 - continuing2.37p (0.22)p2.15p 3.27p(0.20)p3.07p - discontinued - - -(0.38)p -(0.38)p - Total2.37p (0.22)p2.15p 2.89p(0.20)p2.69pAs restated *^Special items comprise costs incurred on the abortive acquisition of the Group during the year. Prior year special items related to exceptional costs and credits relating to reorganisation, redundancy, inventory and intangibles impairments, property disposals, refinancing and pension scheme closure. (see note 3)* Comparative figures have been restated to reflect changes in accounting for interest on pension surplus under IAS 19 (revised) 'Employee Benefits' and related deferred tax movements.
Consolidated statement of comprehensive income
for the 52-week period ended 29 March 2014
Profit for the period
Other comprehensive income/(expense)
Items that will not be reclassified to the Income Statement:
Remeasurement of the net defined benefit assets
Impact of changes to defined benefit asset limit
Impact of transfer to assets held for sale
Deferred taxation
Total items that will not be reclassified to the Income Statement:
Items that are or may in the future be reclassified to the Income Statement:
Foreign exchange translation differences
Total items that are or may in the future be reclassified to the Income Statement:
Other comprehensive income/(expense) for the period, net of income tax
Total comprehensive income/(expense) for the period
Attributable to:
Equity holders of the Parent Company
Total recognised (expense)/income
Notes
28
28
13
52-week
Restated
52-week
period ended
period ended
29 March
30 March
2014
£000
1,852
(229)
-
-
139
(90)
2
2
(88)
1,764
1,764
1,764
2013
£000
2,061
4,291
12,940
(616)
(5,730)
10,885
-
-
10,885
12,946
12,946
12,946
21
Consolidated statement of financial position
As at 29 March 2014
Company Number 00196730
Non-current assets
Property, plant and equipment
Intangible assets
Deferred tax assets
Employee benefits
Current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Total assets
Non-current liabilities
Loans and other borrowings
Deferred tax liabilities
Current liabilities
Trade and other payables
Income tax payable
Provisions
Loans and other borrowings
Total liabilities
Net assets
Shareholders’ equity
Called-up share capital
Share premium account
Revaluation reserve
Capital redemption reserve
Equity reserve
Translation reserve
Retained earnings
Total equity
Notes
11
12
13
28
14
15
16
17
13
18
19
17
21
As at
29 March
2014
£000
4,348
1,780
2,723
19,019
27,870
8,505
6,209
1,149
15,863
43,733
(2,475)
(7,737)
(10,212)
(6,425)
(140)
(429)
(3,982)
(10,976)
(21,188)
22,545
14,581
16,885
862
2,500
180
938
(13,401)
22,545
As at
30 March
2013
£000
4,500
1,297
3,120
18,105
27,022
10,273
6,183
1,025
17,481
44,503
(5,100)
(7,597)
(12,697)
(6,973)
(535)
(1,309)
(1,332)
(10,149)
(22,846)
21,657
14,579
16,858
909
2,500
173
1,860
(15,222)
21,657
The financial statements on pages 20 to 68 were approved by the Board of Directors on 26 June 2014 and were signed on its behalf
by:
NEIL CARRICK
GROUP FINANCE DIRECTOR
26 JUNE 2014
22
Consolidated statement of changes in equity
As at 29 March 2014
At 31 March 2012
At 1 April 2012
Profit for the period (restated)
Other comprehensive income:
Foreign currency translation
Net actuarial losses on employee benefit
schemes (restated)
Impact of assets disposed of
Impact of changes to defined benefit asset
limit
Deferred tax (restated)
Total comprehensive income
Transactions with owners:
Share capital subscribed for
Shareholder loan issue with convertible
warrants
Credit for share-based payments
Total transactions with owners
Ordinary
Share
Capital
share premium Revaluation redemption Translation Equity
Retained
Total
capital account
reserve
reserve[1]
reserve reserve
Earnings
Equity
£000
£000
£000
£000
£000
£000
£000
£000
14,375 15,645
1,080
2,500
1,487 167
(28,267)
6,987
14,375 15,645
1,080
2,500
—
—
—
—
1,487 167
— —
(28,267)
6,987
2,061
2,061
—
—
—
—
—
—
—
—
—
—
—
—
204 1,213
—
—
—
—
204 1,213
26
—
(197)
—
—
(171)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
373 —
—
399
— —
4,291
4,291
— —
(616)
(813)
— —
12,940 12,940
— —
373 —
(5,730)
(5,730)
12,946 13,148
— —
—
—
—
6
—
6
—
—
99
99
1,417
6
99
1,522
At 30 March 2013
At 31 March 2013
Profit for the period
14,579 16,858
909
2,500
1,860
173
(15,222) 21,657
14,579 16,858
909
2,500
—
—
—
—
1,860 173
— —
(15,222) 21,657
1,852
1,852
Other comprehensive income:
Foreign currency translation
Remeasurement of the net defined benefit
assets
Revaluation of properties
Deferred tax
Total comprehensive income
Transactions with owners:
Share capital subscribed for
Shareholder loan issue with convertible
warrants
Credit for share-based payments
Total transactions with owners
—
—
—
—
—
2
—
—
2
—
—
—
—
—
27
—
—
27
(90)
—
43
—
(47)
—
—
—
—
—
—
—
—
—
—
—
—
—
(922) —
2
(1,010)
— —
(229)
(229)
— —
— —
(922) —
—
139
1,764
43
139
795
— —
—
7
—
—
—
7
—
—
57
57
29
7
57
93
At 29 March 2014
14,581 16,885
862
2,500
938
180
(13,401) 22,545
1 The capital redemption reserve was set up on cancellation and repayment of cumulative preference shares in 2001.
23
Consolidated cash flow statement
For the 52-week period ended 29 March 2014
Cash flows from operating activities
Profit for the period
Adjustments for:
Amortisation of development expenditure
Depreciation
Net financial income
Net pension credit
Other Special Items
Equity share option expense
Discontinued operations
Income tax expense
Operating cash flow before changes in working capital and provisions
(Increase)/decrease in trade and other receivables
Decrease in inventories
Decrease in trade and other payables
Restructuring and redundancy expenditure
Cash generated/(used) in operations
Interest paid
Income tax paid
Net cash flows from operating activities
Cash flows from investing activities
Interest received
Proceeds from sale of property, plant and equipment
Proceeds from sale of subsidiary undertakings
Purchase of property, plant and equipment
Development expenditure capitalised
Refinancing expenditure
Net cash flows from investing activities
Cash flows from financing activities
Proceeds from issue of ordinary shares
Net Repayment of external borrowing
Net Finance lease expenditure
Net cash flows from financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the period
Effect of exchange rate fluctuations on cash held
Cash and cash equivalents at the end of the period
52-week
Restated
52-week
period ended
period ended
29 March
30March
Notes
2014
£000
2013
£000
1,852
2,061
28
467
(312)
—
—
57
—
623
2,715
(255)
1,143
(1,243)
(371)
1,989
(290)
(496)
1,203
7
42
—
(545)
(511)
—
(1,007)
29
(72)
58
15
211
1,025
(87)
1,149
22
16
87
627
(39)
(2,429)
1,631
100
(295)
(646)
1,097
346
104
(2,701)
(572)
(1,726)
(469)
(40)
(2,235)
7
2,710
1,708
(129)
(532)
(286)
3,478
1,416
(1,383)
(173)
(140)
1,103
(117)
39
1,025
24
Group accounting policies
BASIS OF PREPARATION
The 600 Group PLC is a public limited company incorporated and domiciled in England and Wales. The Company’s ordinary shares
are traded on the Alternative Investment Market (AIM) of the London Stock Exchange.
The Group Consolidated Financial Statements incorporate accounts, prepared to the Saturday nearest to the Group’s accounting
reference date of 31 March of the Company and its subsidiary undertakings (together referred to as the Group). The results for 2014
are for the 52-week period ended 29 March 2014. The results for 2013 are for the 52-week period ended 30 March 2013. The Parent
Company financial statements present information about the Company as a separate entity and not about its Group.
The Group financial statements have been prepared and approved by the Directors in accordance with International Financial
Reporting Standards (IFRS) as adopted by the EU and with those parts of the Companies Act 2006 applicable to companies reporting
under adopted IFRS.
IFRS and IFRIC are issued by the International Accounting Standards Board (the IASB) and must be adopted into European Union law,
referred to as endorsement, before they become mandatory under the IAS Regulation.
The application of these standards and interpretations has required change to accounting for the expected return on pension assets at
a rate above that of the interest on pension obligations which has been replaced by a net figure based upon the discount rate applied to
the net defined benefit asset or liability as required by the amendment to IAS 19. Comparative figures have been adjusted accordingly
and the pensions financial income of £11.57m and pensions financial expense of £8.07m have been replaced by a single figure of
pensions financial income of £0.62m. The net related deferred taxation of £1.01m has also been adjusted and this and the net interest
of £3.5m have been shown in the restated Statement of Comprehensive Income. Consequently the Statement of Financial Position
remains unchanged.
There have been no further alterations made to the accounting policies as a result of considering all amendments to IFRS and IFRIC
interpretations that became effective during the accounting period as these were considered to be immaterial to the Group’s operations
or were not relevant. A change to the Deed and Rules was agreed with the Trustees of the UK 600 Group Pension Scheme on 28
September 2012 allowing the accounting surplus on the scheme to be included on the Group balance sheet under IFRIC 14.
There are a number of standards and interpretations issued by the IASB that are effective for financial statements after this reporting
period. The following have not been adopted by the Group:
Effective for accounting periods starting on or after:
International Financial Reporting Standards:
IAS 1 Amendment to Financial Statement presentation
IAS 19 Amendment to Employee benefits
IFRS 9 Financial Instruments
IFRS 10 Consolidated financial statements
IFRS 11 Joint arrangements
IFRS 12 Disclosures of interests in other entities
IFRS 13 Fair Value measurement
IAS 27 Separate financial statements (revised)
IAS 28 Associates and joint ventures (revised)
IAS 32 Offsetting Financial Assets and liabilities
1 July 2012
1 January 2013
1 January 2015
1 January 2013
1 January 2013
1 January 2013
1January 2013
1 January 2013
1 January 2013
1 January 2013
These standards and interpretations have been endorsed by the European Union
The Company has elected to prepare its Parent Company financial statements in accordance with UK GAAP; these are presented on
pages 61 to 68.
The preparation of financial statements in conformity with adopted IFRS requires management to make judgements, estimates and
assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and
associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the
circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not
readily apparent from other sources. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the
period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the
revision affects both current and future periods.
25
Group accounting policies
Judgements made by management in the application of IFRS that have a significant effect on the Group financial statements and
estimates with a significant risk of material adjustment in the next year are discussed in Note 31.
The consolidated financial statements are presented in sterling rounded to the nearest thousand.
The following principal accounting policies have been applied consistently to all periods presented in these Group financial statements.
The financial statements are prepared under the historical cost convention except that properties are stated at their fair value.
The Group’s business activities, together with the factors likely to affect its future development, performance and position are set out in
the Chairman’s Statement on page 1 to 2 and the Strategic Report on pages 3 to 10.
The Group refinanced in May 2014 with Santander PLC who provided a Term Loan facility of £2m with scheduled repayments through
to November 2017 and a Revolving Credit facility of £1.3m until 31 May 2017 on normal commercial terms and covenants in the same
form. Security over the UK assets which is shared with Haddeo and the UK Pension Trustees remains in place. Overseas bank
overdrafts in place around the Group are not due for review until after the next 12 months. The Group’s forecasts and projections,
taking account of reasonably possible changes in trading performance, show that the Group should be able to operate within the level
of these facilities.
The Haddeo loan of £2.5m is due for repayment in August 2015. The Group has held discussions with Santander PLC, Haddeo and its
overseas banks and no matters have been drawn to its attention to suggest the renewal of, or provision of, similar working capital or
loan facilities would not be forthcoming on acceptable terms at the expiry of the current facility terms. The Group also considers that
alternative sources of finance would be available should the need arise.
The Directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational
existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the Annual Report
and Accounts.
BASIS OF CONSOLIDATION
The Group’s financial statements consolidate the financial statements of the Company and its subsidiary undertakings. Subsidiary
undertakings are those entities that are controlled by the Group. The results of any subsidiaries sold or acquired are included in the
Group’s income statement up to, or from, the date control passes. All intra-Group balances and transactions, including unrealised
profits arising from intra-Group transactions, are eliminated fully on consolidation.
FOREIGN CURRENCY TRANSLATION
Transactions denominated in foreign currencies are translated into Sterling at the rates of exchange ruling on the date of the
transaction. Monetary assets and liabilities are translated into Sterling at the rate of exchange ruling at the balance sheet dates. Earnings
of foreign operations are translated at the average exchange rate for the period as an approximation to actual transaction date rates.
Exchange rates used to express the assets and liabilities of overseas companies in Sterling are the rates ruling at the balance sheet
dates. Exchange differences arising from the re-translation of the investments in overseas subsidiaries are recorded as a movement on
reserves. All other exchange differences are dealt with through the income statement.
On transition to adopted IFRS, the Group took the exemption under IFRS 1 to start the translation reserve at £nil. The balance on this
reserve only relates to post transition.
REVENUE
Revenue represents commission on agency sales and the total of the amounts invoiced to customers outside the Group for goods
supplied and services rendered, excluding VAT, and after deducting discounts allowed and credit notes issued. Revenue is recognised
at the point at which goods are supplied or title passes to customers, depending on the respective terms of sale. No revenue is
recognised if there are significant uncertainties regarding recovery of the consideration due, associated completion costs, the possible
return of goods or continuing management involvement with the goods other than in respect of storage for customers’ goods.
SEGMENT ANALYSIS
The Group has adopted IFRS 8 “Operating segments” which requires operating segments to be identified on the basis of internal
reporting about components of the Group that are regularly reviewed by the chief operating decision maker to allocate resources to the
segments and to assess their performance.
Following restructuring undertaken the two business streams of Machine Tools and Precision Engineered Equipment have been
aggregated as they are operationally managed and reported internally to the Executive Directors as a single Division.. The Executive
Directors consider there to be two continuing operating segments being Machine Tools and Precision Engineered Components and
Laser Marking.
The Executive Directors assess the performance of the operating segments based on a measure of operating profit/(loss). This
measurement basis excludes the effects of Special Items from the operating segments. Head Office and unallocated represent central
functions and costs.
26
Group accounting policies
OPERATING PROFIT, SPECIAL ITEMS AND DISCONTINUED OPERATIONS
In order for users of the financial statements to better understand the underlying performance of the Group, the Board have separately
disclosed transactions which, whilst falling within the ordinary activities of the Group, are, by the virtue of their size or incidence,
considered to be one off in nature. In addition share based payments are separately identified.
Special Items include gains and losses on the revaluation or sale of properties and assets, exceptional costs relating to reorganisation,
redundancy, restructuring, legal disputes, inventory and intangibles impairments and pension scheme curtailment costs and credits.
Discontinued operations in prior year include the results for the businesses in South Africa and Poland which was disposed of during
that period.
PENSIONS AND POST-RETIREMENT HEALTH BENEFITS
The Group operates both defined benefit and defined contribution pension schemes. It also operates a retirement healthcare benefit
scheme for certain of its employees in the US. The Group’s net obligation in respect of the defined benefit schemes and the retirement
healthcare benefit scheme is calculated by estimating the amount of future benefit that employees have earned in return for their
service in the current and prior periods; that benefit is discounted to determine its present value and the fair value of any scheme
assets is deducted. The discount rate for the UK schemes is based on the annualised yield on AA credit rated corporate bonds. The
discount rate for the retirement healthcare benefit scheme is based on a similar measure which is appropriate for the US market. The
calculations are performed by a qualified actuary using the projected unit method. Actuarial gains and losses are recognised
immediately through the statement of comprehensive income. The extent to which the schemes’ assets exceed the liabilities is shown
as a surplus in the balance sheet to the extent that the surplus is recoverable by the Group. Further provision is made to the extent that
the Group has any additional obligation under a minimum funding requirement. The UK defined benefit scheme was closed to future
accrual on 31 March 2013 after a period of consultation with employees and the agreement of the scheme trustees.
Items recognised in the income statement and statement of comprehensive income are as follows:
WITHIN PROFIT FROM OPERATIONS
• current service cost – representing the increase in the present value of the defined benefit obligation resulting from employee service
in the current period;
• past service cost – representing the increase in the present value of the defined benefit obligation resulting from employee service in
prior periods, which arises from changes made to the benefits under the scheme in the current period. To the extent that the changes
to benefits vest immediately, past service costs are recognised immediately, otherwise they are recognised on a straight-line basis over
the vesting period; and
• gains and losses arising on settlements and curtailments – where the item that gave rise to the settlement or curtailment is
recognised within operating profit.
• obligations for contributions to defined contribution pension schemes are recognised as an expense in the income statement as
incurred.
BELOW PROFIT FROM OPERATIONS
• interest cost on the net asset or liability of the scheme – calculated by reference to the net scheme asset or liability and discount rate
at the beginning of the period..
Within the statement of comprehensive income
• actuarial gains and losses arising on the assets and liabilities of the scheme.
GOODWILL
Goodwill arising on acquisition of subsidiaries and businesses is capitalised as an asset and represents the excess of the fair value of
the consideration given over the fair value of the net identifiable assets, liabilities and contingent liabilities acquired.
In accordance with IFRS 1 “First-time Adoption of IFRS”, goodwill has been frozen at its net book value as at the date of transition and
will not be amortised. Instead it will be subject to an annual impairment review with any impairment losses being recognised
immediately in the income statement. Goodwill written off in prior years under previous UK GAAP will not be reinstated.
RESEARCH AND DEVELOPMENT
Research expenditure undertaken with the prospect of gaining new scientific or technical knowledge and understanding is recognised
in the income statement as an expense as incurred.
Expenditure on development activities, whereby research findings are applied to a plan or design for the production of new or
substantially improved products and processes, is capitalised if the product or process is technically and commercially feasible and the
Group has sufficient resources to complete development. The expenditure capitalised includes direct labour and an appropriate
proportion of overheads. Amortisation is charged to the income statement on a straight-line basis over the useful economic life of the
activity. Currently the annual rate used is five years.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are held at cost, subject to property revaluations every three to five years, or indications of changes in
fair value of properties. During March 2010 the Group’s properties were revalued. The valuations were performed by independent
valuers, Eddisons, and the valuations were determined by market rate for sale with vacant possession. The Directors believe that these
valuations remain appropriate at 29 March 2014. Revalued amounts are reflected in the balance sheet with the resulting credit taken to
revaluation reserve. Profits or losses on disposals are calculated using the carrying value in the balance sheet.
27
Group accounting policies
Depreciation is calculated to write off the cost (or amount of the valuation) of property, plant and equipment less the estimated residual
value on a straight-line basis over the expected useful economic life of the assets concerned. The annual rates used are generally:
• freehold buildings
• leasehold buildings
• plant and machinery
– 2 to 4%
– over residual terms of the leases
– 10 to 20%
• fixtures, fittings, tools and equipment
– 10 to 33.3%
INVENTORIES
Inventories are valued at the lower of cost and net realisable value after making due allowance for obsolete and slow moving items.
Costs incurred in bringing each product to its present location and condition are accounted for as follows:
• raw materials
– purchase cost on a first in, first out basis
• finished goods and work in progress – cost of direct materials on a first in, first out basis and labour and a proportion of manufacturing
overheads based on normal operating capacity
Net realisable value is the estimated selling price in the ordinary course of business, less estimated cost of completion and the
estimated costs necessary to make the sale.
TRADE AND OTHER RECEIVABLES
Trade receivables are initially measured on the basis of their fair value and are subsequently reduced by appropriate provisi ons for
estimated unrecoverable amounts. Trade receivables are subsequently measured at amortised cost. Bad debts are written off when
identified.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents in the balance sheet comprise cash at bank and in hand.
For the purpose of the consolidated cash flow statement, cash and cash equivalents consist of cash and cash equivalents as described
above, net of outstanding bank overdrafts which are repayable on demand and form an integral part of cash management.
COMPOUND FINANCIAL INSTRUMENTS
Compound financial instruments issued by the Group comprise convertible notes that can be converted to share capital at the option of
the holder, when the number of shares to be issued does not vary with changes in their fair value. The liability component of a
compound financial instrument is recognised initially at the fair value of a similar liability that does not have an equity conversion option.
The equity component is recognised initially at the difference between the fair value of the compound financial instrument as a whole
and the fair value of the liability component. Any directly attributable transaction costs are allocated to the liability and equity
components in proportion to their initial carrying amounts.
Subsequent to initial recognition, the liability component of a compound financial instrument is measured at amortised cost using the
effective interest method. The equity component of a compound financial instrument is not remeasured subsequent to initial
recognition.
Interest and gains and losses related to the financial liability are recognised in profit or loss. On conversion, the financial liability is
reclassified to equity; no gain or loss is recognised on conversion.
SHARE-BASED PAYMENTS
The grant-date fair value of equity-settled transactions is recognised, together with a corresponding increase in equity, over the period
in which the performance conditions are fulfilled, ending on the date on which the relevant employees become fully entitled to the
award (vesting date). The cumulative expense recognised for equity-settled transactions at each reporting date until the vesting date
reflects the extent to which the vesting period has expired and the number of awards that, in the opinion of the Directors of the Group
and based on the best available estimates at that date, will ultimately vest. The charge is trued-up only for service and non-market
conditions. The income statement charge or credit for a period represents the movement in cumulative expenses recognised as at the
beginning and end of that period.
Charges for employee services received in exchange for share-based payment have been made for all options granted after 7
November 2002 in accordance with IFRS 2 “Share-based payment”. The fair value of such options has been calculated using a
binomial or Black Scholes option-pricing model, based upon publicly available market data at the point of grant.
28
Group accounting policies
TAXATION
Income tax on the profit or loss for the period comprises current and deferred tax. Income tax is recognised in the income st atement
except to the extent that it relates to items recognised directly in equity, in which case it is recognised in the statement of
comprehensive income. Income tax is the expected tax payable on the taxable income for the year, using tax rates enacted or
substantively enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years.
Deferred tax is provided using the balance sheet liability method, providing for temporary differences between the carrying amounts of
assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The amount of deferred tax provided
is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or
substantively enacted at the balance sheet date.
A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which an asset
can be utilised.
LEASES
Assets financed by leasing arrangements, which give rights approximating to ownership, are treated as if they had been purchased
outright and are capitalised and depreciated over the shorter of the estimated useful life of the assets and the period of the leases. The
capital element of future rentals is treated as a liability and the interest element is charged against profits in proportion to the balances
outstanding. Leases where the risk and reward of ownership remain with the lessor are treated as operating leases and the rental costs
are charged against profits on a straight-line basis.
DERIVATIVE FINANCIAL INSTRUMENTS
The Group does not hedge account but uses on occasion derivative financial instruments to hedge its commercial exposure to foreign
exchange arising from operational, financing and investment activities. In accordance with its treasury policy, the Group does not
hold or issue derivative financial instruments for trading purposes. Derivative financial instruments are accounted for as trading
instruments and are recognised initially at cost. Subsequent to initial recognition, derivative financial instruments are stated at fair value
based on market valuations obtained. The gain or loss on remeasurement to fair value is recognised immediately in the income
statement.
The fair value of forward exchange contracts is their quoted market price at the balance sheet date, which is based on the quoted
forward price.
INTEREST-BEARING BORROWINGS
Interest-bearing borrowings are recognised initially at fair value less attributable transaction costs. Subsequent to initial recognition,
interest-bearing borrowings are stated at amortised cost with any difference between cost and redemption value being recognised in
the income statement over the period of the borrowings on an effective interest basis.
PROVISIONS
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that
an outflow of resources embodying economic benefit will be required to settle the obligation, although there remains uncertainty over
timing or the amount of the obligation, and a reliable estimate can be made of the amount of the obligation.
IMPAIRMENT
The carrying amount of the Group’s assets, other than inventories and deferred tax assets (see accounting policies above), are
reviewed at each balance sheet date to determine whether there is any indication of impairment. If any such indication exists, the asset’s
recoverable amount is estimated.
For goodwill, the recoverable amount is estimated at each balance sheet date.
An impairment loss is recognised whenever the carrying amount of an asset or cash generating unit exceeds its recoverable amount .
Impairment losses are recognised in the consolidated income statement. Those relating to revalued property are treated in acc ordance
with IAS 16.
Impairment losses recognised in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill
allocated to cash-generating units (group of units) and then to reduce the carrying amount of the other assets of the unit (group of units)
on a pro rata basis.
ASSETS AND LIABILITIES HELD FOR SALE
Assets and liabilities held for sale are those which are being actively marketed for sale at the period-end and which management
believes will be disposed of within 12 months of the balance sheet date. These assets are stated at fair value with any gain or loss
resulting from the changes in fair value recognised within the consolidated income statement as a special item. Where the asset is an
investment in a subsidiary undertaking then any corresponding liabilities are disclosed in liabilities held for sale.
BUSINESS COMBINATIONS
The Group measures goodwill at the acquisition date as:
The fair value of the consideration transferred: plus
The recognised amount of any non-controlling interest in the acquire: plus if the business combination is achieved in stages, the fair
value of the existing equity interest in the acquire: less
The net recognised amount (generally fair value) of the identifiable assets acquired and liabilities assumed.
29
Group accounting policies
NON-CONTROLLING INTERESTS
Transactions that result in changes in ownership interests while retaining control are accounted for as transactions with equity holders
in their capacity as equity holders. As a result, no gain or loss on such changes is recognised in profit or loss but rather in equity.
DIVIDENDS
Dividends on non-equity shares are recognised as a liability and accounted for on an accruals basis. Equity dividends are recognised
as a liability in the period in which they are declared (appropriately authorised and no longer at the discretion of the Company).
RESERVES
A consolidated statement of changes in equity is shown on page 23.
Share premium account
The share premium reserve comprises the premium paid over the nominal value of shares for shares issued.
Revaluation reserve
The Group’s properties are valued periodically and the difference between the valuation and the carrying value of the propert y is taken
to revaluation reserve. Any impairments in property valuation in excess of credits made to the revaluation reserve for that property are
charged to the consolidation income statement.
Capital redemption reserve
The capital redemption reserve was created on the cancellation and repayment of cumulative preference shares in 2001.
Translation reserve
The translation reserve comprises all foreign exchange differences arising from the translation of the financial statements of foreign
subsidiaries.
Equity reserve
The equity reserve was created on the issue of the shareholder loan which includes convertible warrants the value of which is
recognised in equity.
30
Notes relating to the consolidated financial statements
For the 52-week period ended 29 March 2014
1. SEGMENT INFORMATION
IFRS 8 – “Operating Segments” requires operating segments to be identified on the basis of internal reporting about components of
the Group that are regularly reviewed by the chief operating decision maker to allocate resources to the segments and to assess
their performance. The chief operating decision maker has been identified as the Executive Directors. The Executive Directors
review the Group’s internal reporting in order to assess performance and allocate resources.
Following the restructuring undertaken the two business streams of Machine Tools and Precision Engineered Equipment have
been aggregated as they are operationally managed and reported internally to the Executive Directors as a single Division. The
Executive Directors consider there to be two continuing operating segments being Machine Tools and Precision Engineered
Components and Laser Marking .
The executive directors assess the performance of the operating segments based on a measure of operating profit/(loss). This
measurement basis excludes the effects of Special Items from the operating segments. Head Office and unallocated represent
central functions and costs.
The following is an analysis of the Group’s revenue and results by reportable segment:
52 Weeks ended 29 March 2014
Segmental analysis of revenue
Revenue from external customers
Inter-segment revenue
Total segment revenue
Less: inter-segment revenue
Total revenue
Continuing
Machine
Tools
& Precision
Engineered
Components
Laser
Marking
Head Office
&
unallocated
Total
continuing Discontinued
£000
£000
£000
34,431
7,276
—
296
34,431
7,572
—
(296)
34,431
7,276
—
—
—
—
—
£000
41,707
296
42,003
(296)
41,707
2,348
(185)
2,163
£000
—
—
—
—
—
—
—
—
Segmental analysis of operating Profit/(loss)
before Special Items
Special Items
Group profit from operations
3,005
—
3,005
421
—
421
(1,078)
(185)
(1,263)
Other segmental information:
Reportable segment assets
Reportable segment liabilities
Fixed asset additions
Depreciation and amortisation
37,454
6,153
126
43,733
(13,007)
(1,522)
(6,659)
(21,188)
412
308
643
159
—
28
1,055
495
Total
£000
41,707
296
42,003
(296)
41,707
2,348
(185)
2,163
31
Notes relating to the consolidated financial statements
For the 52-week period ended 29 March 2014
1. SEGMENT INFORMATION (CONTINUED)
52-weeks ended 30 March 2013
Segmental analysis of revenue
Revenue from external customers
Inter-segment revenue
Total segment revenue
Less: inter-segment revenue
Total revenue
Continuing
Machine
Tools
& Precision
Engineered
Components
Laser
Marking
Head Office
& unallocated
£000
£000
£000
34,906
6,882
—
131
34,906
7,013
—
(131)
34,906
6,882
—
—
—
—
—
Total Discontinued
£000
£000
Total
£000
41,788
131
41,919
(131)
3,658 45,446
323
454
3,981 45,900
(323)
(454)
41,788
3,658 45,446
Segmental analysis of operating Profit/(loss) before
special Items
2,145
213
(1,385)
973
(500)
473
Special Items
(1,391)
7
2,082
698
—
698
Group (Loss)/profit from operations
Other segmental information:
Reportable segment assets
Reportable segment liabilities
Fixed asset additions
Depreciation and amortisation
754
220
697
1,671
(500)
1,171
18,006
4,374
22,123
44,503
(7,166)
(1,187)
(14,493)
(22,846)
72
491
589
195
—
28
661
714
Inter-segment pricing is determined on an arm’s length basis. Segment results, assets and liabilities include items directly attributable
to a segment as well as those that can be allocated on a reasonable basis.
Segment capital expenditure is the total cost incurred during the period to acquire segment assets that are expected to be us ed for
more than one period.
Geographical segmental analysis of revenue is shown by origin and destination in the following two tables:
Segmental analysis by origin
Gross sales revenue:
UK
North America
Australasia
Continuing Revenue
Discontinued
Total Revenue
2014
£000
2013
%
£000
%
20,803
49.9
18,076
39.8
18,703
2,201
41,707
—
41,707
44.8
5.3
100.0
—
100.0
19,994
3,718
41,788
3,658
45,446
44.0
8.2
92.0
8.0
100.0
32
Notes relating to the consolidated financial statements
For the 52-week period ended 29 March 2014
1. SEGMENT INFORMATION (CONTINUED)
Segmental analysis by destination:
2014
2013
£000
%
£000
%
Gross sales revenue:
UK
Other European
North America
Africa
Australasia
Central America
Middle East
Far East
Continuing Revenue
Discontinued
8,223
6,486
22,360
315
2,057
112
914
1,240
41,707
—
41,707
19.7
15.6
53.6
0.8
4.9
0.3
2.2
2.9
100.0
—
100.0
6,581
6,662
22,691
79
3,765
142
729
1,139
41,788
3,658
45,446
14.5
14.7
49.9
0.2
8.3
0.3
1.6
2.5
92.0
8.0
100.0
There are no customers that represent 10% or more of the Group’s revenues.
Discontinued operations
600SA the Group’s South African business was sold on 16 July 2012 to Eqstra Holdings Limited for a total consideration of ZAR (South
African Rand) 24.3m which resulted in net proceeds after costs received in the UK of £1.7m. This represented the full activities of the
Mechanical Handling and Waste business segment. FMT Colchester Sp. Zoo the Group’s Polish business was sold for a nominal sum on
11 September 2012. This business was the Group’s only activity in Poland. The results for both these businesses are included in the post
tax loss on discontinued activities in the Group’s consolidated income statement.
The results of these discontinued operations are as follows:
Results of the discontinued operations
Revenue
Expenses
Loss before tax from discontinued operations
Taxation
Profit/(Loss) from operating activities after tax
Profit/(Loss) from sale of discontinued activities
Loss for the period
Cash flows from discontinued operations
Net cash flow from operating activities
Cash flow from investing activities
Net cash used /generated from discontinued activities
2014
£000
Total South Africa
Poland
3,042
(3,002)
40
—
40
—
40
616
(1,156)
(540)
—
(540)
205
(335)
—
—
—
—
—
—
—
£000
Total South Africa
Poland
—
—
—
40
—
40
(134)
—
(134)
2013
£000
Total
3,658
(4,158)
(500)
—
(500)
205
(295)
£000
Total
(94)
—
(94)
33
Notes relating to the consolidated financial statements
For the 52-week period ended 29 March 2014
2. OTHER OPERATING INCOME/OPERATING EXPENSES
Other operating income
Operating expenses:
– administration expenses
– distribution costs
Total operating expenses
2014
£000
134
8,929
2,899
2013
£000
79
8,068
2,990
11,828
11,058
3. SPECIAL ITEMS AND SHARE-BASED PAYMENTS COST
In order for users of the financial statements to better understand the underlying performance of the Group the Board have separately
disclosed transactions which by virtue of their size or incidence, are considered to be one off in nature. In addition the charge for share
based payments has also been separately identified.
Special items include abortive transaction costs gains and losses on the sale of properties and assets, exceptional costs relating to
reorganisation, redundancy and restructuring, legal disputes and inventory,asset and intangibles impairments.
Cost of sales
Inventory impairments
Redundancies
Operating costs
Abortive transaction costs
Refinancing
Reorganisation and restructuring costs
Property disposals
Pension curtailment credit
Restructuring costs
Share-based payments
2014
£000
—
—
128
—
—
—
—
128
2013
£000
246
354
—
295
760
(23)
(2,429)
(797)
57
99
During the year the Group incurred costs with regard to the abortive acquisition of the Group by Qinddao D&D Investment Group Co.
Ltd. Costs were also incurred with regard to the granting of share options.
In prior years, reorganisation and restructuring costs related to legal disputes and costs incurred in the UK with regard to site closures.
The property disposals related to the disposal of the three UK sites at Shepshed, Batley and Heckmondwike.
Inventory impairments related to a review of the recoverability of stock following these closures.
The pensions curtailment gain arose on the change to actuarial assumptions as a result of the closure to the UK final scheme to future
accrual at the end of March 2013.
Refinancing costs related to the costs of the share placing and bank facility restructuring in September 2012.
34
Notes relating to the consolidated financial statements
For the 52-week period ended 29 March 2014
4. OPERATING PROFIT/(LOSS)
Operating profit/(loss) is after charging/(crediting) :
– depreciation of assets held under finance leases
– amortisation of development expenditure
– research and development expensed as incurred
– hire of plant
– other operating lease rentals
– loss on sale of property, plant and equipment
– rents receivable
– profit on sale of property, plant and equipment
2014
£000
33
28
56
10
86
3
—
—
2013
£000
25
87
—
11
12
1
(52)
(2)
Special Items
–Abortive transaction costs, Reorganisation, redundancy, pensions, inventory and intangibles impairment
(note 3)
185
(797)
Auditor’s remuneration:
– audit of these financial statements
– amounts receivable by auditor and its associates in respect of:
– auditing of accounts of associates of the company pursuant to legislation (including that of countries and
territories outside of Great Britain)
– other services relating to taxation
– other services pursuant to such legislation
77
42
17
45
88
42
36
66
Amounts paid to the Company’s auditor in respect of services to the Company, other than the audit of the Company’s financial
statements have not been disclosed as the information is required instead to be disclosed on a consolidated basis.
5. PERSONNEL EXPENSES
Staff costs:
– wages and salaries
– social security costs
– pension charges relating to defined contribution schemes
– pension charges relating to defined benefit schemes
– equity share options expense (included in Special Items)
2014
£000
7,819
1,113
394
18
57
2013
£000
8,193
1,219
227
234
100
9,401
9,973
In addition to the above staff costs, redundancy costs of £nil were incurred during the year (2013 - £354,000). Director’s emoluments
including disclosure of the highest paid director are included in the Director’s Emoluments table contained within the Remuneration
report.
35
Notes relating to the consolidated financial statements
For the 52-week period ended 29 March 2014
5. PERSONNEL EXPENSES (CONTINUED)
The average number of employees of the Group (including Executive Directors) during the period was as follows:
2014
Number
2013
Number
Management and administration
Production
Sales
Continuing
Discontinued
Total
39
97
76
212
—
212
Details of Directors’ emoluments and share option schemes are given in the Directors’ Remuneration Report on pages 15 to 18.
6. FINANCIAL INCOME AND EXPENSE
Interest income
Interest on pensions surplus
Financial income
Bank overdraft and loan interest
Shareholder loan interest
Other loan interest
Other finance charges
Finance charges on finance leases
Amortisation of shareholder loan expenses
Financial expense
7. TAXATION
Current tax:
Corporation tax at 23% (2013: 24%):
– current period
Overseas taxation:
– current period
Total current tax charge
Deferred taxation:
– current period
– prior period
Total deferred taxation charge (Note 13)
Taxation charged to the income statement
44
105
79
228
109
337
Restated
2013
£000
7
618
625
(185)
(200)
(23)
—
(61)
(117)
(586)
2014
£000
7
827
834
(169)
(200)
—
(1)
(18)
(134)
(522)
2014
£000
Restated
2013
£000
—
—
(62)
(62)
(400)
(161)
(561)
(623)
(499)
(499)
(569)
1,714
1,145
646
36
Notes relating to the consolidated financial statements
For the 52-week period ended 29 March 2014
7. TAXATION (CONTINUED)
TAX RECONCILIATION
The tax charge assessed for the period is lower than the standard rate of corporation tax in the UK of 23% (2013: 24%). The
differences are explained below:
Restated
Profit before tax
Profit before tax multiplied by the standard rate of corporation tax
in the UK of 23% (2013: 24%)
Effects of:
– expenses not deductible
– overseas tax rates
– pension fund surplus taxed at higher rate
– property disposals
– deferred tax prior period adjustment
– (unrecognised losses utilised)/tax not recognised on losses
– impact of rate change
Taxation charged/(credited) to the income statement
2014
£000
2,475
%
2013
£000
1,710
%
583
23.6
410
24.0
138
48
100
-
161
(520)
113
623
5.6
1.9
4.0
-
6.5
(21.0)
4.6
25.2
109
182
340
(656)
(1,714)
725
(42)
(646)
6.4
10.6
19.9
(38.4)
(100.2)
42.4
(2.5)
(37.7)
Following the enactment of legislation in the UK to reduce the corporation tax rate from 24% to 23% from 1 April 2013, the effective tax
rate this year includes the impact on the income statement of calculating the UK deferred tax balances at the lower UK corporation tax
rate. The impact of this rate change is a £113,000 increase in the tax charge in the income statement. The March 2013 Budget
announced that the rate will further reduce to 20% by 2015 in addition to the planned reduction to 21% by 2014 previously announced
in December 2012.
Deferred taxation balances are analysed in note 13.
8. DIVIDENDS
No dividend was paid in period (2013: no dividend paid).
9. EARNINGS PER SHARE
The calculation of the basic earnings per share of 2.19p (2013: 2.75p) is based on the earnings for the financial period attributable to
the Parent Company’s shareholders of a profit of £1,852,000 (2013: £2,061,000) and on the weighted average number of shares i n
issue during the period of 84,430,346 (2013: 74,997,407). At 29 March 2014, there were 4,500,000 (2013: 4,500,000) potentially
dilutive shares on option with a weighted average effect of 1,553,045 (2013: 1,615,068) shares giving a diluted profit per share of 2.15p
(2013 2.69p)
Weighted average number of shares
Issued shares at start of period
Effect of shares issued in the year
Weighted average number of shares at end of period
Total post tax earnings
Discontinued Operations
Special Items and Share Based Payment Costs
Pensions Interest
Amortisation of Shareholder loan expenses
Associated Taxation
Prior year US deferred tax – first time recognition of losses
Underlying Earnings
Underlying EPS
2014
2013
84,256,091
63,926,253
174,255
11,071,154
84,430,346
74,997,407
£000
1,852
-
185
(827)
134
258
-
1,602
1.90p
£000
2,061
295
152
(618)
117
188
(1,753)
442
0.59p
37
Notes relating to the consolidated financial statements
For the 52-week period ended 29 March 2014
10. EMPLOYEE SHARE OPTION SCHEMES
The Group has granted share options to employees under The 600 Group PLC Deferred Share Plan 2011.
Options under the DSP were granted to the Executive Directors on 19 November 2012 which are exercisable between 3 and 10 years
from the grant date at 10p per share. The schemes are equity-settled.
SHARE-BASED EXPENSE
The Group recognised a total charge of £57,000 (2013: £99,000) in relation to equity-settled share-based payment transactions.
2014
DSP
2013
DSP
The number and weighted average exercise prices of share options
Number of options outstanding at beginning of period
4,500,000
502,576
Number of options granted in period
Number of options forfeited/lapsed in period
Number of options exercised in period
Number of options outstanding at end of period
Number of options exercisable at end of period
-
-
—
4,500,000
(502,576)
—
4,500,000
4,500,000
—
—
On 7 April 2014 5,400,000 options with an exercise price of 17p were granted under the 600 Group PLC Deferred Share Plan
excercisable between 3 and 10 years from the date of grant. 2,000,000 options were granted to Mr N Rogers, 1,400,000 options to Mr
N Carrick, 1,000,000 to Mr P Dupee, 500,000 to Mr D Zissman and 500,000 to Mr S Rutherford.
During the current and prior period, the Group has not granted equity as consideration for goods or services received.
FAIR VALUE ASSUMPTIONS OF SHARE-BASED PAYMENTS
THE 600 GROUP PLC 2011 DEFERRED SHARE PLAN (DSP)
The fair value of awards granted under these Share Plans are determined using the Black Scholes valuation model. The fair val ue of
share options and assumptions are shown in the table below:
Fair value
Share price at grant
Exercise price
Dividend yield
Expected volatility
Expected life
Risk-free interest rate
Number of shares under option
2014
DSP
£000
£0.04
£0.13
10p
0%
50%
2013
DSP
£000
£0.04
£0.13
10p
0%
50%
3.0 years
3.0 years
4.08%
4.08%
4,500,000
4,500,000
38
Notes relating to the consolidated financial statements
For the 52-week period ended 29 March 2014
11. PROPERTY, PLANT AND EQUIPMENT
Cost or valuation
At 30 March 2013
Exchange differences
Revaluation
Additions during period
Disposals during period
At 29 March 2014
At professional valuation
At cost
Depreciation
At 30 March 2013
Exchange differences
Revaluation
Charge for period
Disposals during period
At 29 March 2014
Net book value
At 29 March 2014
At 30 March 2013
Land and buildings
Plant and
Fixtures,
fittings,
tools and
Freehold
Leasehold
machinery
equipment
£000
£000
£000
£000
Total
£000
1,124
(186)
31
—
—
969
969
—
969
169
(16)
(13)
7
—
147
822
955
2,427
—
—
11
(32)
2,406
2,395
11
2,406
19,890
(108)
—
464
(1,619)
18,627
—
18,627
18,627
112
18,734
—
—
27
(15)
124
2,282
2,315
(74)
—
395
(1,571)
17,484
1,143
1,156
2,158
(115)
—
69
(93)
2,019
—
2,019
2,019
2,084
(110)
—
38
(94)
1,918
101
74
25,599
(409)
31
544
(1,744)
24,021
3,364
20,657
24,021
21,099
(200)
(13)
467
(1,680)
19,673
4,348
4,500
The net book value of property, plant and equipment includes £268,991 (2013: £129,700) of assets held under finance leases. The
depreciation charged in the period against assets held under finance leases was £32,655 (2013: £25,000).
39
Notes relating to the consolidated financial statements
For the 52-week period ended 29 March 2014
11. PROPERTY, PLANT AND EQUIPMENT (CONTINUED)
During March 2010 the Group’s properties were revalued. The valuations were performed by independent valuers and the valuations
were determined by market rate for sale with vacant possession. The Directors believe that these valuations remain appropriate at 29
March 2014.
Various UK properties with a net book value of £391,000 (2013: £410,000) are charged as security for borrowing facilities.
Cost or valuation
At 31 March 2012
Exchange differences
Additions during period
Disposals during the period
At 30 March 2013
At professional valuation
At cost
Depreciation
At 31 March 2012
Exchange differences
Charge for period
Disposals during period
At 30 March 2013
Net book value
At 30 March 2013
At 31 March 2012
Land and buildings
Plant and
Fixtures,
fittings,
tools and
Freehold
Leasehold
machinery
equipment
£000
£000
£000
£000
Total
£000
1,064
2,518
22,213
2,381
28,176
60
—
—
1,124
1,124
—
1,124
107
6
56
—
169
955
957
—
—
(91)
2,427
2,395
32
2,427
176
—
27
(91)
112
2,315
2,342
48
127
(2,498)
19,890
—
19,890
19,890
50
2
(275)
2,158
—
2,158
2,158
158
129
(2,864)
25,599
3,519
22,080
25,599
20,598
2,210
23,091
34
451
(2,349)
18,734
1,156
1,615
44
93
(263)
2,084
74
171
84
627
(2,703)
21,099
4,500
5,085
40
Notes relating to the consolidated financial statements
For the 52-week period ended 29 March 2014
12. INTANGIBLE ASSETS
Cost
At 30 March 2013
Additions
Written off
At 29 March 2014
Amortisation and impairment
At 30 March 2013
Amortisation
Written off
At 31 March 2014
Net book value
At 31 March 2014
At 30 March 2013
Development
Goodwill
Expenditure
£000
£000
Total
£000
1,514
—
(1,514)
—
1,514
—
(1,514)
—
—
—
1,772
511
(310)
1,973
475
28
(310)
193
1,780
1,297
3,286
511
(1,824)
1,973
1,989
28
(1,824)
193
1,780
1,297
The additions to Development Expenditure of £511k in the period and £532k in the prior period related primarily to internal
development.
Development
Goodwill
Expenditure
£000
£000
Cost
At 31 March 2012
Additions
At 30 March 2013
Amortisation and impairment
At 31 March 2012
Amortisation
At 30 March 2013
Net book value
At 30 March 2013
At 31 March 2012
1,514
—
1,514
1,514
—
1,514
—
—
Amortisation and impairment charges are recorded in the following line items in the income statement:
Operating expenses
1,240
532
1,772
388
87
475
1,297
852
2014
£000
28
Total
£000
2,754
532
3,286
1,902
87
1,989
1,297
852
2013
£000
87
IMPAIRMENT OF GOODWILL
Goodwill of £1.51m arose on acquisitions before the date of transition to adopted IFRS and was retained at the previous UK GAAP
amounts, subject to it being tested for impairment at that date. £1.0m related to the Parat operation in Germany, £0.1m related to the
Gamet operation in the UK and £0.4m related to the Metal Muncher operation in the US. All of these cash-generating units have been
reviewed for impairment and had been fully provided against at the start of the current reporting period.
41
Notes relating to the consolidated financial statements
For the 52-week period ended 29 March 2014
13. DEFERRED TAX ASSETS AND LIABILITIES
RECOGNISED DEFERRED TAX ASSETS AND LIABILITIES
Deferred tax assets and liabilities are attributable to the following:
Accelerated capital allowances
Short-term timing differences
Tax losses
Overseas tax losses
Employee benefits
Revaluations and rolled over gains
Research and development
Net tax assets/(liabilities)
Assets
Liabilities
Net
2014
£000
689
301
1,137
596
—
—
—
2013
£000
725
438
1,308
649
—
—
—
2014
£000
—
—
—
—
(6,653)
(985)
(99)
2,723
3,120
(7,737)
2013
£000
—
—
—
—
(6,350)
(1,133)
(114)
(7,597)
2014
£000
689
301
1,137
596
(6,653)
(985)
(99)
(5,014)
2013
£000
725
438
1,308
649
(6,350)
(1,133)
(114)
(4,477)
MOVEMENT IN DEFERRED TAX DURING THE PERIOD
As at
Statement of
As at
30 March
Income
Eliminated
comprehensive
Exchange
31 March
statement
On disposal
income
Fluctuations
£000
£000
Accelerated capital allowances
Short-term timing differences
Tax losses
Overseas tax losses
Employee benefits
Revaluations and rolled over gains
Research and development
2013
£000
725
438
1,308
649
(6,350)
(1,133)
(114)
(4,477)
£000
(36)
(115)
(171)
4
—
—
—
—
(406)
—
148
15
(561)
—
—
—
£000
—
(22)
—
(57)
(36)
—
—
2014
£000
689
301
1,137
596
(6,653)
(985)
(99)
(115)
(5,014)
—
—
—
—
139
—
—
139
MOVEMENT IN DEFERRED TAX DURING THE PRIOR PERIOD
As at
Restated
Restated
Statement of
As at
31 March
Income
Eliminated
comprehensive
Exchange
30 March
Accelerated capital allowances
Short-term timing differences
Tax losses
Overseas tax losses
Employee benefits
Revaluations and rolled over gains
Research and development
2012
£000
72
36
1,365
405
—
(1,226)
(139)
513
statement
On disposal
income
Fluctuations
£000
£000
£000
£000
653
389
(57)
617
(643)
93
25
—
—
—
(405)
—
—
—
—
—
—
—
(5,730)
—
—
1,077
(405)
(5,730)
2013
£000
725
438
1,308
649
(6,350)
(1,133)
(114)
(4,477)
—
13
—
32
23
—
—
68
Deferred taxation at 35% is applied to pension assets, being the rate applicable to refunds from a scheme, as opposed to the normal rate
of 20%
42
Notes relating to the consolidated financial statements
For the 52-week period ended 29 March 2014
13. DEFERRED TAX ASSETS AND LIABILITIES (CONTINUED)
Following the enactment of legislation in the UK to reduce the corporation tax rate from 24% to 23% from 1 April 2013, the effective tax
rate this year includes the impact on the income statement of calculating the UK deferred tax balances at the lower UK corporation tax
rate. The impact of this rate change is a £42,000 decrease in the tax charge in the income statement. The March 2013 Budget
announced that the rate will further reduce to 20% by 2015 in addition to the planned reduction to 21% by 2014previously announced in
December 2012.
No provision is made for taxation that would arise if reserves in overseas companies were to be distributed.
The following deferred tax assets have not been recognised on the basis that their future economic benefit is uncertain:
Advance corporation tax recoverable
Tax losses
There is no expiry date for the advance corporation tax recoverable or the tax losses.
14. INVENTORIES
Raw materials and consumables
Work in progress
Finished goods and goods for resale
2014
£000
1,670
4,234
2013
£000
1,670
6,782
2014
£000
646
872
6,987
8,505
2013
£000
706
680
8,887
10,273
The Directors consider all inventories to be essentially current in nature although the Group’s operational cycle is such that a proportion
of inventories will not be realised within twelve months. It is not possible to determine with accuracy when specific inventory will be
realised as this is subject to a number of issues, including customer demand.
During the period inventory provisions have decreased by £1,228,000 (2013: decreased by £1,991,000). Following the impairment
provisions, inventories are valued at fair value less costs to sell rather than at historical cost.
15. TRADE AND OTHER RECEIVABLES
Trade receivables
Other debtors
Other prepayments and accrued income
The trade receivables disclosed above are shown net of the provisions which are disclosed below.
2014
£000
5,248
197
764
6,209
2013
£000
5,502
263
418
6,183
43
Notes relating to the consolidated financial statements
For the 52-week period ended 29 March 2014
15. TRADE AND OTHER RECEIVABLES CONTINUED
The movements on the Group’s provisions against trade receivables are as follows:
At start of year
Exchange differences on opening balances
Utilised in the period
Charged in the period
Receivables written off during the year as uncollectable
At end of year
The ageing analysis of gross trade receivables, before provisions, is as follows:
Current (not overdue and no provision held)
Overdue but no provision held:
– 0–3 months overdue
– 3–6 months overdue
– 6–12 months overdue
– more than 12 months overdue
Total gross trade receivables before provision
2013
£000
480
(18)
(272)
62
—
252
2014
£000
4,043
1,235
134
51
37
2013
£000
428
9
(71)
117
(3)
480
2013
£000
4,149
1,176
578
151
12
5,500
6,066
As at 29 March 2014, trade receivables that were neither past due nor impaired related to a number of independent customers for
whom there is no recent history of default.
The other classes of debtors do not contain impaired assets.
44
Notes relating to the consolidated financial statements
For the 52-week period ended 29 March 2014
16. CASH AND CASH EQUIVALENTS
Cash at bank
Short-term deposits
Cash and cash equivalents per statement of financial position and per cash flow statement
17. LOANS AND OTHER BORROWINGS
CURRENT:
Trade finance
Bank loans
Obligations under finance leases (note 20)
NON-CURRENT:
Bank loans
Shareholder loan
Obligations under finance leases (note 20)
2014
£000
1,049
100
1,149
2014
£000
455
3,426
101
3,982
2014
£000
-
2,289
186
2,475
2013
£000
925
100
1,025
2013
£000
-
1,208
124
1,332
2013
£000
2,808
2,163
129
5,100
The £2.5m shareholder loan was issued with 12.5m convertible warrants attached to it. These warrants allow the holders to either
convert the loan into 20p shares or to purchase 20p shares for a cash consideration.11.6m warrants remain outstanding. The loan has
both debt and equity components and so the value has been split between these components. The debt element is only repayable in
August 2015 and as a result the loan is classified as non-current. Deferred costs relating to the loan of £143,000 are also netted off the
loan carrying value which at the period-end is £2,289,000.
The Term Loan of £469,000 included within Bank loans will be repaid on a quarterly basis with payments of £160,000 on 31 Marc h
2014 and 30 June 2014 and a final payment of £149,000 on 30 September 2014. The revolving credit facility of £2,500,000 included
within Bank Loans is repayable in June 2014 and is now classified as current.
Subsequent to the year end the Term Loan and Revolving facility were replaced by a new facility with Santander.
Given the nature of the Group’s financial assets and liabilities, it is the Directors’ opinion that there is no material diff erence between
their reported book values and estimated fair values.
The above loans and borrowings are secured by way of fixed and floating charges over the assets of the Company and its subsidiaries.
18. TRADE AND OTHER PAYABLES
Payments received on account
Trade payables
Social security and other taxes
Other creditors
Accruals and deferred income
2014
£000
13
3,136
206
1,624
1,446
6,425
2013
£000
86
4,034
206
1,279
1,368
6,973
45
Notes relating to the consolidated financial statements
For the 52-week period ended 29 March 2014
19. PROVISIONS
Provision carried forward at 30 March 2013
Exchange differences
Charged to income statement
Utilised in the period
Provision carried forward at 29 March 2014
Other
£000
1,214
—
—
(883)
331
Warranties
£000
95
(13)
20
(4)
98
Total
£000
1,309
(13)
20
(887)
429
The timing of warranty payments are uncertain in nature. The warranty provisions are calculated based on historical experience of
claims received, taking into account recent sales of items which are covered by warranty. The provision relates mainly to pro ducts sold
in the last twelve months. The typical warranty period is now twelve months.
The other provisions relate to various legal disputes that the directors believe should be provided against. Part of the provision utilised
during the year is in respect of payments made on settlement of an onerous lease exited during the Group strategic review in 2012. A
further £150,000 is due to be paid during the 2015 financial year. The timing of other outflows is not clear due to the uncertainty around
the timescales of the various legal processes.
20. OBLIGATIONS UNDER FINANCE LEASES
The maturity of obligations under finance leases is as follows:
Falling due:
– within one year
– within two to five years
– less future finance charges
Amounts falling due within one year
Amounts falling due after one year
2014
£000
110
197
(20)
287
101
186
287
2013
£000
124
139
(10)
253
124
129
253
46
Notes relating to the consolidated financial statements
For the 52-week period ended 29 March 2014
21. SHARE CAPITAL
Authorised
626,391,704 ordinary shares of 1p each
57,233,679 deferred shares of 24p each
Allotted, called-up and fully paid:
Ordinary shares of 1p each
2014
£000
2013
£000
6,264
13,736
20,000
6,264
13,736
20,000
84,256,091 ordinary shares of 1p each on issue at start of the period (2013: 63,926,253 ordinary shares )
235,795 ordinary shares of 1p each issued to N Rogers and N Carrick on subscription following bonus
payment
19,663,171 ordinary shares of 1p each issued in institutional placing
666,667 ordinary shares of 1p each issued to N Rogers on subscription following bonus payment
84,491,886 ordinary shares of 1p each on issue at end of period (2013: 84,256,091 ordinary shares of 1p)
843
2
—
—
845
639
—
197
7
843
Deferred shares of 24p each:
57,233,679 deferred shares of 24p each on issue at start and end of period
13,736
13,736
Total Allotted, called-up and fully paid at the end of period
14,581
14,579
The Company has one class of ordinary shares which carry no rights to fixed income. The ordinary shareholders are entitled to receive
dividends as declared and are entitled to vote at meetings of the Company. During the current year 173,061 and 62,734 ordinary
shares were issued to N Rogers and N Carrick respectively in June 2013. This resulted in share capital increasing by £2,358 w ith a
corresponding share premium increase of £26,527.
During the prior year an institutional placing of 19,663,171 shares and subscription for 666,667 shares by N Rogers took place in
September 2012. This resulted in share capital increasing by £203,298. The corresponding share premium increase was £1,328,106
from which expenses of issue of £114,991 have been deducted.
During 2011 each issued ordinary share of 25p was sub-divided and converted into one new ordinary share of 1p and one deferred
share of 24p. Each of the unissued ordinary shares of 25p was also sub-divided into 25 ordinary shares of 1p. The deferred shares are
not marketed, cannot be converted and are cancellable by the company without compensaton.
During 2011 a £2.5m related party loan was issued with 12.5m convertible warrants attached to it. These warrants allow the holders to
either convert the loan into 1p shares (at a price of 20p per share) or to purchase 1p shares for cash consideration (at a pr ice of 20p
per share) 11.6m warrants remain outstanding.11.6m warrants remain outstanding.
22. RECONCILIATION OF NET CASH FLOW TO NET DEBT
Increase in cash and cash equivalents
Decrease in debt and finance leases
Decrease in net debt from cash flows
Net debt at beginning of period
Shareholder loan deferred cost amortisation
Exchange effects on net funds
Net debt at end of period
2014
£000
211
14
225
2013
£000
1,103
1,556
2,659
(5,407)
(7,994)
(126)
—
(111)
39
(5,308)
(5,407)
47
Notes relating to the consolidated financial statements
For the 52-week period ended 29 March 2014
23. ANALYSIS OF NET DEBT
Cash at bank and in hand
Term deposits (included within cash and cash equivalents on the
balance sheet)
Debt due within one year
Debt due after one year
Shareholder loan
Finance leases
Total
At
30 March
Exchange
2013
£000
925
100
1,025
(1,208)
(2,808)
(2,163)
(253)
(5,407)
movement
£000
(87)
—
(87)
63
—
—
24
—
Other
£000
—
—
—
(2,500)
2,500
(126)
—
(126)
At
29 March
2014
£000
1,049
100
1,149
(3,881)
—
Cash flows
£000
211
—
211
(236)
308
—
(2,289)
(58)
225
(287)
(5,308)
24. FINANCIAL INSTRUMENTS
OVERVIEW
The Group has exposure to the following risks from its use of financial instruments:
• credit risk;
• liquidity risk; and
• market risk.
This note presents information about the Group’s exposure to each of the above risks, the Group’s objectives, policies and processes
for measuring and managing exposure to these.
The Board of Directors has overall responsibility for the establishment and oversight of the Group’s risk management framewor k. The
Board is responsible for developing and monitoring the Group’s risk management policies.
The Group’s risk management policies are established to identify and analyse the risks faced by the Group, to set appropriate risk limits
and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect
changes in market conditions and the Group’s activities. The Group, through its training and management standards and procedures,
aims to develop a disciplined and constructive control environment in which all employees understand their roles and obligations.
The Group actively manages and monitors capital across the different businesses within the Group. Targets in relation to return on
capital are considered as part of the annual budgeting process. During 2011 a shareholder loan was raised which had 12.5m warrants
attached to it. These warrants allow the holders to either convert the loan into 20p shares or to purchase 20p shares for a cash
consideration. 905,000 of these warrants have so far been exercised and shares issued on exercise for cash leaving 11.6m warrants
outstanding which are due to expire in August 2015.
The Directors determine the appropriate capital structure of the Group between funds raised from equity shareholders (equity), through
the issue of shares and retention of profits generated, and funds borrowed from financial institutions, other businesses, individuals and
preference shareholders (debt) in order to finance the Group’s activities both now and in the future. The Board’s objectives when
managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide returns to Sharehold ers and
benefits to other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. In order to maintain or adjust
the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new
shares or sell assets to reduce debt. The Directors have decided that it has not been possible to pay a dividend to equity shareholders.
The Audit Committee oversees how management monitors compliance with the Group’s risk management policies and procedures and
reviews the adequacy of the risk management framework in relation to the risks faced by the Group. The Audit Committee is assisted in
its oversight role by head office staff undertaking both regular and ad hoc reviews of risk management controls and procedures, the
results of which are reported to the Audit Committee.
The Directors have considered the hierarchical fair value disclosure requirements of the relevant accounting Standards and these will be
applied as appropriate. At the period end the Directors do not believe there is a material difference between any financial asset or liability
and the book values disclosed.
48
Notes relating to the consolidated financial statements
For the 52-week period ended 29 March 2014
24. FINANCIAL INSTRUMENTS (CONTINUED)
CREDIT RISK
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual
obligations, and arises principally from the Group’s receivables from customers.
The Group’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. The demographics of the
Group’s customer base, including the default risk of the industry and country in which customers operate, has less of an influence on
credit risk. Geographically, there is no significant concentration of credit risk.
The Board has established a credit policy under which each new customer is analysed individually for creditworthiness before the
Group’s standard payment and delivery terms and conditions are offered. The Group’s review includes external ratings, where
available, and in some cases bank references. Purchase limits are established for each customer, which represents the maximum open
amount without requiring approval from the Board; these limits are reviewed quarterly. Customers that fail to meet the Group’ s
benchmark creditworthiness may transact with the Group only on a prepayment basis.
Goods are sold subject to retention of title clauses, so that in the event of non-payment the Group may have a secured claim. The
Group does not require collateral in respect of trade and other receivables.
The Group establishes an allowance for impairment that represents its estimate of incurred losses in respect of trade and other
receivables. The main components of this allowance are a specific loss component that relates to individually significant exposures,
and a collective loss component established for groups of similar assets in respect of losses that have been incurred but not yet identified.
The collective loss allowance is determined based on historical data of payment statistics for similar financial assets.
The carrying value of financial assets represents the maximum credit exposure. The maximum exposure at the reporting date was:
Trade receivables
Cash and cash equivalents
The maximum exposure to credit risk for trade receivables at the reporting date by geographic region was:
UK
Other European countries
North America
Australasia
2014
£000
5,248
693
5,941
2013
£000
3,058
-
1,921
269
5,248
2013
£000
5,502
1,025
6,527
2013
£000
3,627
-
1,837
121
5,585
49
Notes relating to the consolidated financial statements
For the 52-week period ended 29 March 2014
24. FINANCIAL INSTRUMENTS (CONTINUED)
LIQUIDITY RISK
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group’s approach to
managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both
normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation.
Due to banking facilities being held with different banks in USA and Australia certain restrictions on the repatriation of funds to the UK
may be imposed by the local bank.
Typically the Group ensures that it has sufficient cash or overdraft facilities on demand to at least meet any unexpected ope rational
expenses; this excludes the potential impact of extreme circumstances that cannot reasonably be predicted, such as natural disasters.
The following are the contractual maturities of financial liabilities, including interest payments:
Bank overdrafts
Bank loan
Shareholder loan
Finance lease obligations
Interest bearing financial liabilities
Trade and other payables
Financial liabilities
Bank overdrafts
Bank loan
Shareholder loan
Finance lease obligations
Interest bearing financial liabilities
Trade and other payables
Financial liabilities
2014
carrying
Contractual
Less than
amount
cash flows
£000
455
3,426
2,289
287
6,457
6,425
£000
455
3,426
2,289
287
6,457
6,425
1 year
£000
455
3,426
—
101
3,982
6,425
12,882
12,882
10,407
2013
carrying
Contractual
Less than
1–2 years
2–5 years
£000
£000
—
—
2,289
106
2,395
—
2,395
—
—
—
80
80
—
80
amount
cash flows
£000
—
4,016
2,163
253
6,432
6,973
£000
—
4,016
2,163
253
6,432
6,973
13,405
13,405
1 year
£000
—
1,208
—
124
1,332
6,973
8,305
1–2 years
2–5 years
£000
—
2,808
—
129
2,937
—
2,937
£000
—
—
2,163
—
2,163
—
2,163
MARKET RISK
Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect the
Group’s income. The objective of market risk management is to manage and control market risk exposures within acceptable
parameters, while optimising the return on risk.
50
Notes relating to the consolidated financial statements
For the 52-week period ended 29 March 2014
24. FINANCIAL INSTRUMENTS (CONTINUED)
CURRENCY RISK
The Group is exposed to currency risk on sales, purchases and borrowings that are denominated in a currency other than the
respective currencies of Group entities, primarily the Euro (€) and US Dollars ($).
The Group’s exposure to foreign currency risk may be summarised as follows:
Trade receivables
Trade payables
Balance sheet exposure
The following exchange rates applied during the year:
US Dollar
Euro
US Dollar
2014
PLN
US Dollars
PLN000
—
—
—
$000
1,921
(181)
1,740
Euro
€000
95
(1,142)
(1,047)
2013
PLN
US Dollars
PLN000
276
(1,479)
$000
1,837
(472)
Euro
€000
95
(1,142)
(1,203)
(1,365)
(1,047)
2014
Average
rate
1.592
1.187
Year end
spot rate
1.664
1.210
2013
Average
rate
1.579
1.223
Year end
spot rate
1.519
1.183
Change if
appreciated/
Depreciated
Net assets
by 25%
in foreign
against local
currency
Currency
7,168
1,792
The Group has operations around the world and is therefore exposed to foreign exchange risk arising from net investments in foreign
operations. Where cost effective, the exposures arising from the translation of the net assets of the Group’s foreign operations are
managed through the use of borrowings or cross-currency swaps in the relevant foreign currency.
Some Group operations on occasion also enter into commercial transactions in currencies other than their functional currencies. Exposures
arising from the translation of foreign currency transactions are continually monitored and material exposures are managed where
necessary through the use of forward contracts or options once cash flows can be identified with sufficient certainty. Expos ures arising
from the translation of intra-group lending are managed through the use of borrowings in the relevant foreign currency.
51
Notes relating to the consolidated financial statements
For the 52-week period ended 29 March 2014
24. FINANCIAL INSTRUMENTS (CONTINUED)
The following table shows the impact (due to the retranslation of non-functional currency monetary assets and liabilities in the Group's
operations) of a, reasonably possible, 10% movement in the Group’s principal foreign currency exchange rates at the year-end date.
29 March 2014
US$
AUD
30 March 2013
US$
AUD
10%
increase
Effect on
profit
before tax
Effect on
shareholders’
equity
10 %
decrease
Effect on
profit before
tax
Effect on
shareholders’
equity
66
(7)
110
21
717
158
715
195
(66)
7
(110)
(21)
(717)
(158)
(715)
(195)
The effect on profit before taxation is due to the retranslation of trade receivables, cash and cash equivalents, borrowings, trade
payables and derivative financial assets and liabilities denominated in non-functional currencies. The effect on shareholders’ equity is
due to the effect on profit as well as the effect of financial assets and liabilities denominated in foreign currencies qualified as either
cash flow or net investment hedges.
INTEREST RATE RISK
The Group holds a mixture of both fixed and floating interest borrowings to control its exposure to interest rate risk although it has no
formal target for a ratio of fixed to floating funding. The level of debt is continually reviewed by the Board. The sensitivity analysis is set
out below:
US Dollar
AUS Dollar
CAD Dollar
Net cash/
Change if
in foreign interest rates
borrowings
in foreign
in foreign
Currency
currency
change by
1%
£’000
£’000
(457)
231
4
(5)
2
—
The impact of interest rate risk on the Group's result is due to changes in interest rates on net floating rate cash and cash equivalents
and borrowings. On 29 March 2014, if interest rates on the Group's net floating rate cash and cash equivalents and borrowings had
been 100 basis points higher, a reasonably possible movement, with all other variables held constant, the effect on profit before
taxation in the year would have been a charge of £0.03m (2013: charge of £0.05m). A reduction of 100 basis points would have the
equal and opposite effect. There is no further impact on shareholders' equity.
52
Notes relating to the consolidated financial statements
For the 52-week period ended 29 March 2014
24. FINANCIAL INSTRUMENTS (CONTINUED)
HEDGING OF FLUCTUATIONS IN FOREIGN CURRENCY
The Group is exposed to foreign currency risk on sales, purchases and borrowings that are denominated in a currency other than
Sterling.
The Group uses on occasion forward exchange contracts to hedge its commercial foreign currency risk. The Group does not apply a
policy of hedge accounting. Forward exchange contracts generally have maturities of less than one year. There were no contracts
outstanding at the period end.
In respect of other monetary assets and liabilities held in currencies other than Sterling, the Group ensures that the net exposure is
kept to an acceptable level by buying or selling foreign currencies at spot rates where necessary to address short-term imbalances.
At the period-end there were no outstanding derivative contracts in place.
SENSITIVITY ANALYSIS
In managing interest rate and currency risks, the Group aims to reduce the impact of short-term fluctuations on the Group’s earnings.
Over the longer term, however, permanent changes in foreign exchange and interest rates would have an impact on consolidated
earnings.
FINANCIAL INSTRUMENTS
The Group’s financial instruments include bank loans, overdrafts and cash. These financial instruments are used for the purpose of
funding the Group’s operations.
In addition, the Group enters into forward currency derivative transactions on occasion which have been used in the management of
risks associated with currency exposure. There were no contracts in place at the period-end.
ASSETS AND LIABILITIES
The Group does not hedge account but occasionally uses derivative financial instruments to hedge its commercial exposure to foreign
exchange. These instruments are recognised at fair value. Any gain or loss is immediately recognised in the income statement.
The fair value of forward exchange contracts used at 30 March 2013 was a liability of £nil (Note 18) (2012: liability of £nil ) and the
movement has been recognised within cost of sales.
FINANCIAL ASSETS
The Group’s financial assets comprise cash, trade receivables and derivative contract assets. The profile of the financial as sets at 29
March 2014 and 30 March 2013 was:
Currency
Sterling
US Dollars
Australian Dollars
Euros
Polish Zloty
Canadian Dollars
2014
Financial
assets
2013
Financial
assets
Floating rate
Fixed rate
on which
Floating rate
Fixed rate
on which
financial
financial
no interest
financial
financial
no interest
assets
assets
is earned
£000
814
—
231
—
—
4
£000
100
—
—
—
—
—
£000
3,499
2,408
302
—
—
—
Total
£000
4,413
2,408
533
—
—
4
assets
assets
is earned
£000
469
—
456
—
—
—
£000
100
—
—
—
—
—
£000
3,790
2,197
196
—
—
—
Total
£000
4,359
2,197
652
—
—
—
1,049
100
6,209
7,358
925
100
6,183
7,208
The weighted average interest rate on floating rate financial assets is:
Currency
US Dollars
Australian Dollars
Sterling
Canadian Dollars
%
2.5%
2.5%
0.0%
0.0%
Sterling fixed-rate financial assets are centrally controlled. At 29 March 2014 the weighted average interest rate on these deposits was
1.0% (2013: 1.0%).
The floating rate financial assets comprise other deposits that earn interest based on short-term deposit rates.
53
Notes relating to the consolidated financial statements
For the 52-week period ended 29 March 2014
24. FINANCIAL INSTRUMENTS (CONTINUED)
FINANCIAL LIABILITIES
Financial liabilities comprise short-term loans, overdrafts, trade payables, obligations under finance leases, other creditors more than
one year, forward exchange contract liabilities and other provisions for liabilities and charges (excluding accrued post-retirement health
care accrual and deferred tax provision). The profile of the Group’s financial liabilities at 30 March 2013 and 31 March 2012 was:
Currency
Sterling
US Dollars
South African Rand
Australian Dollars
Canadian Dollars
2014
Financial
liabilities
2013
Financial
liabilities
Floating rate
Fixed rate
on which
Floating rate
Fixed rate
on which
financial
financial no interest
financial
financial
no interest
liabilities
liabilities
is paid
£000
£000
£000
3,424
2,464
3,475
457
—
—
—
—
—
112
—
763
—
287
—
Total
£000
9.363
1,220
—
399
—
liabilities
liabilities
£000
£000
is paid
£000
Total
£000
3,289
2,286
4,439
10,014
728
—
—
—
—
—
130
—
799
—
198
—
1,527
—
328
—
3,881
2,576
4,525
10,982
4,017
2,416
5,436
11,869
The floating rate financial liabilities comprise bank borrowings and overdrafts that bear interest rates based on local curre ncy base
interest rates.
BORROWING FACILITIES
At 29 March 2014 and 30 March 2013 the Group had undrawn committed borrowing facilities as follows:
UK
US
Australia
FAIR VALUES OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES
Trade receivables
Cash and cash equivalents
Bank overdrafts
Bank loan
Other loans
Finance lease obligations
Trade payables
Fair value of derivative contracts
2014
‘000
£860
$1,739
2013
‘000
£1,652
$1,395
AUD$900
AUD$900
2014
£000
6,209
1,149
(455)
(3,426)
(2,289)
(287)
(4,525)
—
2013
£000
6,183
1,025
—
(4,016)
(2,163)
(253)
(5,436)
—
(3,624)
(4,661)
Given the nature of the Group’s financial assets and liabilities, it is the Directors’ opinion that there is no material diff erence between
their reported book values and estimated fair values.
54
Notes relating to the consolidated financial statements
For the 52-week period ended 29 March 2014
25. CONTINGENT LIABILITIES
Third-party guarantees
2014
£000
86
2013
£000
86
These guarantees and letters of credit are entered into in the normal course of business. A liability would only arise in the event of the
Group failing to fulfil its contractual obligations.
26. CAPITAL COMMITMENTS
Capital expenditure contracted for but not provided in the accounts
2014
£000
—
2013
£000
170
27. OPERATING LEASE COMMITMENTS
The Group has outstanding commitments for future minimum lease payments under non-cancellable operating leases which fall due as
follows:
Land and buildings
Within one year
More than one year and less than five years
Over five years
Other
Within one year
More than one year and less than five years
2014
£000
321
1,030
709
2,060
31
36
67
2013
£000
311
1,139
887
2,337
13
19
32
28. EMPLOYEE BENEFITS
The Group operates a number of defined benefit pension schemes throughout the world. The assets of these schemes are held in
separate trustee-administered funds.
The benefits from these schemes are based upon years of pensionable service and pensionable remuneration of the employee as
defined under the respective scheme provisions. The schemes are funded by contributions from the employee and from the employing
company over the period of the employees’ service. Contributions are determined by independent qualified actuaries based upon
triennial actuarial valuations in the UK and on annual valuations in the US.
UK
In relation to the fund in the UK, the Group’s funding policy is to ensure that assets are sufficient to cover accrued service liabilities
allowing for projected pay increases. The most recent triennial full valuation was carried out as at 31 March 2013.
During the prior period, a credit of £2.43m arose in respect of a curtailment gain due to the closure of the UK scheme to future accrual
from 31 March 2013 onwards. This amount has been disclosed as a special item within operating costs in the prior year income
statement.
US
In relation to the fund in the US, the funding policy is to ensure that assets are sufficient to cover accrued service liabilities allowing for
projected pay increases.
In addition, the Group operates a retirement healthcare benefit scheme for certain of its retired employees in the US, which is also
treated as a defined benefit scheme.
The most recent annual valuation was carried out as at 31 March 2014. The disclosures for the US schemes that follow refer to the US
defined benefit scheme and the retirement healthcare benefit scheme.
55
Notes relating to the consolidated financial statements
For the 52-week period ended 29 March 2014
28. EMPLOYEE BENEFITS (CONTINUED)
MORTALITY RATES
The mortality assumptions for the UK scheme are based on standard mortality tables which allow for future mortality improvements.
The assumptions are that a member who retires in 2013 at age 65 will live on average for a further 21.6 years (2013: 21.6 years) after
retirement if male and for a further 23.6 years (2013: 23.6 years) after retirement if female.
For a member who is currently aged 45 retiring in 2033 at age 65, the assumptions are that they will live on average for a further 22.7
years (2013: 22.7 years) after retirement if they are male and for a further 24.6 years (2013: 24.6 years) after retirement if they are
female.
The mortality rates for the US scheme are based on the RP-2000 Mortality Table for males and females.
IAS 19
Disclosures in accordance with IAS 19 are set out below. The principal assumptions used for the purpose of the IAS 19 valuation were
as follows:
Inflation under RPI
Inflation under CPI
Rate of general long-term increase in salaries
Rate of increase for CARE benefit while an active member
Rate of increase to pensions in payment – LPI 5%
Rate of increase to pensions in payment – LPI 2.5%
Discount rate for scheme liabilities
2014
2013
UK scheme
UK scheme
% p.a.
% p.a.
3.2
2.0
n/a
n/a
3.10
2.15
4.5
3.5
2.3
5.0
3.35
3.33
2.2
4.2
The principal assumptions for the US schemes relate to the discount rate for scheme liabilities. The discount rate used for t he US
defined benefit scheme was 3.92% (2013: 3.53%) and for the US medical scheme was 3.92% (2013: 3.53%).
Expected return on assets UK scheme
Long-term
rate of return
Long-term
rate of return
Long-term
rate of return
expected at
Value at
expected at
Value at
expected at
29 March
29 March
30 March
30 March
31 March
2014
% p.a.
4.50
4.50
4.50
4.50
4.50
4.50
4.50
4.50
2014
£m
40.10
21.20
69.60
n/a
14.60
31.20
19.00
195.70
2013
% p.a.
4.20
4.20
4.20
4.20
4.20
4.20
4.20
4.20
2013
£m
51.30
19.30
76.80
n/a
14.30
29.80
11.80
203.30
2012
% p.a.
8.00
8.00
3.50
3.50
4.70
3.50
6.30
Value at
31 March
2012
£m
53.61
19.39
70.69
n/a
40.97
3.12
187.78
Equities
Property
LDI funds
Government bonds
Corporate bonds
Absolute Return
Other
Combined
The accounting for pensions under IAS 19 changed in the current year in that there is no longer any allowance for asset
outperformance above the discount rate used for valuation of the scheme liabilities. Previously the Group had employed a buil ding
block approach in determining the long-term rate of return on pension plan assets. Historical markets were studied and assets with
higher volatility assumed to generate higher returns consistent with widely accepted capital market principles. The assumed l ong-term
rate of return on each asset class in prior years is set out within this note. The assets held within the US scheme amount to £0.791m
(2012: £0.914m) and are held mainly in bonds.
56
Notes relating to the consolidated financial statements
For the 52-week period ended 29 March 2014
28. EMPLOYEE BENEFITS (CONTINUED)
IAS 19 CONTINUED
Assumed healthcare cost trend rates have a significant effect on the amounts recognised in the income statement. From 1 November 2010
future changes in healthcare costs re the US retirement healthcare benefit scheme will be borne by the participants rather than the
company.
The assets and liabilities of the schemes at 29 March 2014 and 30 March 2013 were:
2014
Assets
Liabilities
(Deficit)/surplus
2014
US
UK
schemes
scheme
£000
£000
791
Total
£000
195,700
196,491
US
schemes
£000
914
2013
UK
scheme
£000
Total
£000
203,300
204,214
(1,706)
(175,803)
(177,509)
(2,269)
(183,840)
(186,109)
(915)
19,897
18,982
(1,355)
19,460
18,105
Following a change to UK scheme rules in September 2012 the accounting surplus can now be recognised on the Group balance sheet
under IFRIC 14
Amounts recognised in the income statement in respect of the defined benefit schemes before taxation are as follows:
Included within operating profit:
– current service cost
– curtailment credit (Special Items)
Included within financial income:
–Interest on pension surplus
2014
US
UK
schemes
scheme
£000
£000
11
—
—
—
US
schemes
£000
2013
UK
scheme
£000
Total
£000
27
—
308
335
(2,429)
(2,429)
Total
£000
11
—
(30)
(797)
(827)
(43)
(575)
(618)
57
Notes relating to the consolidated financial statements
For the 52-week period ended 29 March 2014
28. EMPLOYEE BENEFITS (CONTINUED)
IAS 19 CONTINUED
Amounts recognised in the statement of comprehensive income are as follows:
Actual return on scheme assets
Expected return on scheme assets
Change in irrecoverable surplus –
limit on paragraph 58 (b) of IAS 19
Experience gain/(loss) on liabilities/change
in assumptions
Net gain/(loss) before exchange
Exchange differences
Amounts recognised during the period
Balance brought forward
Balance carried forward
2014
US
UK
schemes
scheme
£000
12
(28)
(16)
—
£000
2,543
(8,300)
(5,757)
—
184
5,360
168
—
168
1,007
1,175
(397)
—
(397)
13,112
12,715
Total
£000
2,555
(8,328)
(5,773)
—
5,544
(229)
—
(229)
14,119
13,890
Changes in the present value of the defined benefit obligations before taxation are as follows:
Opening defined benefit obligation
Exchange differences
Current service cost
Past service cost credit
Curtailment credit
Interest cost
Benefits paid
Actuarial (gains)/losses
Contributions by scheme participants
US
Schemes
£000
2,269
(182)
11
—
—
63
(116)
(339)
—
2014
UK
scheme
£000
Total
£000
183,840
186,109
—
—
—
—
(182)
11
—
—
7,482
7,545
(10,175)
(10,291)
(5,360)
(5,699)
16
16
Closing defined benefit obligations
1,706
175,803
177,509
US
schemes
£000
47
(45)
2
—
766
768
—
768
239
2013
UK
scheme
£000
Total
£000
25,291
25,338
(11,527)
(11,572)
13,764
13,766
12,940
12,940
(13,126)
(12,360)
13,578
14,346
—
—
13,578
14,346
(466)
(227)
1,007
13,112
14,119
US
schemes
£000
2,897
155
27
—
—
86
(130)
(766)
—
2,269
2013
UK
scheme
£000
Total
£000
174,840
177,737
—
308
—
155
335
—
(2,429)
(2,429)
7,981
8,067
(10,201)
(10,331)
13,126
12,360
215
215
183,840
186,109
58
Notes relating to the consolidated financial statements
For the 52-week period ended 29 March 2014
28. EMPLOYEE BENEFITS (CONTINUED)
IAS 19 CONTINUED
Changes in the fair value of the schemes’ assets before taxation are as follows:
2014
US
UK
schemes
scheme
Opening fair value of scheme assets
Exchange differences
Expected return
Actuarial gains/(losses)
Contribution by scheme participants
Contributions by employer
Benefits paid
Closing fair value of schemes’ assets
£000
914
(77)
30
(16)
—
—
(60)
791
£000
Total
£000
203,300
204,214
—
8,300
(5,757)
16
16
(77)
8,330
(5,773)
16
16
(10,175)
(10,235)
195,700
196,491
US
schemes
£000
885
47
44
2
—
—
(64)
914
2013
UK
scheme
£000
Total
£000
187,780
188,665
—
11,527
13,764
215
215
47
11,571
13,766
215
215
(10,201)
(10,265)
203,300
204,214
The history of the schemes for the current and prior period before taxation is as follows:
2014
US
UK
Schemes
Scheme
£000
£000
Total
£000
US
schemes
£000
2013
UK
scheme
£000
Total
£000
Present value of defined benefit obligation
(1,706)
(175,803)
(177,509)
(2,269)
(183,840)
(186,109)
Fair value of scheme assets
(Deficit)/surplus in the scheme
Experience adjustments on the scheme liabilities
Experience adjustments on scheme assets
Exchange differences
791
(915)
325
(15)
105
195,700
196,491
914
203,300
204,214
19,897
5,360
(5,757)
—
18,982
5,685
(5,772)
105
(1,355)
19,460
18,105
56
2
(108)
(13,126)
(13,070)
13,764
—
13,766
(108)
Following the closure of the UK scheme to future accrual there will be no further payments to the scheme. Pension provision has been
replaced by a money purchase arrangement in the UK.
History of asset values, defined benefit obligation and surplus/deficit in schemes:
Fair value of scheme assets
Defined benefit obligation
Surplus/(Deficit) in schemes
29 March
30March
31 March
2014
£000
2013
£000
2012
£000
2 April
2011
£000
3 April
2010
£000
196,491
204,214
188,665
173,952
172,820
(177,509)
(186,109)
(177,737)
(171,671)
(176,957)
18,982
18,105
10,928
2,281
(4,130)
(1,849)
(4,137)
—
(4,137)
Unrecognised asset due to limit in paragraph 58 (b) of IAS 19
—
—
(12,940)
Surplus /(Deficit) in schemes
18,982
18,105
(2,012)
History of experience gains and losses
Experience gains/(losses) on scheme assets
Experience (losses)/gains on scheme liabilities[1]
2014
£000
2013
£000
2012
£000
2011
£000
2010
£000
(5,772)
5,685
13,766
(13,758)
1,404
(6,731)
(23)
2,259
16,275
(19,323)
1 This item consists of gains/(losses) in respect of liability experience only, and excludes any change in liabilities in respect of changes to the actuarial assumptions used.
59
Notes relating to the consolidated financial statements
For the 52-week period ended 29 March 2014
29. ACCOUNTING ESTIMATES AND JUDGEMENTS
Management discussed with the Audit Committee the development, selection and disclosures of the Group’s accounting policies and
estimates and the application of these policies and estimates. The accounting policies are set out above on pages 25 to 30.
Management considers there are no critical accounting judgements made in the preparation of the financial statements. The key
sources of estimation and uncertainty are:
FINANCIAL INSTRUMENTS
Note 26 contains information about the assumptions and estimates and the risk factors relating to interest rate and foreign c urrency
exposures.
PENSIONS
The Directors have employed the services of a qualified, independent actuary in assessing pension assets and liabilities. However they
note that final liabilities and asset returns may differ from actuarial estimates and therefore the pension liability may dif fer from that
included in the financial statements. Note 30 contains information about the principal actuarial assumptions used in the determination of
the net assets for defined benefit obligations.
DEFERRED TAXATION
Note 13 contains details of the Group’s deferred taxation. Liabilities recognised are determined by the likelihood of settlement and the
likelihood that assets are received are based on assumptions of future actions. The recognition of deferred taxation assets is
particularly subjective and may be undermined by adverse economic decisions.
INVENTORY VALUATION
The Directors have reviewed the carrying value of inventory and believe this is appropriate in the context of current trading levels and
strategic direction of the Group.
DEVELOPMENT EXPENDITURE
The level of development expenditure capitalised is at risk if technological advancements make new developments obsolete. However
management constantly reviews the appropriateness of the product portfolio and have reviewed the carrying value of capitalised
development expenditure and believe it to be appropriate given expected future trading levels and strategic direction of the Group.
30. RELATED PARTY TRANSACTIONS
Detailed disclosure of the individual remuneration of Board members is included in the Remuneration Report. There is no difference
between transactions with Key Management Personnel of the Company and the Group.
Mr P Dupee is the managing partner of Haddeo Partners LLP who have received £200,000 in interest payments during the financial
year in respect of the Shareholder Loan of £2.5m.
There have been no other transactions between Key Management Personnel and the Company. None of the directors were due any
monies at the end of the current period or the prior period.
The Group contributed £nil to the UK pension scheme during the current period (2013 - £0.30m) and no contributions were overdue at
the period-end. In the US no employer contributions were made to the US pension scheme during the current period (2013 - nil) and no
payments were overdue at the period-end.
60
Company balance sheet
For the 52-week period ended 29 March 2014
Fixed assets
Tangible assets
Investments
Current assets
Debtors
Cash at bank and in hand
Current liabilities
As at
As at
29 March
30 March
2014
£000
392
8,713
9,105
2013
£000
1,142
8,713
9,855
Notes
4
5
6
25,584
33,508
156
25,740
-
33,508
Creditors: amounts falling due within one year
7
(15,008)
(20,749)
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
Share premium account
Revaluation reserve
Capital redemption reserve
Equity reserve
Translation reserve
Profit and loss account
Equity shareholders’ funds
10,732
19,837
(2,465)
17,372
14,581
16,885
236
2,500
180
(22)
12,759
22,614
(4,986)
17,628
14,579
16,858
236
2,500
173
(22)
(16,988)
(16,696)
17,372
17,628
8
9
10
10
10
10
10
10
13
The financial statements on pages 61 to 68 were approved by the Board of Directors on 26 June 2014 and were signed on its behalf
by:
NEIL CARRICK
GROUP FINANCE DIRECTOR
26 JUNE 2014
REGISTERED OFFICE
1 Union Works
Union Street
Heckmondwike
West Yorkshire
WF16 0HL
61
Company accounting policies
BASIS OF PREPARATION
As used in the financial statements and related notes, the term “Company” refers to The 600 Group PLC. The separate financial
statements of the Company are presented as required by the Companies Act 2006. As permitted by the Act, the separate financial
statements have been prepared in accordance with UK Generally Accepted Accounting Principles (UK GAAP).
BASIS OF ACCOUNTING
The following principal accounting policies have been applied consistently in dealing with items which are considered material in
relation to the Company’s financial statements, except as detailed below.
These accounts have been prepared under the historical cost convention, modified to include the revaluation of certain proper ties, and
in accordance with applicable accounting standards. The accounts are prepared to the Saturday nearest to the Company’s accounting
reference date of 31 March. The results for 2014 are for the 52-week period ended 29 March 2014. The results for 2013 are for the 52-
week period ended 30 March 2013.
A separate profit and loss account dealing with the results of the Company only has not been presented, as permitted by Section 408 of
the Companies Act 2006.
Under FRS 1 the Company is exempt from the requirement to present its own cash flow statement.
NOTES ON INTERPRETATION OF ACCOUNTING STANDARDS
FRS 20 “SHARE-BASED PAYMENTS”
The Company has adopted FRS 20 and the accounting policies followed are in all material regards the same as the Group’s polic y
under IFRS 2. This policy is shown in The Group accounting policies on pages 25 to 30.
REVALUATION OF FIXED ASSETS
Property, plant and equipment are held at cost, subject to triennial property revaluations.
In 2010 the Company adopted a policy of revaluation for properties. As a result all properties were independently revalued during
March 2010.
DEPRECIATION
Depreciation is calculated to write off the cost (or amount of the valuation) of fixed assets less the estimated residual val ue on a
straight-line basis over the expected useful economic life of the assets concerned. The annual rates used are generally:
• freehold buildings
• leasehold buildings
• plant and machinery
– 2 to 4%
– over residual terms of the leases
– 10 to 20%
• fixtures, fittings, tools and equipment
– 10 to 33.3%
LEASES
Assets financed by leasing arrangements, which give rights approximating to ownership, are treated as if they had been purchased
outright and are capitalised and depreciated over the shorter of the estimated useful life of the assets and the period of the leases. The
capital element of future rentals is treated as a liability and the interest element is charged against profits in proportion to the balances
outstanding. The rental costs of all other leased assets are charged against profits on a straight-line basis.
TAXATION
The charge for taxation is based on the profit or loss for the period and takes into account taxation deferred because of timing
differences between the treatment of certain items for taxation and accounting purposes. Deferred tax is recognised, without discounting,
in respect of all timing differences between the treatment of certain items for taxation and accounting purposes which have arisen but
not reversed by the balance sheet date, except as otherwise required by FRS 19 “Deferred tax”.
CURRENCY TRANSLATION
Transactions denominated in foreign currencies are translated into Sterling at the rates of exchange ruling on the date of the
transaction. Monetary assets and liabilities are translated into Sterling at the year-end rates.
INVESTMENTS
Investments in respect of subsidiaries are stated at cost less any impairment in value.
FINANCIAL INSTRUMENTS: MEASUREMENT
Where the Company enters into financial guarantee contracts to guarantee the indebtedness of other companies within its Group, the
Company considered these to be insurance arrangements and accounts for them as such. In this respect, the Company treats the
guarantee contract as a contingent liability until such time as it becomes probable that the Company will be required to make a
payment under the guarantee.
DIVIDENDS
Dividends on non-equity shares are recognised as a liability and accounted for on an accruals basis. Equity dividends are recognised
as a liability in the period in which they are declared (appropriately authorised and no longer at the discretion of the Company).
FRS8 EXEMPTION
As these Parent Company Financial Statements are presented together with the Consolidated Financial Statements, the Company has
taken advantage of the exemption contained in FRS 8 and has therefore not disclosed transactions or balances with wholly owne d
entities which form part of the Group (or investees of the Group qualifying as related parties).
62
Notes relating to the company financial statements
1. PERSONNEL EXPENSES
Staff costs:
– wages and salaries
– social security costs
– pension charges
– equity share options (credit)/expense
2014
£000
678
61
17
57
813
2013
£000
643
69
24
99
835
The average number of employees of the Company (including Executive Directors) during the period was as follows:
Machine tools and equipment
2014
Number
4
2013
Number
5
These staff costs related entirely to the Directors and head office staff who are all classified as administration and management.
Details of Directors’ emoluments, share option schemes and pension entitlements are given in the Remuneration Report on pages 15
to 18.
2. EMPLOYEE SHARE OPTION SCHEMES
The Group has granted share options to employees under The 600 Group PLC Deferred Share Plan 2011.
Options under the DSP were granted to the Executive Directors on 19 November 2012 which are exercisable between 3 and 10 year s
from the grant date at 10p per share. The schemes are equity-settled.
SHARE-BASED EXPENSE
The Group recognised a total charge of £57,000 (2013: £99,000) in relation to equity-settled share-based payment transactions.
2014
DSP
2013
DSP
The number and weighted average exercise prices of share options
Number of options outstanding at beginning of period
4,500,000
502,576
Number of options granted in period
Number of options forfeited/lapsed in period
Number of options exercised in period
Number of options outstanding at end of period
Number of options exercisable at end of period
-
-
—
4,500,000
(502,576)
—
4,500,000
4,500,000
—
—
On 7 April 2014 5,400,000 options with an exercise price of 17p were granted under the 600 Group PLC Deferred Share Plan
excercisable between 3 and 10 years from the date of grant. 2,000,000 options were granted to Mr N Rogers, 1,400,000 options to Mr
N Carrick, 1,000,000 to Mr P Dupee, 500,000 to Mr D Zissman and 500,000 to Mr S Rutherford.
During the current and prior period, the Group has not granted equity as consideration for goods or services received.
63
Notes relating to the company financial statements
2. EMPLOYEE SHARE OPTION SCHEMES (CONTINUED)
THE 600 GROUP PLC 2008 PERFORMANCE SHARE PLAN
The fair value of awards granted under these Share Plans are determined using the Black Scholes valuation model. The fair val ue of
share options and assumptions are shown in the table below:
Fair value
Share price at grant
Exercise price
Dividend yield
Expected volatility
Expected life
Risk-free interest rate
Number of shares under option
3. DIVIDENDS
No dividend was paid in period (2013: no dividend paid).
4. TANGIBLE FIXED ASSETS
Cost or valuation
At 30 March 2013
Disposals
Transfers to group companies
At 29 March 2014
At professional valuation
At cost
Depreciation
At 30 March 2013
Disposals
Charge for period
At 29 March 2014
Net book value
At 29 March 2014
At 30 March 2013
2014
DSP
£000
£0.04
£0.13
10p
0%
50%
2013
DSP
£000
£0.04
£0.13
10pil
0%
50%
3.0 years
3.0 years
4.08%
4.08%
4,500,000
4,500,000
Land and buildings
Fixtures,
fittings,
tools and
Long lease
Short lease
equipment
£000
£000
£000
1,217
—
(722)
495
495
—
495
78
—
26
104
391
1,139
92
(92)
—
—
—
—
—
92
(92)
—
—
—
—
94
—
—
94
—
94
94
91
—
2
93
1
3
Total
£000
1,403
(92)
(722)
589
495
94
589
261
(92)
28
197
392
1,142
Historic cost disclosures are not made as, in the opinion of the Directors, unreasonable expense and delay would be incurred in
obtaining the original costs.
During March 2010 the Group’s properties were revalued. The valuations were performed by independent valuers, Eddisons, and the
valuations were determined by market rate for sale with vacant possession. The Directors believe that these valuations remain
appropriate at 29 March 2014. Revalued amounts are reflected in the balance sheet with the resulting credit taken to revaluation
reserve.
64
Notes relating to the company financial statements
Various UK properties are charged as security for borrowing facilities.
5. INVESTMENTS
Cost:
At 30 March 2013
Additions in the period
At 29 March 2014
Provisions
At 30 March 2013
Impairment in the period
At 29 March 2014
Net book values
At 29 March 2014
At 30 March 2013
Shares
In Group
Undertakings
£000
40,423
—
40,423
31,710
—
31,710
8,713
8,713
During the period an impairment review of the carrying values of investments in other group companies was carried out with no further
impairment deemed necessary. This review comprised a comparison of the investment with its recoverable amount (the higher of net
realisable value and value in use). To the extent that the carrying amount exceeds the recoverable amount, an impairment charge is
recognised. Value in use calculations are based on Board approved profit forecasts and the resulting cashflows are discounte d at the
Group’s pre-tax weighted average cost of capital, which is adjusted for CGU risk factors, resulting in a rate of 19%. Cash flows are
extrapolated beyond their term (of between 1 and 4 years) using an estimated growth rate of 2% and are appropriate because these
are long term businesses. The growth rates used are consistent with the long-term average growth rates for the countries in which the
CGUs are located. This has no impact on the group accounts.
The principal subsidiary undertakings of The 600 Group PLC and their countries of incorporation are:
ENGLAND:
600 UK Limited
The 600 Group (Overseas) Limited*
US:
600 Group Inc
Clausing Industrial, Inc
REST OF THE WORLD:
600 Machine Tools Pty Limited (Australia)
All undertakings marked * are 100% owned directly by the Parent Company. The others are 100% owned through intermediate holding
companies. All undertakings above are included in the consolidated accounts.
All other subsidiary undertakings will be shown in the company’s next annual return.
6. DEBTORS
Amounts owed by subsidiary undertakings1
Deferred tax
Other debtors
Other prepayments and accrued income
1 All inter-company loans are repayable on demand and as such are recorded at their face value.
2014
£000
2013
£000
24,710
33,242
809
65
—
—
266
—
25,584
33,508
65
Notes relating to the company financial statements
7. CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR
Bank overdraft
Bank loans
Trade creditors
Amounts owed to subsidiary undertakings1
Corporation tax
Sundry creditors
Accruals and deferred income
Other creditors
1 All inter-company loans are repayable on demand and as such are recorded at their face value.
The 600 Group PLC has undertaken to discharge the liability for corporation tax of all UK Group undertakings.
8. CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR
Shareholder loan
Bank loans
Deferred taxation
2014
£000
—
2,969
460
2013
£000
78
480
479
10,632
18,663
68
621
258
47
563
439
15,008
20,749
2014
£000
2,289
—
176
2,465
2013
£000
2,163
2,808
15
4,986
The £2.5m shareholder loan was issued with 12.5m convertible warrants attached to it. These warrants allow the holders to either
convert the loan into 20p shares or to purchase 20p shares for a cash consideration. The loan has both debt and equity components
and so the value has been split between these components. The debt element is only repayable in August 2015 and as a result t he
loan is classified as non-current. Deferred borrowing costs relating to the loan of £281,000 are also netted off the loan carrying value
which at the period-end is £2,290,000.
The Term Loan of £469,000 included within Bank loans will be repaid on a quarterly basis with payments of £160,000 on 31 Marc h
2014 and 30 June 2014 and a final payment of £149,000 on 30 September 2014. The revolving credit facility of £2,500,000 included
within Bank Loans is repayable in June 2014 and is now classified as current.
In May 2014 the Group refinanced with Santander – details are included in the basis of preparation in the notes to the Group accounts.
66
Notes relating to the company financial statements
9. SHARE CAPITAL
Authorised
626,391,704 ordinary shares of 1p each
57,233,679 deferred shares of 24p each
Allotted, called-up and fully paid:
Ordinary shares of 1p each
2014
£000
2013
£000
6,264
13,736
20,000
6,264
13,736
20,000
84,256,091 ordinary shares of 1p each on issue at start of the period (2013: 63,926,253 ordinary shares )
235,795 ordinary shares of 1p each issued to N Rogers and N Carrick on subscription following bonus
payment
19,663,171 ordinary shares of 1p each issued in institutional placing
666,667 ordinary shares of 1p each issued to N Rogers on subscription following bonus payament
84,491,886 ordinary shares of 1p each on issue at end of period (2013: 84,256,091 ordinary shares of 1p)
843
2
—
—
845
639
—
197
7
843
Deferred shares of 24p each:
57,233,679 deferred shares of 24p each on issue at start and end of period
13,736
13,736
Total Allotted, called-up and fully paid at the end of period
14,581
14,579
The Company has one class of ordinary shares which carry no rights to fixed income. The ordinary shareholders are entitled to receive
dividends as declared and are entitled to vote at meetings of the Company. During the current year 173,061 and 62,734 ordinary
shares were issued to N Rogers and N Carrick respectively in June 2013. This resulted in share capital increasing by £2,358 w ith a
corresponding share premium increase of £26,527.
During the prior year an institutional placing of 19,663,171 shares and subscription for 666,667 shares by N Rogers took place in
September 2012. This resulted in share capital increasing by £203,298. The corresponding share premium increase was £1,328,10 6
from which expenses of issue of £114,991 have been deducted.
During 2011 each issued ordinary share of 25p was sub-divided and converted into one new ordinary share of 1p and one deferred
share of 24p. Each of the unissued ordinary shares of 25p was also sub-divided into 25 ordinary shares of 1p.
During 2011 a £2.5m related party loan was issued with 12.5m convertible warrants attached to it. These warrants allow the holders to
either convert the loan into 1p shares (at a price of 20p per share) or to purchase 1p shares for cash consideration (at a price of 20p
per share). 11.6m warrants remain outstanding which expire in August 2015.
67
Notes relating to the company financial statements
10. RESERVES
At 31 March 2012
Loss for the period
Share-based payment
Shareholder loan
On shares issued
At 30 March 2013
Profit for the period
Share-based payment
Shareholder loan
On shares issued
At 29 March 2014
Share
Capital
premium
Revaluation
redemption
Equity
Translation
reserve
reserve
reserve
reserve
£000
236
—
—
—
—
£000
2,500
—
—
—
—
£000
167
—
—
6
—
£000
(22)
—
—
—
—
Profit
and loss
Account
£000
(16,137)
(658)
99
—
—
236
2,500
173
(22)
(16,696)
—
—
—
—
—
—
—
—
—
—
7
—
—
—
—
—
(349)
57
—
—
16,885
236
2,500
180
(22)
(16,988)
account
£000
15,645
—
—
—
1,213
16,858
—
—
—
27
In accordance with the exemption allowed under Section 408 of the Companies Act 2006, the Company has not presented its own
profit and loss account but has returned a profit in the period of £7,390,000 (2013: loss of £658,000). Amounts paid to the C ompany’s
auditor in respect of services to the Company, other than the audit of the Company’s financial statements, have not been disclosed as
the information required is instead disclosed in Note 4 to the Consolidated financial statements.
11. CONTINGENT LIABILITIES
Bank guarantees in respect of Group undertakings
12. PENSION
2014
£000
86
2013
£000
86
The Company makes contributions to defined contribution schemes for certain employees. The pension contribution charge for the
Company amounted to £15,000 (2013: £22,000).
13. RECONCILIATION OF MOVEMENT IN SHAREHOLDERS’ FUNDS
Retained (loss)/profit
Share-based payment cost
Issued share capital/share premium
Equity reserve
Net increase/(reduction) in shareholders’ funds
Opening shareholders’ funds
Closing shareholders’ funds
14. RELATED PARTY TRANSACTIONS
There are no related party transactions which require disclosure.
2014
£000
(349)
57
29
7
(256)
17,628
17,372
2013
£000
(658)
99
1,417
6
864
16,764
17,628
68