The 600 Group PLC
Union Street
Heckmondwike
West Yorkshire
WF16 0HL
T: +44 (0)1924 415000
W: www.600group.com
165943 600 Group - R&A Cover.indd All Pages
12/08/2015 17:46
The 600 Group PLC
annual report and accounts 2015
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
1
3
11
14
15
19
20
21
22
23
24
25
31
63
64
65
165943 600 Group - R&A Cover.indd All Pages
12/08/2015 17:46
Chairman’s Statement
I am pleased to report that the Group has continued to establish a stronger position in the markets in which it
operates and improve its overall financial performance to deliver increased revenues and profits. This was achieved
despite challenging worldwide market conditions and in particular a weaker than expected performance from our
Australian subsidiary.
The UK based European business continues to improve. We successfully launched newly designed lathes and
ancillary products under the widely recognised Colchester, Harrison and Pratt Burnerd brands along with
improvements in delivery times for existing products.
In addition, we have implemented the worldwide distribution of the Clausing branded machine tool range. The
combination of the Colchester, Harrison, Clausing and Pratt Burnerd brands, successful in North America, is now
available throughout our worldwide distributor base. Don Haselton the President of 600 Group Inc. has played a key
role in this activity and will continue to work with the UK team.
Our laser marking business has been transformed by the acquisition of TYKMA Inc in February this year, and already
we are seeing substantial improvements to its operating performance. Electrox is now fully integrated into Tykma and
is run by David Grimes. David has built up the Tykma business which, when combined with the UK business, now
ranks it as a world leader in a very fragmented industry.
We continue to seek and evaluate opportunities for further strategic acquisitions, particularly in North America.
Strong Brands, distribution and exports
The 600 Group has developed several of the most widely recognised and respected brands in the machine tool
industry. These brands along with accessories, spare parts and service provide a well balanced platform that delivers
exceptional revenue and profit potential.
In the UK and Europe, our much improved financial position has enabled our sales and engineering team to deliver
machines and spare parts from stock quickly. This improvement in customer service has delivered welcome gains in
its market share.
The North American business continues to be successful in gaining market share and exceeding revenue goals by
providing exceptional customer service and support along with high quality machine tools that cover the requirements
of its target customers. This model will provide the framework for the marketing and sales platform that we hope will
bring the North American success across all 600 Group machine tool markets. North America also continues to
develop a line of US built products, including drills, milling machines and saws. These products broaden the
manufacturing base and deliver the US built products desired by the domestic market.
We will also expand our distribution network in South East Asia in the coming year with particular emphasis on the
Thailand, Philippines and Malaysian markets. These markets are high growth areas where the 600 Group machine
tool and components names have a high level of brand recognition. Early discussions with distributors in these
markets are very promising and we anticipate incremental revenue growth in the next financial year.
The integration of TYKMA and Electrox has also opened up new markets and distribution channels for both of these
respected laser marking brands and given the division worldwide credibility to appeal to multi-national corporations.
Financial Overview
Revenue from continuing operations was £43.8m (2014: £41.7m) a 5% increase on the previous year.
After taking account of interest, pensions, taxation special items and share based payment charge, the Group profit
for the financial year was £2.35m (2014: £1.85m).
Underlying earnings (from continuing operations before special items, share based payment charge, pensions
interest and shareholder loan amortisation) amounted to 2.09 pence per share (2014: 1.90p) and total earnings were
2.66 pence per share (2014:2.19 p).
At the end of the financial year, group net indebtedness stood at £10.80m (2014: £5.31m), and gearing was 31%
(2014:24%). The group had financial headroom on existing borrowing facilities of £4.2m and was in full compliance
with all its financial covenants.
1
Chairman’s Statement
Acquisitions
In August 2014 we acquired a 26.3% share of ProPhotonix Limited, a company that designs and manufactures LED
arrays and laser diode modules in the UK and Ireland. It has a strong base of technology and applications
knowledge, applicable to high growth sectors including niche industrial, security and medical markets.
In February 2015 we acquired an 80% controlling stake in TYKMA Inc a US based laser marking business run by
David Grimes its Chief Operating Officer. TYKMA is a specialist designer, producer and distributor of laser marking
systems which are used for traceability, branding and component identification. Electrox, the 600 Group’s laser
marking company based in Letchworth has been entirely integrated into TYKMA and the combined business is
already achieving significantly improved results.
Facilities
In June 2014 we acquired the freehold site in Colchester, UK occupied previously under lease by our Gamet
Bearings operation for a consideration of £0.77m. In the US we are re-locating Clausing to new purpose built
leasehold premises in Kalamazoo, Michigan and TYKMA, again to purpose built leasehold premises, in Chillicothe
Ohio. These new sites are better located with excellent road links and significantly improved facilities. In the period
we also agreed the sale of our previous Head Office building in Leeds.
People
We have welcomed a number of new people to the Group at Board and operational level during the year. Stephen
Fiamma was appointed as a Non- Executive Director in May 2015 and we welcome his experience in cross-border
acquisitions, divestitures and joint ventures.
David Grimes the CEO of Tykma is now leading our Laser marking division and his experience in building one of the
world’s leading companies in the sector will be of great benefit as we develop this division even further. Lastly,
following the resignation of Nigel Rogers in April, I was delighted to assume the position of Executive Chairman with
responsibility for managing the operational activities of the Group as well as pursuing our strategy for growth and
working with my fellow Board and executive team to achieve this.
On behalf of the Board I would like to thank all our employees for their ongoing support, commitment and dedication
to The 600 Group which has been so important in the last year and I look forward to working with them in the coming
year.
Dividends
The Board continues to believe that the retention of earnings for deployment in the business is the most appropriate
use of available financial resources. Accordingly they do not recommend the payment of a dividend at the present
time.
Outlook
The 600 Group has begun the process of leveraging our industry recognised brands to expand our worldwide
distribution network and accelerate our revenue growth. In the coming year, we aim to deliver additional organic
revenue growth through market development in conjunction with our distribution base throughout Europe and Asia.
We will also continue to evaluate acquisition opportunities to identify the partners who will best compliment our core
competencies.
Paul Dupee
Chairman
30 June 2015
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 laser marking systems and
precision engineered components. The Group operates these businesses from locations in North America,
Europe 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 March 2015 issue identified the largest five producer countries of
machine tools to be China, Germany, Japan, South Korea and Italy. The largest five countries ranked by the
consumption of machine tools are China, USA, Germany, Japan and South Korea. The UK ranks eleventh as
a producer nation, and thirteenth in order of consumption.
The same publication identified that the global consumption of machine tools was flat during 2014 against a
reduction globally of 9% in the prior year. Zero growth was recorded in our most important markets of USA
and UK and a 10% decline in Germany, France, Austria and Switzerland and 11% decline in Australia.
The report also anticipated strong growth of over 20% in 2015 in the USA and the UK but with Europe
remaining more difficult at 5% reduction.
Industry use of industrial lasers for material processing has continued to expand worldwide. Laser systems
have now become a mainstream manufacturing process covering the areas of laser machining including
cutting and drilling, marking, ablation and a host of other niche applications.
Industry spending for the entire global industrial laser market is reported to grow to approximately $17 billion
by 2020. Several industry journals, including Industrial Laser Solutions, have pointed to this number based on
input from leading providers of laser processing equipment obtained by industry trade journals. The overall
laser industry is reported to grow by 6% annually with some estimates that the market for fiber lasers for
processing is growing by approximately 15%.
The laser marking subset of the overall laser industry continues to grow due to enhanced techniques in the
speed, cost and quality of the systems being implemented. Additionally, laser marking companies are
increasing their presence in the laser machining subset due to the ease in implementation of high power fiber
lasers within their existing system designs.
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.
3
Strategic Report
Routes to market and customers
By product category
Following the acquisition of TYKMA in early February 2015 the Group is now expected to derive
approximately 32% of Group revenues from the sale of metal turning machine tools, and a further 14% from
other machine tools. The sale of precision engineered components for use in metal turning is expected to
contributed approximately 14%, and laser marking equipment approximately 27%. The remainder of Group
revenues, amounting to approximately 13%, are expected to derived from after sales 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.
The Group benefits from a high degree of loyalty and repeat business via established distributors in many
countries and territories. In the year ended 28 March 2015 the top 20 customers, 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
2015
%
55
18
16
11
100
2014
%
54
20
15
11
100
4
Strategic Report
Results
Revenue
Revenue from continuing operations increased by 5% to £43.8m (2014: £41.7m). Excluding the effects of the
TYKMA acquisition, revenue growth was 3% reflecting the difficult market conditions experienced in our major
markets in Europe, the USA and particularly Australia.
Costs and margins
Gross margins were maintained at 33% and, with Group operating expenses contained in line with the
underlying sales growth, the overall Group operating margin before special items was also maintained at
5.6%.
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 Clausing branded machines
have now started to be distributed in Europe through our existing sales channels
The financial results of these activities, before special items, were as follows:
Revenues
Operating profit
Operating margin
2015
£’000
34,747
2,931
8.4%
2014
Restated
£’000
33,749
2,740
8.1%
Revenues overall increased by 3% to £34.7m. Revenues in local currency in our North American operations
increased by 9% as this business led by Don Haselton continues to win market share, and profit margins
increased to 8.2% (2014 7.9%). These results now exclude the results of the Electrox spares and service
operation which was transferred to TYKMA on acquisition. Comparative figures have been restated
accordingly. The overall revenue increase was held back by very challenging market conditions in Australia
where a fall of 6% in local currency was compounded by the weakness of the Australian Dollar to give a
13.4% fall in Sterling terms. A small trading loss was incurred and significant effort was put into preserving
cash. With its strong brands and wide product range, a great deal of focus is now going into sales
opportunities outside Australia into South East Asia.
The European operation, headed up by Mike Berry, experienced difficult market conditions, particularly in
Europe, where the weakness of the Euro has added to pricing pressure and consequently revenue was 1%
lower year on year. Good control of operating costs, which was underlined by the business winning the EEF
regional and runner up in the National Business Efficiency Awards, led to improved margins and operating
profit increasing to 10.3% (2014 9.6%)
At a recent open house in the UK, the Group launched a number of new machines including the Harrison
Alpha 1400XC combination Lathe and the Harrison EziTurn 330. Also under the Colchester brand, the new
Master VS and Triumph VS lathes were launched and have met with significant success with distributors. In
addition, for the first time products which Clausing has successfully sold in the US were introduced to the UK
and Europe including variables speed drills and precision manual surface grinders.
5
Strategic Report
Laser marking
Following the acquisition of TYKMA Inc in early February 2015, the Electrox UK based laser marking business
was entirely integrated, including the sales, spares and service operations in the USA, moving from their base
within Clausing in Michigan to TYKMA in Ohio. The segmental analysis includes the twelve months trading for
Electrox and the USA spares and service previously within Clausing Machine tools, combined with the two
months trading from TYKMA. Comparative figures have been restated accordingly. The Enlarged laser
marking Division is now headed up by David Grimes. The combined laser marking Division provides a wide
range of industrial marking and product identification systems to manufacturing industries.
Results for the financial year before special items were as follows:
2015
£ 000
9,229
304
3.3%
Revenues
Operating profit
Operating margin
2014
Restated
£ 000
8,254
686
8.3%
Revenues increased by 12% as a result of the TYKMA acquisition to £9.2m. Operating profit fell significantly
in the second half of the year as the performance of Electrox in the US deteriorated and corrective action was
delayed pending the completion of the TYKMA acquisition. In addition development costs previously
capitalized were written off, adding a further £0.2m to operating costs.
Looking forward, the year has started strongly and the integration benefits are being realised. We are
confident that this division is now back on track and capable of sustained growth in the coming year under the
very experienced management team at TYKMA.
Profit before taxation
Group profit before tax was £3.68m (2014: £2.48m) and the underlying profit figure before special items and
share based payment costs and the pensions interest credit and amortization of shareholder loan costs was
£2.01m (2014: £1.97m).
Special items
During the financial year, the Group had a number of transactions which in the opinion of the Director’s should
be excluded for a better understanding of the underlying trading performance of the Group.
A credit of £2.35m is included in operating profit as a result of the work by the trustees of the UK pension
scheme and the company in reducing liabilities. A number of transacations including a pension increase
exchange took place during the year. This resulted in an actuarial adjustment to the pension liabilities, which
was processed through the Consolidated Income Statement.
Costs incurred on the acquisition of TYKMA amounted to £0.3m and redundancy and restructuring costs
incurred on the integration of the Electrox and TYKMA businesses were £0.4m.
The Group disposed of the previous UK head office in Leeds and the Clausing machine tools site in Michigan
during the period and incurred a loss on valuation of the Colchester site. The total property related special
items were £0.4m. In addition share option costs and amortization of intangible assets acquired which are
non-cash costs to the Group have been included in special items.
6
Strategic Report
Taxation
The current year charge for taxation amounted to £1.33m (2014 £0.62m). The majority of this charge relates
to deferred taxation provided on the pension credit of £2.35m and interest on pension surplus of £0.86m which
is at a rate of 35%, being the rate applicable to any refund from a pension scheme. The UK businesses
continue to benefit from the substantial previous tax losses and no taxation is payable in the UK. The US
businesses are subject to taxation on their profits at a rate of 34%.
Net profit and earnings per share
The total profit attributable to equity holders of the parent for the current financial year amounted to £2.33m
(2014: £1.85m). The non- controlling interest represents 20% of the after tax profits of the TYKMA business.
Underlying earnings from continuing operations before pension and equity adjustments, special items and
share based payment charge and related taxation was 2.09p per share (2014: 1.90p) and basic earnings per
share was 2.66p (2014(2.19p)
Financial position and utilisation of resources
Cash flow
Cash generated from operations before working capital movements was £3.02m (2014: £2.71m). The working
capital movement included an increase in inventories as a result of shipments into the USA caught up in the
backlog from the East Coast dock strike and improved machine availability being offered by the European
business to meet customer requirements. A large multiple machine sale to an educational establishment just
before the period end increased receivables within the European Lathe business.
Taxation paid related entirely to the Clausing business in the USA.
Proceeds from the sale of the previous Head Office in Leeds and the Clausing facility in Kalamazoo
contributed £0.46m to cash with the acquisition of the Colchester Gamet Bearings site at £0.72m being the
major item of capital expenditure.
The investment in ProPhotonix was entirely funded by the issue of new shares and the investment and
associated costs in relation to the purchase of 80% of TYKMA Inc. was funded by the issue of new loan notes.
Net borrowings
Group net debt at 28 March 2015 stood at £10.80m (2014: £5.31m) comprising net bank and finance lease
indebtedness of £4.02m (2014: £3.02m) and the amount outstanding on the new loan notes of £6.78m (2014
shareholder loans of £2.29m). The amount outstanding is net of unamortised costs of £0.7m in the current
financial year (2014: £0.21m).
New facilities were agreed with Santander in the UK in May 2014 and with Bank of America in April 2015. The
Group has a mixture of term loans and revolving facilities with maturities between 2 and 6 years in addition to
annual credit and tradeline facilities. Headroom on bank facilities was £4.2m at the year-end (2014: £2.72m)
and all financial covenants were met in full.
During February and March 2015 the Group issued £7.69m of New 8% Loan Notes with a maturity of
February 2020 under an £8.5m Loan Note programme. These Loan Notes, following shareholder approval in
March 2015, also entitled holders to warrants of equal value to subscribe for new ordinary shares at 20p.
Gearing amounted to 31% of aggregate net assets (2014: 24%)
Going concern
In accordance with FRC guidelines, the Board has assessed the Group’s funding and liquidity position. 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.
7
Strategic Report
Retirement Benefits
The accounting surplus at 28 March 2015 was £34.29m (2014: £19.02m). This surplus has been calculated in
accordance with the scheme rules and recognized accounting requirements.
As a result of liability reduction exercises undertaken by the UK scheme’s Trustees in conjunction with the
company, including pension increase Exchanges, a credit has been taken in the period in the Income
Statement of £2.35m to reflect the actuarial reduction in Scheme liabilities.
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 estimated 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 at least the next funding valuation due as at 31 March 2016.
At 28 March 2015, 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 £9.5m. The performance has continued to improve since that time and in mid May 2015 the deficit
was £5.9m. On a full buy-out basis the deficit had reduced to £31m by the end of March 2015.
The directors and the Trustees 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 increased slightly during the year due to changes in
actuarial assumptions to £1.10.m (2014: £0.91m.)
Property Transactions and Revaluations
The Group disposed of the former Head Office in Leeds and the Clausing business sold its existing facility in
Michigan during the period. Net proceeds were £0.46m and the loss on sale was £0.1m.
In addition, as required by the accounting rules for revaluing assets, the remaining freehold properties in the
Group were revalued as at 28 March 2015. This has resulted in a reduction of £0.3m on the UK Colchester
site, which is taken through the income statement and an increase of £0.6m on the UK Letchworth site, which
is taken directly to revaluation reserve.
Share Capital and Reserves
Following approval by Shareholder at the AGM in September 2014 an application to reduce the deferred
shares, share premium and capital redemption reserve were processed through the High Court and £34.2m of
capital was released to accumulated reserves.
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.
8
Strategic Report
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
2015
2014
2013
2012
5%
97%
1.4
32.9%
5.6%
23.3%
2.7x
58
(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
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.
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.
Neil Carrick
Finance Director
30 June 2015
10
Report of the directors
Paul Dupee
Appointed to the Board as a non-executive Director on 2 February 2011, appointed Chairman on 14 September 2011 and
appointed Executive Chairman on 30 April 2015. A private investor and currently Managing Partner of Haddeo Partners LLP.
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 LogicNow S.a.r.l.,
Amiad Water Solutions Ltd (AIM Listed), and Hotel Urbano Viagens e Turismo SA, and previous vice-chairman of KPMG LLP .
Stephen Fiamma*
Appointed to the Board as a non-executive Director on 13 May 2015. Currently a consultant in the tax practice of Allen & Overy
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 Asset Services
34 Beckenham Road
Beckenham
Kent
BR3 4TU
AUDITOR
KPMG Audit LLP
BANKERS
Santander Plc
Bank of America, N.A.
BROKER
Finncap
NOMINATED 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 28
March 2015, 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
2015 are for the 52-week period ended 28 March 2015. The results for 2014 are for the 52-week period ended 29 March 2014.
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 8 June 2015, 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
Schroder Investment Management
CriSeren Investments Limited
Percentage
of issued
ordinary
Number share capital
22,792,535
25.44
6,100,000
3,671,320
3,548,811
6.81
4.10
3.96
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 18 March 2015 shareholders approved the issue of up to 43,950,000 new warrants to subscribe for ordinary shares at a price of
20p per share. Subscribers to the new loan notes issued in February and March 2015 were issued with warrants totalling 30,725,000.
In addition 9,195,000 new warrants were issued as replacements for the same number of old warrants granted as part of the old
shareholder loan arrangements to those old shareholder loan note holders who agreed to roll over their notes into the new loan issue.
2,400,000 old shareholder loan warrants remain in issue and will expire on 27 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 8,960,795 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 17 September 2014. 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 11.
The directors retiring by rotation are Mr N Carrick and Mr S Rutherford who, being eligible, offer themselves for re-election. In addition,
Mr S Fiamma, who was appointed following the year-end, will also be seeking appointment by the shareholders. Mr N Carrick has a 12
month rolling service contract with the Company. Mr S Rutherford and Mr S Fiamma’s contracts are terminable on 3 months’ notice.
The beneficial interests of the Directors in the share capital of the Company at 28 March 2015 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 25 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 provision for
the purpose of the Companies Act 2006.
On behalf of the Board
NEIL CARRICK
DIRECTOR
30 JUNE 2015
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
30 JUNE 2015
14
Remuneration report
As an AIM listed company The 600 Group plc is not required to prepare a remuneration report in accordance with Directors Report
Regulations of the Companies Act 2006, however the Directors recognise the importance and support the principles of the Regulations.
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. Following the year-end P Dupee was
appointed Executive Chairman of the Group and as a result he stepped down from the Remuneration Committee and was replaced by
S Fiamma.
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. 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 have contracts of service terminable on 3 months’ notice 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 2010 to 28 March 2015 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.
16
Remuneration report
DIRECTORS’ INTERESTS IN SHARES
The interests of Directors holding office at 28 March 2015 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
28 March
2015
Number
At
29 March
2014
Number
22,792,535
22,792,535
1,499,508
1,209,728
20,000
113,404
300,000
20,000
62,734
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 and Mr Carrick 250,000 warrants which can be used to either convert their
Loan notes into shares or to purchase shares for a cash consideration.
DIRECTORS’ EMOLUMENTS
P R Dupee
N F Rogers
N R Carrick
D Zissman
S J Rutherford
Total
.
Salary
Fees
Pension
Bonus
in kind
£
£
£
£
£
All
benefits
Total
2015
£
Total
2014
£
—
60,000
200,000
145,000
—
—
—
—
—
—
—
60,000
60,000
1,585 201,585
301,387
13,050
50,000
18,682 226,732
236,287
—
—
33,000
33,000
—
—
—
—
—
—
33,000
33,000
33,000
33,000
345,000 126,000
13,050
50,000
20,267 554,317
663,674
17
Remuneration report
DIRECTORS’ SHARE OPTIONS
Details of share options at 28 March 2015 and 29 March 2014 for each Director who held office during the year are as follows:
N Carrick
P Dupee
N Rogers
S Rutherford
D Zissman
Number of
options at
30 March
2014
Granted
Exercised
1,750,0001
1,400,0002
—
1,000,0002
2,750,0001
2,000,0002
—
—
500,0002
500,0002
—
—
—
—
—
Number of
options at
28 March
2015
3,150,000
1,000,000
4,750,000
500,000
500,000
Lapsed/
forfeited
—
—
—
—
—
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.
2 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.
On 30 April 2015 Mr N Rogers resigned as a Director. 2,750,000 options with an exercise price of 10p were agreed to become
immediately exercisable by Mr N Rogers and 2,000,000 options with an exercisable price of 17p were forfeit.
The charge to the Income Statement in respect of share based payments was £131,000 (2014: £57,000).
The share price at 28 March 2015 was 16p and the highest and lowest prices during the period were 23.5p and 15.0p, respectively.
On behalf of the Board
NEIL CARRICK
DIRECTOR
30 JUNE 2015
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 year ended 28 March 2015 set out on pages 20 to 71. 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 28 March 2015
and of the group’s profit for the year 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 financial
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
30 June 2015
19
Consolidated income statement
For the 52-week period ended 28 March 2015
Continuing
Revenue
Cost of sales
Gross profit
Other operating income
Net operating expenses
Pensions credit
Acquisition costs
Share option costs
Other special items
Amortisation of intangible assets
acquired
Total Net operating expenses
Operating profit
Bank and other interest
Interest on pension surplus
Financial income
Bank and other interest
Amortisation of shareholder loan
expenses
Financial expense
Profit before tax
Income tax charge
Profit for the period from continuing
operations
Attributable to equity holders of the
parent
Attributable to non controlling interests
Basic earnings per share
Diluted earnings per share
Company Number 00196730
Notes
1
2
2
3
3
3
3
3
4
6
6
7
52 weeks
ended
28 March
2015
£000
43,794
(29,374)
14,420
42
(11,998)
2,347
(335)
(131)
(896)
(27)
52 weeks
ended
29 March
2014
£000
41,707
(27,850)
13,857
134
(11,643)
_
_
(57)
(128)
_
(11,040)
(11,828)
3,422
2
857
859
(451)
(155)
(606)
3,675
(1,325)
2,350
2,333
17
2,350
2.66p
2.58p
2,163
7
827
834
(388)
(134)
(522)
2,475
(623)
1,852
1,852
_
1,852
2.19p
2.15p
The accompanying accounting policies and notes on pages 25 to 71 form part of these Financial Statements.
20
Consolidated statement of comprehensive income
for the 52-week period ended 28 March 2015
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
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 for the period
Attributable to:
Equity holders of the Parent Company
Non controlling interests
Total recognised income
Notes
29
29
14
52-week
52-week
period ended
period ended
28 March
29 March
2015
£000
2,350
-
12,188
(4,296)
7,892
(13)
(13)
7,879
10,229
10,212
17
10,229
2014
£000
1,852
(229)
-
139
(90)
2
2
(88)
1,764
1,764
-
1,764
The accompanying accounting policies and notes on pages 25 to 71 form part of these Financial Statements.
21
Consolidated statement of financial position
As at 28 March 2015
Company Number 00196730
Non-current assets
Property, plant and equipment
Goodwill
Other Intangible assets
Investments
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
Trade and other payables
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
Non-controlling interests
Total equity
As at
28 March
2015
£000
5,159
7,144
2,347
525
3,022
34,292
52,489
11,036
7,070
902
19,008
71,497
(8,405)
(4,175)
(13,358)
(25,938)
Notes
11
12
12
13
14
29
15
16
17
18
19
14
19
(6,792)
20
18
22
(135)
(611)
(3,295)
(10,833)
(36,771)
34,726
896
-
1,494
-
124
806
31,270
34,590
136
34,726
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
-
22,545
The financial statements on pages 20 to 71 were approved by the Board of Directors on 30 June 2015 and were signed on its behalf
by:
NEIL CARRICK
GROUP FINANCE DIRECTOR
30 JUNE 2015
22
Consolidated statement of changes in equity
As at 28 March 2015
Company Number 00196730
Ordinary
Ordinary
Share
Share
Capital
Capital
Non
share
premium Revaluation redemption Translation Equity
Retained
Controlling
Total
capital
account
reserve
reserve[1]
reserve reserve
Earnings
Total
Interest
Equity
£000
£000
£000
£000
£000
£000
£000
£000
£000
£000
At 30 March 2013
At 31 March 2013
14,579
16,858
909
2,500
1,860
173
(15,222) 21,657
— 21,657
14,579
16,858
909
2,500
1,860
173
(15,222) 21,657
— 21,657
Profit for the period (restated)
Other comprehensive income:
Foreign currency translation
Net defined benefit asset movement
Revaluation of properties
Deferred tax
Total comprehensive income
Transactions with owners:
Share capital subscribed for
Shareholder loan issue
Credit for share-based payments
Total transactions with owners
At 29 March 2014
At 30 March 2014
Profit for the period
Other comprehensive income:
Foreign currency translation
Net defined benefit asset movement
Fair valuation of Investments
Revaluation of properties
Deferred tax
Total comprehensive income
Transactions with owners:
—
—
—
—
—
—
2
—
—
2
—
—
—
—
—
—
27
—
—
27
—
—
—
—
1,852
1,852
—
1,852
(90)
— (922)
—
43
—
—
—
—
—
—
—
(47)
— (922)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
7
—
7
2 (1,010)
—
(1,010)
(229)
(229)
—
139
1,764
—
—
57
57
43
139
795
29
7
57
93
—
—
—
—
—
—
—
—
(229)
43
139
795
29
7
57
93
14,581
16,885
862
2,500
938
180
(13,401) 22,545
— 22,545
14,581
16,885
862
2,500
938
180
(13,401) 22,545
— 22,545
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
2,333
2,333
17
2,350
(24)
—
—
656
—
632
—
—
—
—
—
490
—
—
(13)
453
—
453
— 12,188 12,188
— 12,188
(622) —
— —
—
—
(622)
656
— —
(4,296)
(4,296)
—
—
—
(622)
656
(4,296)
— (132)
— 10,212 10,712
17 10,729
Share capital subscribed for
51
1,094
—
—
—
—
— 1,145
—
1,145
Cancellation of deferred shares,
share premium and capital
redemption reserve
Shareholder loan issue
Credit for share-based payments
Total transactions with owners
(13,685)
(16,885)
—
—
—
—
—
—
(2,500)
—
—
—
(56)
—
104
131
48
131
(56)
34,450
1,324
(13,736)
(17,979)
—
(2,500)
—
— 34,215
—
—
—
—
—
—
48
131
1,324
Non controlling interest
At 28 March 2015
—
896
—
— 1,494
—
—
—
—
—
—
119
119
806
124
31,261 34,581
136 34,717
—
—
—
—
1 The capital redemption reserve was set up on cancellation and repayment of cumulative preference shares in 2001.
The accompanying accounting policies and notes on pages 25 to 71 form part of these Financial Statements.
23
Consolidated cash flow statement
For the 52-week period ended 28 March 2015
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
Income tax expense
Operating cash flow before changes in working capital and provisions
Decrease/(increase) in trade and other receivables
(Increase)/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
Purchase of Tykma
Investment in Prophotonics
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
Proceeds from issue of Loan Notes
Net Repayment of external borrowing
Net Finance lease (expenditure)/income
Net cash flows from financing activities
Net (decrease)/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
52-week
period ended
period ended
28 March
29 March
Notes
23
17
2015
£000
2,350
133
450
(253)
(2,347)
1,231
131
1,325
3,020
203
(1,051)
(1,626)
(170)
376
(414)
(205)
(243)
2
460
(3,802)
(1,147)
(944)
(299)
(487)
(6,217)
1,145
7,694
(2,505)
(107)
6,227
(233)
1,149
(14)
902
2014
£000
1,852
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
24
The accompanying accounting policies and notes on pages 25 to 71 form part of these Financial Statements.
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 2015
are for the 52-week period ended 28 March 2015. The results for 2014 are for the 52-week period ended 29 March 2014. 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.
There have been no 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:
International Financial Reporting Standards:
IFRS 9 Financial Instruments (not yet adopted by the EU)
IFRS 15 Revenue from Contracts with Customers (not yet adopted by the EU)
Effective for accounting periods starting on or after:
1 January 2018
1January 2017
The Group is currently reviewing the potential impact of the above standards. Preliminary indications are that the impact would not be
significant. The same is true of the following new or amended standards:
IFRS 14 Regulatory Deferral Accounts; Accounting for Acquisitions of Interests in Joint Operations (Amendments to IFRS 11);
Clarification of Acceptable Methods of Depreciation and Amortisation (Amendments to IAS 16 and IAS 38); Defined Benefit Plans:
Employee Contributions (Amendments to IAS 19); Annual Improvements to IFRSs 2010-2012 Cycle; and Annual Improvements to
IFRSs 2011-2013 Cycle.
The Company has elected to prepare its Parent Company financial statements in accordance with UK GAAP; these are presented on
pages 63 to 71.
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.
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 loan note holders and the UK Pension Trustees, remains in place. Overseas
bank finance in place around the Group is not due for review until after the next 12 months. In February and March 2015 the Group
issued £7.7m of 8% loan notes with a 5 year maturity. 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 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.
25
Group accounting policies
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.
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.
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 and amortisation of intangible assets acquired 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.
26
Group accounting policies
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.
INVESTMENTS
Investments relate to the acquisition of shares capitalised as an asset. Investments are valued at market value at the year-end with any
write-down required taken through reserves.
27
Group accounting policies
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 2015 the Group’s properties were revalued. The valuations were performed by independent
valuers, Sanderson Weatherall, and the valuations were determined by market rate for sale with vacant possession. Revalued amounts
are reflected in the balance sheet with resulting credits taken to revaluation reserve and debits taken to the consolidated income
statement. Profits or losses on disposals are calculated using the carrying value in the balance sheet.
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 provisions 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 statement
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 accordance
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 acquiree: plus if the business combination is achieved in stages, the fair
value of the existing equity interest in the acquiree: 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. This was cancelled during the
period following shareholder approval and a High Court process.
Revaluation reserve
The Group’s properties are valued periodically and the difference between the valuation and the carrying value of the property 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. This was
cancelled during the period following shareholder approval and a High Court process.
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 loan notes which include convertible warrants, the value of which is recognised in
equity.
30
Notes relating to the consolidated financial statements
For the 52-week period ended 28 March 2015
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.
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 28 March 2015
Segmental analysis of revenue
Revenue from external customers
Inter-segment revenue
Total segment revenue
Less: inter-segment revenue
Total revenue
Segmental analysis of operating Profit/(loss) before
Special Items
Special Items
Group profit from operations
Other segmental information:
Reportable segment assets
Reportable segment liabilities
Fixed asset additions
Depreciation and amortisation
Continuing
Machine
Tools
& Precision
Engineered
Components
Laser
Marking
Head Office
& unallocated
£000
£000
£000
34,747
9,047
—
34,747
—
34,747
182
9,229
(182)
9,047
—
—
—
—
—
2,931
304
1,965
(772)
(771)
(235)
4,896
(468)
(1,006)
Total
£000
43,794
182
43,976
(182)
43,794
2,464
958
3,422
29,443
6,622
35,432
71,497
(19,614)
(2,619)
(14,538)
(36,771)
919
305
353
278
—
—
1,272
583
31
Notes relating to the consolidated financial statements
For the 52-week period ended 28 March 2015
1. SEGMENT INFORMATION (CONTINUED)
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
Restated
Machine
Tools
& Precision
Engineered
Components
Laser
Marking
Head Office
& unallocated
£000
33,749
—
33,749
—
£000
7,958
296
8,254
(296)
33,749
7,958
£000
—
—
—
—
—
Total
£000
41,707
296
42,003
(296)
41,707
Segmental analysis of operating Profit/(loss) before special Items
2,740
686
(1,078)
2,348
Special Items
Group (Loss)/profit from operations
—
2,740
—
686
(185)
(1,263)
(185)
2,163
Other segmental information:
Reportable segment assets
Reportable segment liabilities
Fixed asset additions
Depreciation and amortisation
37,454
6,153
(13,007)
(1,522)
412
308
643
159
126
(6,659)
—
28
43,733
(21,188)
1,055
495
The comparative figures have been restated to reflect the move of the laser marking spares and service activity from within
Clausing Machine Tools to TYKMA in the current year.
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 used 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
Total Revenue
2015
£000
20,806
21,083
1,905
43,794
2014
%
£000
%
47.5
48.1
4.4
100.0
20,803
18,703
2,201
41,707
49.9
44.8
5.3
100.0
32
Notes relating to the consolidated financial statements
For the 52-week period ended 28 March 2015
1. SEGMENT INFORMATION (CONTINUED)
Segmental analysis by destination:
Gross sales revenue:
UK
Other European
North America
Africa
Australasia
Central America
Middle East
Far East
There are no customers that represent 10% or more of the Group’s revenues.
2. OTHER OPERATING INCOME/OPERATING EXPENSES
Other operating income
Operating expenses:
– administration expenses
– distribution costs
Total net operating expenses
2015
2014
£000
%
£000
%
8,043
7,045
24,087
187
1,709
148
893
1,682
43,794
18.4
16.1
55.0
0.4
3.9
0.3
2.1
3.8
100.0
8,223
6,486
22,360
315
2,057
112
914
1,240
41,707
2015
£000
42
7,995
3,045
19.7
15.6
53.6
0.8
4.9
0.3
2.2
2.9
100.0
2014
£000
134
8,929
2,899
11,040
11,828
33
Notes relating to the consolidated financial statements
For the 52-week period ended 28 March 2015
3. SPECIAL ITEMS, ACQUISITION COSTS AND SHARE OPTION COSTS
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 and amortization of intangible assets acquired have also been separately identified.
Special items include acquisition costs, 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.
Operating costs
Abortive transaction costs
Inventory write downs
Reorganisation and restructuring costs
Property disposals
Property write-downs
Other Special Items
Pensions credit
Acquisition costs
Share option costs
Amortisation of intangible assets acquired
2015
£000
—
268
157
193
278
896
(2,347)
335
131
27
2014
£000
128
—
—
—
—
128
—
—
57
—
During the year the Group incurred costs with regard to the acquisition of TYKMA Inc. Property disposals in both the UK and US and
the revaluation of properties led to losses. Reorganisation and restructuring costs were principally related to the integration of TYKMA
Inc and the Electrox Laser marking division.
The pension credit relates to liability reduction exercises undertaken by the trustees of the main scheme including pensions increase
exchange.
During the prior 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.
34
Notes relating to the consolidated financial statements
For the 52-week period ended 28 March 2015
4. OPERATING PROFIT/(LOSS)
Operating profit/(loss) is after charging/(crediting) :
– depreciation of assets held under finance leases
– amortisation of development expenditure and trademarks
– research and development expensed as incurred
– hire of plant
– other operating lease rentals
– loss on sale of property, plant and equipment
2015
£000
34
133
297
6
108
3
2014
£000
33
28
56
10
86
3
Special Items
–Acquisition costs, Reorganisation and restructuring, inventory and property write-downs, property disposals
and abortive transaction costs (note 3)
1,362
185
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
55
15
8
77
42
17
45
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)
2015
£000
8,292
1,142
415
16
131
2014
£000
7,819
1,113
394
18
57
9,996
9,401
In addition to the above staff costs, redundancy costs of £84,000 were incurred during the year (2014: £nil). 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 28 March 2015
5. PERSONNEL EXPENSES (CONTINUED)
The average number of employees of the Group (including Executive Directors) during the period was as follows:
2015
Number
2014
Number
Management and administration
Production
Sales
Total
.
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
42
90
74
206
2015
£000
2
857
859
(174)
(238)
(22)
—
(17)
(155)
(606)
39
97
76
212
2014
£000
7
827
834
(169)
(200)
—
(1)
(18)
(134)
(522)
36
Notes relating to the consolidated financial statements
For the 52-week period ended 28 March 2015
7. TAXATION
Current tax:
Corporation tax at 21% (2014: 23%):
– current period
Overseas taxation:
– current period
Total current tax charge
Deferred taxation:
– current period
– prior period
Total deferred taxation charge (Note 14)
Taxation charged to the income statement
2015
£000
—
(339)
(339)
(1,060)
74
(986)
(1,325)
2014
£000
—
(62)
(62)
(400)
(161)
(561)
(623)
TAX RECONCILIATION
The tax charge assessed for the period is higher than the standard rate of corporation tax in the UK of 21% (2014: 23%). The
differences are explained below:
Profit before tax
Profit before tax multiplied by the standard rate of corporation tax
in the UK of 21% (2014: 23%)
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 to the income statement
The corporation tax rate reduced to 20% from 1 April 2015
Deferred taxation balances are analysed in note 14.
8. DIVIDENDS
No dividend was paid in period (2014: no dividend paid).
2015
£000
3,675
%
2014
£000
2,475
%
772
21.0
569
23.0
252
114
454
-
(74)
(193)
-
1,325
6.9
3.1
12.3
-
(2.0)
(5.2)
-
36.1
152
48
100
-
161
(520)
113
623
6.2
1.9
4.0
-
6.5
(21.0)
4.6
25.2
37
Notes relating to the consolidated financial statements
For the 52-week period ended 28 March 2015
9. EARNINGS PER SHARE
The calculation of the basic earnings per share of 2.66p (2014: 2.19p) is based on the earnings for the financial period attributable to
the Parent Company’s shareholders of a profit of £2,333,000 (2014: £1,852,000) and on the weighted average number of shares in
issue during the period of 87,771,514 (2014: 84,430,346). At 28 March 2015, there were 9,900,000 (2014: 4,500,000) potentially
dilutive shares on option with a weighted average effect of 2,783,270 (2014: 1,553,045) shares giving a diluted profit per share of 2.58p
(2014: 2.15p)
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
Share Option Costs
Pensions Interest
Amortisation of Shareholder loan expenses
Pensions credit
Amortisation of intangible assets acquired
Property sales and revaluation
Other special items
Acquisition costs
Associated Taxation
Underlying Earnings before tax
Underlying Earnings after tax
Underlying EPS
2015
2014
84,430,346
84,256,091
3,341,168
174,255
87,771,514
84,430,346
£000
2,350
131
(857)
155
(2,347)
27
462
434
335
1,159
2,015
1,849
2.09p
£000
1,852
57
(827)
134
-
-
-
128
-
258
1,967
1,602
1.90p
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 at 10p per share and on 7 April 2014 at 17p per
share. These options are exercisable between 3 and 10 years from the grant date. The schemes are equity-settled.
SHARE-BASED EXPENSE
The Group recognised a total charge of £131,000 (2014: £57,000) in relation to equity-settled share-based payment transactions.
2015
DSP
2014
DSP
The number and weighted average exercise prices of share options
Number of options outstanding at beginning of period
4,500,000
4,500,000
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
5,400,000
—
—
—
—
—
9,900,000
4,500,000
—
—
On 19 November 2012 4,500,000 options with an exercise price of 10p were granted. On 7 April 2014 5,400,000 options with an
exercise price of 17p were granted. All options are excercisable between 3 and 10 years from the date of grant.
On 30 April 2015 Mr N Rogers resigned as a Director. 2,750,000 options with an exercise price of 10p were agreed to become
immediately exercisable by Mr N Rogers and 2,000,000 options with an exercisable price of 17p were forfeit.
During the current and prior period, the Group has not granted equity as consideration for goods or services received.
38
Notes relating to the consolidated financial statements
For the 52-week period ended 28 March 2015
10. EMPLOYEE SHARE OPTION SCHEMES (CONTINUED)
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 value 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
11. PROPERTY, PLANT AND EQUIPMENT
Cost or valuation
At 29 March 2014
Exchange differences
Revaluation
Acquisitions during period
Additions during period
Disposals during period
At 28 March 2015
At professional valuation
At cost
Depreciation
At 29 March 2014
Exchange differences
Acquisitions during period
Charge for period
Disposals during period
At 28 March 2015
Net book value
At 28 March 2015
At 29 March 2014
2014
Grant
£000
£0.05
£0.17
17p
0%
25%
2012
Grant
£000
£0.04
£0.13
10p
0%
50%
3.0 years
3.0 years
4.08%
4.08%
5,400,000
4,500,000
Land and buildings
Plant and
Fixtures,
fittings,
tools and
Freehold
Leasehold
machinery
equipment
£000
£000
£000
£000
Total
£000
969
(14)
(269)
—
782
(282)
1,186
1,186
—
1,186
147
18
—
19
(168)
16
1,170
822
2,406
18,627
2,019
24,021
1
647
117
—
(495)
2,676
2,558
118
2,676
56
—
19
126
(7,834)
10,994
—
10,994
10,994
126
—
670
65
(806)
2,074
—
2,074
2,074
169
378
806
973
(9,417)
16,930
3,744
13,186
16,930
124
17,484
1,918
19,673
—
20
38
(104)
78
2,598
2,282
56
18
342
(7,801)
10,099
895
1,143
115
299
51
(805)
1,578
496
101
189
337
450
(8,878)
11,771
5,159
4,348
39
Notes relating to the consolidated financial statements
For the 52-week period ended 28 March 2015
11. PROPERTY, PLANT AND EQUIPMENT (CONTINUED)
The net book value of property, plant and equipment includes £172.814 (2014: £268,991) of assets held under finance leases. The
depreciation charged in the period against assets held under finance leases was £34,266 (2014: £32,655).
During March 2015 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.
Various properties with a net book value of £3,777,000 (2014: £3,104,000) are charged as security for borrowing facilities.
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
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
Total
£000
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
40
Notes relating to the consolidated financial statements
For the 52-week period ended 28 March 2015
12. GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill
Trademarks
Expenditure
£000
£000
£000
Development
Cost
At 29 March 2014
Acquisitions
Additions
Fair value adjustment
Foreign exchange
At 28 March 2015
Amortisation and impairment
At 29 March 2014
Acquisitions
Amortisation
Foreign exchange
At 28 March 2015
Net book value
At 28 March 2015
At 29 March 2014
—
7,144
—
—
—
7,144
—
—
—
—
—
7,144
—
—
231
1
207
6
445
—
42
28
1
71
374
—
Total
£000
1,973
7,375
299
207
6
1,973
—
298
—
—
2,271
9,860
193
—
105
—
298
1,973
1,780
193
42
133
1
369
9,491
1,780
The additions to Development Expenditure of £299k in the period and £511k in the prior period related primarily to internal
development. The goodwill related to the acquisition of TYKMA Inc and more details on this can be found in note 31.
Development
Goodwill
Expenditure
£000
£000
Total
£000
Cost
At 30 March 2013
Additions
Written off
At 29 March 2014
Amortisation and impairment
At 30 March 2013
Amortisation
Written off
At 29 March 2014
Net book value
At 29 March 2014
At 30 March 2013
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
1,772
511
(310)
1,973
475
28
(310)
193
1,780
1,297
2014
£000
133
3,286
511
(1,824)
1,973
1,989
28
(1,824)
193
1,780
1,297
2013
£000
28
41
Notes relating to the consolidated financial statements
For the 52-week period ended 28 March 2015
12. GOODWILL AND OTHER INTANGIBLE ASSETS (CONTINUED)
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 written off prior to the start of the current reporting period.
13. INVESTMENTS
Cost:
At 30 March 2014
Additions in the period
Disposals in the period
At 28 March 2015
Provisions:
At 30 March 2014
Impairment in the period
At 28 March 2015
Net book values
At 28 March 2015
At 30 March 2014
Shares
In Associate
Undertakings
£000
—
1,147
—
1,147
—
622
623
525
—
Total
£000
—
1,147
—
1,147
—
622
623
525
—
On 3 August 2014 the Company acquired 26.3% of the ordinary share capital of ProPhotonix Limited through the issue of ordinary shares
in the Company representing 5.5% of the enlarged share capital of 600 Group Plc. The share exchange was carried out following
presentations with three London-based institutional investors, each of whom indicated support for the exchange.
ProPhotonix Limited is AIM listed, although registered in Delaware, and designs and manufactures LED arrays and laser diode modules in
the UK and Ireland. It has a strong base of technology and applications knowledge, applicable to high growth sectors including niche
industrial, security and medical markets. We continue to engage with the board of Prophotonix in constructive dialogue to promote closer
co-operation.
The initial investment of £1.15m was adjusted down to a fair value of £0.53m at 28 March 2015. The £0.62m write down was taken to the
Statement of comprehensive income and expense.
During the year 600 Group Inc acquired 80% of the shares of TYKMA Inc with deferred contingent consideration included in the
agreement for the final 20%. Further details can be found in note 31 of the Group accounts.
14. 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
2015
£000
819
316
1,187
700
—
—
—
2014
£000
689
301
1,137
596
—
—
—
2015
£000
—
—
—
—
2014
£000
—
—
—
—
2015
£000
819
316
1,187
700
2014
£000
689
301
1,137
596
(12,013)
(1,246)
(99)
(6,653)
(12,013)
(6,653)
(985)
(99)
(1,246)
(99)
(985)
(99)
3,022
2,723
(13,358)
(7,737)
(10,336)
(5,014)
42
Notes relating to the consolidated financial statements
For the 52-week period ended 28 March 2015
14. DEFERRED TAX ASSETS AND LIABILITIES (CONTINUED)
MOVEMENT IN DEFERRED TAX DURING THE PERIOD
As at
Statement of
As at
30 March
Income
comprehensive
Exchange
28 March
statement
Acquisitions
income
Fluctuations
Accelerated capital allowances
Short-term timing differences
Tax losses
Overseas tax losses
Employee benefits
Revaluations and rolled over gains
Research and development
2014
£000
689
301
1,137
596
(6,653)
(985)
(99)
(5,014)
MOVEMENT IN DEFERRED TAX DURING THE PRIOR PERIOD
Accelerated capital allowances
Short-term timing differences
Tax losses
Overseas tax losses
Employee benefits
Revaluations and rolled over gains
Research and development
As at
31 March
2013
£000
725
438
1,308
649
(6,350)
(1,133)
(114)
(4,477)
£000
306
(9)
50
£000
(176)
—
—
31
—
(1,103) —
(261)
—
(986)
—
—
£000
£000
—
—
—
—
(4,296)
—
—
—
24
—
73
39
—
—
2015
£000
819
316
1,187
700
(12,013)
(1,246)
(99)
(176)
(4,296)
136
(10,336)
Restated
Statement of
As at
Income
Comprehensive
Exchange
29 March
statement
Income
Fluctuations
£000
(36)
(115)
(171)
4
(406)
148
15
(561)
£000
—
—
—
—
139
—
—
139
£000
—
(22)
—
(57)
(36)
—
—
2014
£000
689
301
1,137
596
(6,653)
(985)
(99)
(115)
(5,014)
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%
The rate of UK corporation tax reduced to 20% in April 2015.
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.
2015
£000
1,670
4,295
2014
£000
1,670
4,234
43
Notes relating to the consolidated financial statements
For the 52-week period ended 28 March 2015
15. INVENTORIES
Raw materials and consumables
Work in progress
Finished goods and goods for resale
2015
£000
311
760
9,965
11,036
2014
£000
646
872
6,987
8,505
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 increased by £424,000 (2014: decreased by £1,228,000). Following the impairment
provisions, inventories are valued at fair value less costs to sell rather than at historical cost.
16. 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.
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
At end of year
2015
£000
6,074
160
836
7,070
2015
£000
252
15
(171)
39
135
2014
£000
5,248
197
764
6,209
2014
£000
480
(18)
(272)
62
252
44
Notes relating to the consolidated financial statements
For the 52-week period ended 28 March 2015
16. TRADE AND OTHER RECEIVABLES (CONTINUED)
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
2015
£000
5,159
698
233
7
112
2014
£000
4,043
1,235
134
51
37
6,209
5,500
As at 28 March 2015, 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.
17. CASH AND CASH EQUIVALENTS
Cash at bank
Short-term deposits
Cash and cash equivalents per statement of financial position and per cash flow statement
18. LOANS AND OTHER BORROWINGS
CURRENT:
Trade finance
Bank loans
Other loans
Obligations under finance leases (note 21)
NON-CURRENT:
Bank loans
Shareholder loan
Obligations under finance leases (note 21)
2015
£000
802
100
902
2015
£000
644
2,452
110
89
3,295
2015
£000
1,539
6,783
83
8,405
2014
£000
1,049
100
1,149
2014
£000
455
3,426
-
101
3,982
2014
£000
-
2,289
186
2,475
45
Notes relating to the consolidated financial statements
For the 52-week period ended 28 March 2015
18. LOANS AND OTHER BORROWINGS (CONTINUED)
The £7.7m shareholder loan in place at the year-end was issued in two tranches in February and March 2015 with 39.9m 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 £2.5m shareholder loan in place at prior year-end was issued with 12.5m convertible warrants attached to it. These warrants
allowed the holders to either convert the loan into 20p shares or to purchase 20p shares for a cash consideration. The loan had both
debt and equity components and so the value was split between these components. The loan was repaid in full in February 2015 and
the equity element attached to it has been released to reserves. 2.4m warrants remain outstanding and these will, if not exercised,
expire on 27 August 2015.
The Term Loan of £1,696,000 included within Bank loans will be repaid on a quarterly basis with payments of £153,846 on 31 March
2015 through to 30 November 2017. The Term Loan of £702,000, also included within Bank loans, will be repaid on a quarterly basis
with payments of £18,000 on 31 March 2015 through to 30 June 2019 and a final payment of £378,000 on 31 May 2019.
Given the nature of the Group’s financial assets and liabilities, it is the Directors’ opinion that there is no material difference 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.
19. TRADE AND OTHER PAYABLES
Current liabilities:
Payments received on account
Trade payables
Social security and other taxes
Other creditors
Accruals and deferred income
Non-current liabilities:
Contingent deferred consideration
2015
£000
27
3,294
205
1,551
1,715
6,792
4,175
4,175
2014
£000
13
3,136
206
1,624
1,446
6,425
-
-
The contingent deferred consideration of £4.175m relates to the TYKMA Inc acquisition (note 31).
20. PROVISIONS
Provision carried forward at 30 March 2014
Exchange differences
(Credited)/Charged to income statement
Fair value adjustment on acquisition
Utilised in the period
Provision carried forward at 28 March 2015
Fair Value
Other
Warranties
£000
—
7
—
479
—
486
£000
331
—
(35)
—
(226)
70
£000
98
(2)
8
—
(49)
55
Total
£000
429
5
(27)
479
(275)
611
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 products sold
in the last twelve months. The typical warranty period is now twelve months.
The other provisions related to various legal disputes that the directors believe should be provided against. Part of the provision utilised
during the year was in respect of payments made on the final settlement of an onerous lease exited during the Group strategic review
in 2012. A further £147,000 was paid during the 2015 financial year in full settlement of this lease. Other provisions of £70,000 relate
largely to bonuses provided for at the year-end. The fair value provision relates to the TYKMA Inc acquisition and further details on this
can be found in note 31.
46
Notes relating to the consolidated financial statements
For the 52-week period ended 28 March 2015
21. 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
22. 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
84,491,886 ordinary shares of 1p each on issue at start of the period (2014: 84,256,091 ordinary shares )
190,450 ordinary shares of 1p each issued to N Rogers and N Carrick on subscription following bonus
payment (2014 – 235,795 ordinary shares of 1p each issued to N Rogers and N Carrick)
4,925,621 ordinary shares of 1p each issued in ProPhotonix Limited share acquisition
89,607,957 ordinary shares of 1p each on issue at end of period (2014: 84,491,886 ordinary shares of 1p)
Deferred shares of 24p each:
57,233,679 deferred shares of 24p each on issue at start of period
Cancellation of deferred shares of 24p
Nil deferred shares of 24p on issue at end of period (2014 – 57,233,679)
Total Allotted, called-up and fully paid at the end of period
2015
£000
95
89
(12)
172
89
83
172
2015
£000
6,264
—
6,264
845
2
49
896
13,736
(13,736)
—
896
2014
£000
110
197
(20)
287
101
186
287
2014
£000
6,264
13,736
20,000
843
2
—
845
13,736
—
13,736
14,581
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 139,780 and 50,670 ordinary
shares of 1p each were issued to N Rogers and N Carrick respectively in June 2014. This resulted in share capital increasing by
£1,905 with a corresponding share premium increase of £41,423.
In August 2014 the Company issued 4,925,621 ordinary shares of 1p each as consideration for the purchase of 22,042,143 ordinary
shares in ProPhotonix Limited.
During the prior year 173,061 and 62,734 ordinary shares of 1p each were issued to N Rogers and N Carrick respectively in June 2013.
This resulted in share capital increasing by £2,358 with a corresponding share premium increase of £26,527.
During the current year the deferred shares of 24p each were cancelled by the company without compensaton following approval by
the shareholders at the AGM on 17 September 2014.
47
Notes relating to the consolidated financial statements
For the 52-week period ended 28 March 2015
22. SHARE CAPITAL (CONTINUED)
On 16 February and 18 March the Company raised £6.739m and £0.955m respectively through the issue of loan notes. The loan notes
have 5 year maturity and carry a coupon of 8% payable quarterly in arrears. The subscribers for loan notes are also entitled to receive
warrants with an expiry date of 18 February 2020 to subscribe for 35.145m and 4.775m ordinary shares of 1p each in the Company at
a price of 20p per Ordinary Share. The issue of the warrants occurred after approval was granted by the shareholders at a general
meeting on 18 March 2015.
In February 2015 the first tranche of proceeds from the issue of loan notes was used to repay in full a £2.5m related party loan. The
warrants attached to this £2.5m loan 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). At the year-end 2.4m warrants remained and these are due to
expire on 27 August 2015 (2014: 11.6m warrants remained outstanding).
23. 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 costs
Cash and debt through acquisitions
Exchange effects on net funds
Net debt at end of period
24. ANALYSIS OF NET DEBT
2015
£000
(233)
(5,200)
(5,433)
(5,308)
701
(697)
(61)
2014
£000
211
14
225
(5,407)
(126)
—
—
(10,798)
(5,308)
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
Loan notes due after one year
Shareholder loan
Finance leases
Total
At
30 March
Exchange
2014
£000
1,049
100
1,149
(3,881)
—
—
(2,289)
(287)
(5,308)
movement
£000
(14)
—
(14)
(54)
—
—
—
7
(61)
At
28 March
2015
£000
802
100
902
(3,206)
(1,539)
(6,783)
—
(172)
Cash flows
£000
(233)
—
(233)
1,426
(1,539)
(7,695)
2,500
108
(5,433)
(10,798)
Other
£000
—
—
—
(697)
—
912
(211)
—
4
48
Notes relating to the consolidated financial statements
For the 52-week period ended 28 March 2015
25. 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 framework. 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 the year £7.7m was raised through the issue of loan notes
which had 39.9m warrants attached to them. These warrants allow the holders to either convert the loan into 20p shares or to purchase
20p shares for a cash consideration. In addition, 2.4m of warrants remain outstanding from the shareholder loan which was repaid in
full in February 2015. These warrants will 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 Shareholders 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.
49
Notes relating to the consolidated financial statements
For the 52-week period ended 28 March 2015
25. 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
North America
Australasia
2015
£000
6,074
902
6,976
2015
£000
3,199
2,797
78
6,074
2014
£000
5,248
693
5,941
2014
£000
3,058
1,921
269
5,248
50
Notes relating to the consolidated financial statements
For the 52-week period ended 28 March 2015
25. 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 operational
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:
Trade finance
Bank loan
Other 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
2015
Carrying
Contractual
Less than
Amount
cash flows
£000
644
3,991
110
6,783
172
11,700
10,967
22,667
£000
644
3,991
110
6,783
172
11,700
10,967
22,667
2014
1 year
£000
644
2,452
110
—
55
3,261
6,792
10,053
1–2 years
2–5 years
£000
—
687
—
—
65
752
—
752
£000
—
852
—
6,783
52
7,687
4,175
11,862
1–2 years
2–5 years
£000
£000
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
12,882
12,882
1 year
£000
455
3,426
—
101
3,982
6,425
10,407
—
—
2,289
106
2,395
—
2,395
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.
—
—
—
80
80
—
80
51
Notes relating to the consolidated financial statements
For the 52-week period ended 28 March 2015
25. 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
2015
US Dollars
$000
2,797
(777)
2,020
Euro
€000
227
(249)
(22)
2014
US Dollars
$000
1,921
(181)
1,740
Euro
€000
272
(195)
77
2015
2014
Average
rate
1.609
1.282
Year end
spot rate
1.488
1.366
Average
rate
1.592
1.187
Year end
spot rate
1.664
1.210
Change if
appreciated/
Depreciated
Net assets
by 25%
in foreign
against local
currency
Currency
9,108
2,277
The Group has operations around the world and is therefore exposed to foreign exchange risk arising from net investments in foreign
operations. Where cost effective, the exposures arising from the translation of the net assets of the Group’s foreign operations are
managed through the use of borrowings or cross-currency swaps in the relevant foreign currency.
Some Group operations on occasion also enter into commercial transactions in currencies other than their functional currencies. Exposures
arising from the translation of foreign currency transactions are continually monitored and material exposures are managed where
necessary through the use of forward contracts or options once cash flows can be identified with sufficient certainty. Exposures arising
from the translation of intra-group lending are managed through the use of borrowings in the relevant foreign currency.
52
Notes relating to the consolidated financial statements
For the 52-week period ended 28 March 2015
25. FINANCIAL INSTRUMENTS (CONTINUED)
The following table shows the impact (due to the retranslation of non-functional currency monetary assets and liabilities in the Group's
operations) of a, reasonably possible, 10% movement in the Group’s principal foreign currency exchange rates at the year-end date.
28 March 2015
US$
AUD
29 March 2014
US$
AUD
10%
increase
Effect on
profit
before tax
Effect on
shareholders’
equity
10 %
decrease
Effect on
profit before
tax
Effect on
shareholders’
equity
90
17
66
7
911
132
717
158
(90)
(17)
(66)
(7)
(911)
(132)
(717)
(158)
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
£’000
(887)
142
2
change by
1%
£’000
(9)
1
—
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 28 March 2015, 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 (2014: charge of £0.03m). A reduction of 100 basis points would have the
equal and opposite effect. There is no further impact on shareholders' equity.
53
Notes relating to the consolidated financial statements
For the 52-week period ended 28 March 2015
25. 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 28 March 2015 was a liability of £nil (Note 18) (2014: 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 assets at 28
March 2015 and 29 March 2014 was:
2015
Financial
assets
2014
Financial
assets
Floating rate
Fixed rate
on which
Floating rate
Fixed rate
on which
financial
financial
no interest
financial
financial
no interest
Currency
Sterling
US Dollars
Australian Dollars
Euros
Canadian Dollars
£000
335
215
142
108
2
802
assets
assets
is earned
£000
100
—
—
—
—
£000
3,672
3,305
93
—
—
Total
£000
4,300
3,435
235
—
2
assets
assets
is earned
£000
771
34
231
9
4
£000
100
—
—
—
—
£000
3,499
2,408
302
—
—
Total
£000
4,413
2,408
533
—
4
100
7,070
7,972
1,049
100
6,209
7,358
There is no interest received on floating rate financial assets.
The floating rate financial assets comprise other deposits that earn interest based on short-term deposit rates.
54
Notes relating to the consolidated financial statements
For the 52-week period ended 28 March 2015
25. 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 28 March 2015 and 29 March 2014 was:
2015
Financial
liabilities
2014
Financial
liabilities
Floating rate
Fixed rate
on which
Floating rate
Fixed rate
on which
financial
Financial
no interest
financial
financial
no interest
liabilities
Liabilities
Currency
Sterling
US Dollars
Australian Dollars
£000
3,042
1,703
—
4,745
£000
6,881
—
74
is paid
£000
4,505
6,264
198
Total
£000
14,428
7,967
272
liabilities
liabilities
£000
3,424
457
—
£000
2,464
—
112
6,955
10,967
22,667
3,881
2,576
is paid
£000
4,934
1,156
335
6,425
Total
£000
10,822
1,613
447
12,882
The floating rate financial liabilities comprise bank borrowings and overdrafts that bear interest rates based on local currency base
interest rates.
BORROWING FACILITIES
At 28 March 2015 and 29 March 2014 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
2015
‘000
£1,406
$1,949
2014
‘000
£860
$1,739
AUD$900
AUD$900
2015
£000
7,070
902
(644)
(2,452)
(6,893)
(172)
(5,009)
(7,198)
2014
£000
6,209
1,149
(455)
(3,426)
(2,289)
(287)
(4,525)
(3,624)
Given the nature of the Group’s financial assets and liabilities, it is the Directors’ opinion that there is no material difference between
their reported book values and estimated fair values.
55
Notes relating to the consolidated financial statements
For the 52-week period ended 28 March 2015
26. CONTINGENT LIABILITIES
Third-party guarantees
2015
£000
92
2014
£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.
27. CAPITAL COMMITMENTS
Capital expenditure contracted for but not provided in the accounts
2015
£000
—
2014
£000
—
28. 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
2015
£000
291
901
551
1,743
59
23
82
2014
£000
321
1,030
709
2,060
31
36
67
29. 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.
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 2015. The disclosures for the US schemes that follow refer to the US
defined benefit scheme and the retirement healthcare benefit scheme.
56
Notes relating to the consolidated financial statements
For the 52-week period ended 28 March 2015
29. 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 2015 at age 65 will live on average for a further 21.6 years (2014: 21.6 years) after
retirement if male and for a further 23.6 years (2014: 23.6 years) after retirement if female.
For a member who is currently aged 45 retiring in 2035 at age 65, the assumptions are that they will live on average for a further 22.7
years (2014: 22.7 years) after retirement if they are male and for a further 24.6 years (2014: 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
0Rate 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
2015
2014
UK scheme
UK scheme
% p.a.
2.85
1.85
n/a
n/a
2.80
2.10
3.30
% p.a.
3.20
2.00
n/a
n/a
3.10
2.15
4.50
The principal assumptions for the US schemes relate to the discount rate for scheme liabilities. The discount rate used for the US
defined benefit scheme was 3.24% (2014: 3.92%) and for the US medical scheme was 3.24% (2014: 3.92%).
Long-term
rate of return
expected at
Expected return on assets UK scheme
Long-term
rate of return
Long-term
rate of return
Value at
expected at
Value at
expected at
28 March
28 March
29 March
29 March
30 March
2015
% p.a.
3.30
3.30
3.30
3.30
3.30
3.30
3.30
3.30
2015
£m
52.80
9.90
83.30
n/a
23.20
44.80
15.20
229.20
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
Value at
30 March
2013
£m
51.30
19.30
76.80
n/a
14.30
29.80
11.80
203.30
Equities
Property
LDI funds
Government bonds
Corporate bonds
Absolute Return
Other
Combined
The assumed long-term rate of return on each asset class is equal to the discount rate applied to liabilities. The assets held within the
US scheme amount to £0.846m (2014: £0.791m) and are held mainly in bonds.
57
Notes relating to the consolidated financial statements
For the 52-week period ended 28 March 2015
29. 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 28 March 2015 and 29 March 2014 were:
Assets
Liabilities
(Deficit)/surplus
2015
US
UK
schemes
scheme
£000
£000
846
Total
£000
229,200
230,046
US
schemes
£000
791
2014
UK
scheme
£000
Total
£000
195,700
196,491
(1,969)
(193,785)
(195,754)
(1,706)
(175,803)
(177,509)
(1,123)
35,415
34,292
(915)
19,897
18,982
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
– past service credit (Special Items)
Included within financial income:
–Interest on pension surplus
2015
US
UK
schemes
scheme
£000
£000
Total
£000
US
schemes
£000
12
—
—
12
(2,347)
(2,347)
11
—
2014
UK
scheme
£000
—
—
Total
£000
11
—
(38)
(895)
(933)
(30)
(797)
(827)
58
Notes relating to the consolidated financial statements
For the 52-week period ended 28 March 2015
29. 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
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
US
schemes
£000
25
(34)
(9)
(79)
(88)
—
(88)
1,175
1,087
2015
UK
scheme
£000
44,891
(8,553)
36,338
Total
£000
44,916
(8,587)
36,329
(24,062)
(24,141)
12,276
12,188
—
12,276
12,715
24,991
—
12,188
13,890
26,078
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
Interest cost
Benefits paid
Actuarial (gains)/losses
Contributions by scheme participants
US
Schemes
£000
1,706
206
12
—
69
2015
UK
scheme
£000
Total
£000
175,803
177,509
—
—
206
12
(2,347)
(2,347)
7,658
7,727
(103)
(11,391)
(11,494)
79
—
24,062
24,141
—
—
Closing defined benefit obligations
1,969
193,785
195,754
US
Schemes
£000
12
(28)
(16)
184
168
—
168
1,007
1,175
US
schemes
£000
2,269
(182)
11
—
63
(116)
(339)
—
1,706
2014
UK
scheme
£000
2,543
Total
£000
2,555
(8,300)
(8,328)
(5,757)
(5,773)
5,360
5,544
(397)
—
(397)
13,112
12,715
(229)
—
(229)
14,119
13,890
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
175,803
177,509
59
Notes relating to the consolidated financial statements
For the 52-week period ended 28 March 2015
29. EMPLOYEE BENEFITS (CONTINUED)
IAS 19 CONTINUED
Changes in the fair value of the schemes’ assets before taxation are as follows:
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
US
schemes
£000
791
90
31
(9)
—
—
(57)
846
2015
UK
scheme
£000
Total
£000
195,700
196,491
—
8,553
36,338
—
—
90
8,584
36,329
—
—
(11,391)
(11,448)
229,200
230,046
US
schemes
£000
914
(77)
30
(16)
—
—
(60)
791
2014
UK
scheme
£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
The history of the schemes for the current and prior period before taxation is as follows:
2015
US
UK
Schemes
Scheme
£000
£000
Total
£000
US
schemes
£000
2014
UK
scheme
£000
Total
£000
Present value of defined benefit obligation
(1,969)
(193,785)
(195,754)
(1,706)
(175,803)
(177,509)
Fair value of scheme assets
(Deficit)/surplus in the scheme
Experience adjustments on the scheme liabilities
Experience adjustments on scheme assets
Exchange differences
846
229,200
230,046
(1,123)
35,415
34,292
79
(9)
(116)
(24,062)
(23,983)
36,338
—
36,329
(116)
791
(915)
325
(15)
105
195,700
196,491
19,897
5,360
(5,757)
—
18,982
5,685
(5,772)
105
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
28 March
29 March
30 March
31 March
2015
£000
2014
£000
2013
£000
2012
£000
2 April
2011
£000
230,046
196,491
204,214
188,665
173,952
(195,754)
(177,509)
(186,109)
(177,737)
(171,671)
34,292
18,982
18,105
10,928
Unrecognised asset due to limit in paragraph 58 (b) of IAS 19
—
—
—
(12,940)
Surplus /(Deficit) in schemes
34,292
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]
2015
£000
2014
£000
2013
£000
2012
£000
36,329
(23,983)
(5,772)
5,685
13,766
(13,758)
1,404
(6,731)
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.
2,281
(4,130)
(1,849)
2011
£000
(23)
2,259
60
Notes relating to the consolidated financial statements
For the 52-week period ended 28 March 2015
30. 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 25 contains information about the assumptions and estimates and the risk factors relating to interest rate and foreign currency
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 differ from that
included in the financial statements. Note 29 contains information about the principal actuarial assumptions used in the determination of
the net assets for defined benefit obligations.
DEFERRED TAXATION
Note 14 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.
31. ACQUISITION
On 13 February 2015 the Group acquired 80%of the issued share capital of TYKMA Inc., a US laser marking company. The provisional
net assets at the date of acquisition were as follows:
Fair value of assets and liabilities acquired:
Intangible assets – Development costs
Plant and equipment
Inventories
Trade and other receivables
Cash and cash equivalents
Trade and other payables
Current tax liabilities
Deferred tax liabilities
Loans and other borrowings
Net Assets
Intangible assets identified
Fair value provisions identified
Goodwill
Total consideration
£000
114
514
610
364
218
(534)
(19)
(140)
(660)
467
207
(479)
7,144
7,339
61
Notes relating to the consolidated financial statements
For the 52-week period ended 28 March 2015
31. ACQUISITION (CONTINUED)
Cash paid
Working capital adjustment payment
Contingent consideration
Total consideration
Cash paid
Cash acquired
Loans and other borrowings
Acquisition costs charged to expenses
Cashflow impact of acquisition
£000
3,103
117
4,119
7,339
3,103
(218)
660
257
3,802
The fair value of trade and other receivables acquired had a gross contractual amount of £508,000. At the acquisition date the Group’s
best estimate of contractual cashflow not expected to be recovered was £52,000.
Management identified intangible assets relating to customer lists and relationships, non compete and existing order book of £312,000
and these are being amortised in the Statement of Comprehensive Income over 4 years, non compete 5 years and the expected order
fulfilment period respectively. In addition, provisions were made for the dilapidations of the existing premises along with fixtures and
fittings which would need to be written off. Provisions were also made for warranty costs along with other write-offs of sundry debtors
and developments costs which had been previously capitalised.
TYKMA Inc generated a profit after taxation of £87,000 in the period since acquisition to the reporting date. Had the business been
acquired at the start of the financial year it is estimated that would have increased Group revenues by £5,221,000 and profit after tax by
£260,000.
The goodwill recognised relates to the integration benefits of combining the Group’s existing Electrox laser marking business with the
TYKMA Inc operation.
In the reporting period since acquisition TYKMA Inc has contributed the following cashflows:
Operating cashflows
£116,000
Investing activities
£(43,000)
32. 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 £65,000 in interest payments during the financial year
in respect of their respective holding of the Shareholder Loans and loan notes. At the year-end Haddeo Partners LLP held £810,000 of
loan notes. In addition, the wife of Mr N Carrick, the Group Finance Director, also held £50,000 of loan notes. Further details on the
loan notes can be found in note 18.
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 (2014: £nil) and no contributions were overdue at the
period-end. A payment of £10,000 per month will be paid by the Group to the UK pension scheme from April 2015 in respect of an
augmentation to benefits made in 2008/09 of £510,971. No deficit reduction payments are currently required. In the US no employer
contributions were made to the US pension scheme during the current period (2014: £nil) and no payments were overdue at the period-
end.
33. POST BALANCE SHEET EVENTS
On 30 April 2015 Mr N Rogers resigned as a director. A termination payment of £230,000 was paid to Mr Rogers at that time.
62
Company balance sheet
For the 52-week period ended 28 March 2015
Fixed assets
Tangible assets
Investments
Current assets
Debtors
Cash at bank and in hand
Current liabilities
Creditors: amounts falling due within one year
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
Shareholders’ funds
As at
As at
28 March
29 March
Notes
4
5
2015
£000
2,500
9,228
11,728
6
23,147
-
23,147
(3,690)
19,457
31,185
(7,886)
23,299
896
-
1,311
-
124
(544)
21,512
23,299
7
8
9
10
10
10
10
10
10
13
2014
£000
392
8,713
9,105
25,584
156
25,740
(15,008)
10,732
19,837
(2,465)
17,372
14,581
16,885
236
2,500
180
(22)
(16,988)
17,372
The financial statements on pages 63 to 71 were approved by the Board of Directors on 30 June 2015 and were signed on its behalf
by:
NEIL CARRICK
GROUP FINANCE DIRECTOR
30 JUNE 2015
REGISTERED OFFICE
1 Union Works
Union Street
Heckmondwike
West Yorkshire
WF16 0HL
63
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 properties, 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 2015 are for the 52-week period ended 28 March 2015. The results for 2014 are for the 52-
week period ended 29 March 2014.
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 policy
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 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%
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 owned
entities which form part of the Group (or investees of the Group qualifying as related parties).
64
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
2015
£000
587
66
16
131
800
2014
£000
678
61
17
57
813
The average number of employees of the Company (including Executive Directors) during the period was as follows:
Head office function
2015
Number
5
2014
Number
4
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 at 10p per share and on 7 April 2014 at 17p per
share. These are exercisable between 3 and 10 years from the grant date. The schemes are equity-settled.
SHARE-BASED EXPENSE
The Group recognised a total charge of £131,000 (2014: £57,000) in relation to equity-settled share-based payment transactions.
2015
DSP
2014
DSP
The number and weighted average exercise prices of share options
Number of options outstanding at beginning of period
4,500,000
4,500,000
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
5,400,000
—
—
—
—
—
9,900,000
4,500,000
—
—
On 19 November 2012 4,500,000 options with an exercise price of 10p per share were granted. On 7 April 2014 5,400,000 options with
an exercise price of 17p were granted. All options are exercisable between 3 and 10 years from the date of grant.
On 30 April 2015 Mr N Rogers resigned as a Director. 2,750,000 options with an exercise price of 10p were agreed to become
immediately exercisable by Mr Rogers and 2,000,000 options with an exercise price of 17p were forfeit.
During the current and prior period, the Group has not granted equity as consideration for goods or services received.
65
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 value 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 (2014: no dividend paid).
4. TANGIBLE FIXED ASSETS
Cost or valuation
At 30 March 2014
Disposals
Transfers from group companies
Revaluation
At 28 March 2015
At professional valuation
At cost
Depreciation
At 30 March 2014
Disposals
Transfers from group companies
Charge for period
At 28 March 2015
Net book value
At 28 March 2015
At 29 March 2014
2014
Grant
£000
£0.05
£0.17
17p
0%
25%
2012
Grant
£000
£0.04
£0.13
10p
0%
50%
3.0 years
3.0 years
4.08%
4.08%
5,400,000
4,500,000
Long Lease
Fixtures, fittings,
tools and
equipment,
Total
£000
£000
£000
495
(495)
1,928
656
2,584
2,584
—
2,584
104
(104)
80
4
84
2,500
391
94
(94)
—
—
—
—
—
—
93
(93)
—
—
—
—
1
589
(589)
1,928
656
2,584
2,584
—
2,584
197
(197)
80
4
84
2,500
392
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 2015 the Company’s properties were revalued. The valuations were performed by independent valuers, Sanderson
Weatherall, and the valuations were determined by market rate for sale with vacant possession.
Various UK properties are charged as security for borrowing facilities.
66
Notes relating to the company financial statements
5. INVESTMENTS
Cost:
At 30 March 2014
Additions in the period
Disposals in the period
At 28 March 2015
Provisions
At 30 March 2014
Impairment in the period
At 28 March 2015
Net book values
At 28 March 2015
At 30 March 2014
Shares
Shares
In Associate
In Group
Undertakings Undertakings
£000
£000
—
40,423
1,147
—
—
(10)
1,147
40,413
—
622
622
525
—
31,710
—
31,710
8,703
8,713
Total
£000
40,423
1,147
(10)
41,560
31,710
622
32,332
9,228
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 discounted 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 disposal of shares in group undertakings of £10,000 related to the liquidation of Coborn Pension Trustees Limited during the year.
During the year 600 Group Inc acquired 80% of the shares of TYKMA Inc with deferred contingent consideration included in the
agreement for the final 20%. Further details can be found in note 31 of the Group accounts.
On 3 August 2014 the Company acquired 26.3% of the ordinary share capital of ProPhotonix Limited through the issue of ordinary shares
in the Company representing 5.5% of the enlarged share capital of 600 Group Plc. The share exchange was carried out following
presentations with three London-based institutional investors, each of whom indicated support for the exchange.
ProPhotonix Limited is AIM listed, although registered in Delaware, and designs and manufactures LED arrays and laser diode modules in
the UK and Ireland. It has a strong base of technology and applications knowledge, applicable to high growth sectors including niche
industrial, security and medical markets. We continue to engage with the board of Prophotonix in constructive dialogue to promote closer
co-operation.
The initial investment of £1.15m was adjusted down to a fair value of £0.53m at 28 March 2015. The £0.62m write down was taken to the
Statement of comprehensive income and expense.
The principal subsidiary undertakings of The 600 Group PLC and their countries of incorporation are:
ENGLAND & WALES:
600 UK Limited
The 600 Group (Overseas) Limited*
US:
600 Group Inc
Clausing Industrial, Inc
TYKMA 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 except TYKMA Inc which is 80% owned. All undertakings above are included in the consolidated accounts.
All other subsidiary undertakings will be shown in the company’s next annual return.
67
Notes relating to the company financial statements
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.
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
.
2015
£000
2014
£000
22,221
24,710
809
117
—
809
65
—
23,147
25,584
2015
£000
208
769
511
2014
£000
—
2,969
460
1,331
10,632
101
292
478
68
621
258
3,690
15,008
2015
£000
6,783
927
176
7,886
2014
£000
2,289
—
176
2,465
The £6.8m shareholder loan in place at the year-end was issued in two tranches in February and March 2015 with 39.9m 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 with
the gross loan value being £7.7m.
The £2.3m shareholder loan in place at prior year-end was issued with 12.5m convertible warrants attached to it. These warrants
allowed the holders to either convert the loan into 20p shares or to purchase 20p shares for a cash consideration. The loan had both
debt and equity components and so the value was split between these components. The loan was repaid in full in February 2015 and
the equity element attached to it has been released to reserves. 2.4m warrants remain outstanding and these will, if not exercised,
expire on 27 August 2015.
The Term Loan of £1,696,000 included within Bank loans will be repaid on a quarterly basis with payments of £153,846 on 31 March
2015 through to 30 November 2017.
Given the nature of the Company’s financial assets and liabilities, it is the Directors’ opinion that there is no material difference 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.
68
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
84,491,886 ordinary shares of 1p each on issue at start of the period (2014: 84,256,091 ordinary shares )
190,450 ordinary shares of 1p each issued to N Rogers and N Carrick on subscription following bonus
payment (2014 – 235,795 ordinary shares of 1p each issued to N Rogers and N Carrick)
4,925,621 ordinary shares of 1p each issued in ProPhotonix Limited share acquisition
89,607,957 ordinary shares of 1p each on issue at end of period (2014: 84,491,886 ordinary shares of 1p)
Deferred shares of 24p each:
57,233,679 deferred shares of 24p each on issue at start of period
Cancellation of deferred shares of 24p
Nil deferred shares of 24p on issue at end of period (2014 – 57,233,679)
Total Allotted, called-up and fully paid at the end of period
2015
£000
6,264
—
6,264
845
2
49
896
13,736
(13,736)
—
896
2014
£000
6,264
13,736
20,000
843
2
—
845
13,736
—
13,736
14,581
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 139,780 and 50,670 ordinary
shares of 1p each were issued to N Rogers and N Carrick respectively in June 2014. This resulted in share capital increasing by
£1,905 with a corresponding share premium increase of £41,423.
In August 2014 the Company issued 4,925,621 ordinary shares of 1p each as consideration for the purchase of 22,042,143 ordinary
shares in ProPhotonix Limited.
During the prior year 173,061 and 62,734 ordinary shares of 1p each were issued to N Rogers and N Carrick respectively in June 2013.
This resulted in share capital increasing by £2,358 with a corresponding share premium increase of £26,527.
During the current year the deferred shares of 24p each were cancelled by the company without compensaton following approval by
the shareholders at the AGM on 17 September 2014.
On 16 February and 18 March the Company raised £6.739m and £0.955m respectively through the issue of loan notes. The loan notes
have 5 year maturity and carry a coupon of 8% payable quarterly in arrears. The subscribers for loan notes are also entitled to receive
warrants with an expiry date of 18 February 2020 to subscribe for 35.145m and 4.775m ordinary shares of 1p each in the Company at
a price of 20p per Ordinary Share. The issue of the warrants occurred after approval was granted by the shareholders at a general
meeting on 18 March 2015.
In February 2015 the first tranche of proceeds from the issue of loan notes was used to repay in full a £2.5m related party loan. The
warrants attached to this £2.5m loan 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). At the year-end 2.4m warrants remained and these are due to
expire on 27 August 2015 (2014: 11.6m warrants remained outstanding).
69
Notes relating to the company financial statements
10. RESERVES
At 30 March 2013
Loss for the period
Share-based payment
Shareholder loan
On shares issued
At 29 March 2014
Profit for the period
Foreign exchange
Investment write-down
Share-based payment
Cancellation of capital redemption reserve, share
capital and share premium
Group property transfer
Revaluation
Shareholder loan
On shares issued
At 28 March 2015
Share
Capital
premium
Revaluation
redemption
Equity
Translation
reserve
reserve
reserve
reserve
account
£000
16,858
—
—
—
27
£000
236
—
—
—
—
£000
2,500
—
—
—
—
£000
173
—
—
7
—
16,885
236
2,500
180
—
—
—
—
(17,979)
—
—
—
1,094
—
—
—
—
—
—
419
656
—
—
1,311
—
—
—
—
(2,500)
—
—
—
—
—
—
—
—
—
—
—
—
(56)
—
124
Profit
and loss
Account
£000
(16,696)
(349)
57
—
—
(16,988)
4,050
—
—
131
34,215
—
—
104
—
£000
(22)
—
—
—
—
(22)
—
100
(622)
—
—
—
—
—
—
(544)
21,512
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 £4,050,000 (2014: loss of £349,000). 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 required is instead disclosed in Note 4 to the Consolidated financial statements.
11. CONTINGENT LIABILITIES
Bank guarantees in respect of Group undertakings
12. PENSION
2015
£000
92
2014
£000
86
The Company makes contributions to defined contribution schemes for certain employees. The pension contribution charge for the
Company amounted to £16,000 (2014: £17,000).
13. RECONCILIATION OF MOVEMENT IN SHAREHOLDERS’ FUNDS
Retained profit/(loss)
Share-based payment cost
Issued share capital/share premium
Property transfer and revaluation
Investment write down
Foreign exchange
Shareholder loan
Net increase/(reduction) in shareholders’ funds
Opening shareholders’ funds
Closing shareholders’ funds
2015
£000
4,050
131
1,145
1,075
(622)
100
48
5,927
17,372
23,299
2014
£000
(349)
57
29
—
—
—
7
(256)
17,628
17,372
70
Notes relating to the company financial statements
14. 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 £65,000 in interest payments during the financial year
in respect of their respective holding of the Shareholder Loans and loan notes. At the year-end Haddeo Partners LLP held £810,000 of
loan notes. In addition, the wife of Mr N Carrick, the Group Finance Director, also held £50,000 of loan notes. Further details on the
loan notes can be found in note 18.
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 (2014: £nil) and no contributions were overdue at the
period-end. A payment of £10,000 per month will be paid by the Group to the UK pension scheme from April 2015 in respect of an
augmentation to benefits made in 2008/09 of £510,971. No deficit reduction payments are currently required. In the US no employer
contributions were made to the US pension scheme during the current period (2014: £nil) and no payments were overdue at the period-
end.
15. POST BALANCE SHEET EVENTS
On 30 April 2015 Mr N Rogers resigned as a director. A termination payment of £230,000 was paid to Mr Rogers at that time.
71
165943
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
1
3
11
14
15
19
20
21
22
23
24
25
31
63
64
65
165943 600 Group - R&A Cover.indd All Pages
12/08/2015 17:46
The 600 Group PLC
Union Street
Heckmondwike
West Yorkshire
WF16 0HL
T: +44 (0)1924 415000
W: www.600group.com
165943 600 Group - R&A Cover.indd All Pages
12/08/2015 17:46
The 600 Group PLC
annual report and accounts 2015