167892 600 Group R&A (Cover)_167892 600 Group R&A (Cover) 31/08/2016 15:07 Page 1
The 600 Group PLC
Union Street
Heckmondwike
West Yorkshire
WF16 0HL
T: +44 (0)1924 415000
W: www.600group.com
ANNUAL REPORT & ACCOUNTS 2016
The 600 Group PLC
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 income statement
Company statement of comprehensive income
Company statement of financial position
Company statement of changes in equity
Company cash flow statement
Company accounting policies
Notes relating to the company financial statements
1
3
11
14
15
19
20
21
22
23
24
25
31
6 4
65
66
67
68
69
70
Chairman’s statement
I am pleased to report that we have continued to implement structural changes in both our operating divisions to give
the Group a greater opportunity to grow in existing and new markets from a reduced cost base.
The financial benefits of these actions began to be evident in the final few months of the 2016 financial year. The
improvement in profitability was, however, delayed by a number of factors including the expanded integration
programme for the TYKMA Electrox business and the costs associated with staff reductions in the UK. In addition,
like many other companies in the sector, we were also affected by the challenging market conditions in the machine
tool sector with a much weaker than expected performance in the UK and Europe.
The integration of the two laser businesses has reduced their overall cost base significantly and we have achieved
further efficiencies by revising the supply chain and closing down the Electrox manufacturing operation in Letchworth,
UK. We consolidated the two businesses onto a single site in Ohio, USA and whilst this proved to be more disruptive
and expensive than we first envisaged it is now trading satisfactorily under David Grimes, who became a significant
shareholder in the 600 Group following the acquisition of the remaining 20% of TYKMA not already owned in late
March 2016.
The integration of TYKMA and Electrox has given the Industrial lasers division worldwide credibility and initial sales
have already been made to a number of multi-national corporations. The joint TYKMA Electrox brand now provides
laser solutions across a number of industrial laser applications including marking, engraving and micro-material
processing.
The performance of our US and Australian machine tool businesses in the period matched their performance of last
year which we consider to be quite an achievement considering the difficult state of the markets. However, business
conditions in the UK and Europe were very fragile and we took the necessary steps to restructure our activities and
reduce our cost base accordingly.
I’m pleased to report that following the appointment of Don Haselton as Managing Director for the machine tools
division in August 2015 we have had a good initial response in establishing the Clausing brand of machine tools in
the UK, European and Australian markets. Additional resources have been put into sales and marketing for the
Colchester, Harrison, Clausing, Pratt Burnerd and Gamet brands and we expect to see continuing improvement in
market penetration and revenues as a result of these initiatives.
Since the start of the new financial year our Australian machine tool business has experienced a significant increase in
activity. We have expanded our distribution network in the Australian state of Victoria, along with new distributors in
Thailand, Vietnam and Malaysia and strengthened our existing distribution relationships in Singapore and the Philippines.
We expect these improvements in Australia and South East Asia to continue throughout the fiscal year.
The UK and European markets continue to be challenged by weak economic growth and depressed commodity prices. We
have restructured the production operation to provide resources to strengthen the sales and marketing organization. We
have seen improvements in market share for the Colchester and Harrison brands in addition to the introduction of the
Clausing brand. We expect these improvements to also continue throughout the current fiscal year.
The US market has also been challenged by weak economic growth. The AMT (Association for Manufacturing Technology)
reports Manufacturing Technology Orders on a monthly basis. This report shows a decrease in order activity of 17.5% in
2015 with an additional decrease of 16.4% through June 2016. The U.S. Presidential campaign has created further
uncertainty. Despite these economic headwinds, the US machine tool business continues to increase market share.
Utilisation of contract manufacturing has enabled Clausing to capitalise upon the successful introduction of US built drills
with the addition of sawing products. US production of additional product lines is planned for the next few years.
We have signed an updated supply agreement with our important Taiwanese machine tool supplier and, in addition,
entered into a supply and distribution agreement with an Indian manufacturer for supply of machine tools and
manufacture and distribution under licence in India of our branded products. These important initiatives reduce risk,
expand our product offering and increase market coverage of our brands.
Although it is very early to speculate on the effect that the UK leaving the EU may have in the coming year, we would
ask shareholders to consider a number of important factors which we believe reduce the risks for the Group
associated with this new trading environment. Over 60% of the Group’s activity is currently conducted in the USA and
these businesses are the main profit drivers of the Group. Furthermore, the dollar income we receive gives us a
natural hedge against the majority of our purchases which are in dollars.
In the last year only 13% of Group sales were to EU countries and as I have outlined above we are firmly focused on
developing new markets outside of this area particularly in South East Asia. Over 15% of our total revenues are
derived from the supply of spares parts and services and this is not dependent on achieving new sales but simply
servicing our existing client base. Lastly, the growth of our global industrial laser systems business is largely driven
by legislative changes and the requirement for traceability both of which are increasing worldwide irrespective of the
situation in the UK.
1
Chairman’s statement
Financial Overview
Revenue from continuing operations was £45.3m (2015: £43.8m) a 3.4% increase on the previous year.
After taking account of interest, taxation, pensions credits and other special items, the Group profit for the financial
year was £1.15m (2015: £2.35m).
Underlying profit (before special items) amounted to £1.54m (2015: £1.85m) resulting in underlying earnings of 1.69p
per share (2015: 2.09p) and total earnings were 1.26p per share (2015: 2.66p).
At the end of the financial year, group net indebtedness stood at £13.89m (2015: £10.80m), and gearing was 34%
(2015: 31%). In addition to the acquisition of the remaining 20% of TYKMA during the year we have invested in new
facilities, products and working capital to support our strategic growth plans. At the end of the year the group had
financial headroom on the then existing borrowing facilities of £3.30m and had complied with all financial covenants
in place throughout the year.
I am pleased to report that following the disposal of the Letchworth premises we restructured our UK banking
arrangement and new increased facilities were agreed with HSBC in the UK in August 2016 which will provide more
flexible support for the Group going forward.
In the USA Bank of America have continued to be very supportive, providing facilities to fund the $1.8m cash element
of the TYKMA 20% acquisition and renewal of ongoing working capital facilities for both TYKMA and Clausing.
Acquisitions
At the end of March 2016 we acquired the remaining 20% of TYKMA, the US based industrial laser business we had
acquired 80% of in February 2015. The consideration for this was satisfied by the issue of 12m shares in the Group
and $1.8m in cash. TYKMA has been fully integrated with Electrox, the 600 Group’s original laser business, during
the current financial year and the combined business now operates under the TYKMA Electrox brand.
Facilities
In the USA we successfully re-located the Clausing machine tools business to new purpose built leasehold premises
in Kalamazoo, Michigan and TYKMA re-located, again to purpose built leasehold premises, in Chillicothe Ohio.
These new sites are better located with excellent road links and significantly improved facilities. To the credit of our
management teams and their planning there was no significant impact on trading during the period of the moves. At
the beginning of July we completed the sale of our Letchworth long leasehold site for £2.0m, with the much reduced
UK laser operation moving to a new leasehold site in Letchworth.
People
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 again 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
Trading in the period since the FY16 financial year end has been in line with the Board’s expectations. The 600
Group is in the process of leveraging our industry recognised brands through an increased worldwide distribution
network to accelerate revenue growth. We expect that the actions taken to reduce overheads and become more
efficient will yield better margins on increased sales in the future.
Paul Dupee
Chairman
31 August 2016
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, precision engineered components and the design, manufacture and
distribution of industrial laser systems. The Group operates these businesses from locations in North
America, Europe and Australia selling into more than 180 countries worldwide.
During the 53 week period ended 2 April 2016 31% of revenues came from the sale of metal turning machine
tools, with a further 17% from other machine tools and 11% from the sale of precision engineered
components. Sales of Industrial laser equipment amounted to 26% with the remaining 15% of revenues being
from after sales support, spare parts and services from both divisions.
Group businesses serve customers across a 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 revenue is 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 2 April 2016 the top 20 customers, of which 17 were distributors,
contributed less than 26% 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
2016
%
60
19
13
8
100
2015
%
55
18
16
11
100
Macroeconomic and industry trends
Machine tools and precision engineered components
The worldwide machine tool industry is estimated at over $70bn in annual sales and is determined by the
investment intentions of manufacturers, and is sensitive to changes in the economic and financial climate.
Demand responds to economic trends and typically lags the main cycle of the economy.
Gardner Research identified the largest five producer countries of machine tools to be China, Germany,
Japan, South Korea and Italy with the largest five countries ranked by consumption as China, USA, Germany,
Japan and South Korea.
The global consumption of machine tools was reported as being negative at 10.3% in the latest Oxford
Economics data for the year to December 2015 against a relatively flat 2014. In our most important markets
USA was -15.6%, Germany -11.9% and UK -8.3%.
Industrial laser systems
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 be $3.3bn and growing between
4% and 6% each year. The laser marking and micro-materials subset of the overall laser industry continues to
grow due to enhanced techniques in the speed, cost and quality of the systems being implemented and
legislative changes driving a requirement for greater traceability.
3
Strategic report
Results
Machine tools and precision engineered components
This division operates from Heckmondwike in the UK, Kalamazoo Michigan in the USA, and Sydney and
Brisbane in Australia. It designs and develops metal processing machine tools sold under the brand names
Colchester, Harrison and Clausing and designs and manufactures precision engineering components under
the brand names Pratt Burnerd and Gamet. There is also a spares, accessories and service operation to
support the significant number of machines sold over the Group’s long history of supplying quality
equipment. Sales are made worldwide, with direct sales operations in North America, Europe, and Australia
and a network of distributors in all other key end-user markets.
The financial results of these activities, before special items, were as follows:
2016
£’000
32,127
2,073
6.5%
2015
£’000
34,747
2,931
8.4%
Revenues
Operating profit
Operating
margin
Revenues overall fell by 7.5% with a 16% fall in the UK and European business and 22% fall in Australia.
Revenues and operating profit in our North American operations remained level with the prior year which we
consider to be a significant achievement given a 15% industry-wide fall in US consumption. Although the
Australian business had a difficult year and was forced to reduce overheads and preserve cash by operating
on a four day week basis it has since the financial year end returned to full time working to cope with
increased demand and has traded profitably so far this financial year. The Australian operation is also leading
the expansion into the South East Asian markets and is responsible for signing up the new distributors in
Malaysia, Thailand and Vietnam and it is clear there remains brand recognition in these markets with orders
and quotations actively being undertaken.
The UK and European operation experienced difficult market conditions, particularly in Germany, where the
weakness of the Euro added pricing pressure. In response to these difficult conditions direct and overhead
costs were reduced and the mix of products manufactured in the UK revised during the second half of the
financial year. The fall in volume was concentrated on the higher margin component product resulting in a
disproportionate fall in operating margins. This was the principal reason for the division’s poor overall
performance.
Since his appointment as Divisional Managing Director of the machine tool division in August 2015 Don
Haselton has been focusing on the introduction to the UK and Europe of the Clausing product range of drills,
mills, saws and grinders which are now becoming a regular feature of the package of products we supply in
the UK and Europe.
The Clausing range of products has been one of the key reasons behind the sustained growth in the North
American operations and represent over 1/3 of their product sales compared to a figure of just 4% for the UK
and European operation at present.
4
Strategic report
Industrial laser systems
Following the acquisition of 80% of TYKMA Inc. in early February 2015, both the TYKMA and Electrox
operations were merged into a single industrial laser systems business under a unified management structure.
The remaining 20% of TYKMA was purchased at the end of March 2016 just before the financial year end.
The integration of the two businesses continued throughout the year with all manufacturing operations
centered in a new purpose built facility in Chillicothe, Ohio USA. In the UK we took steps to expand our UK
sales presence by signing a distribution agreement with Needham Coding based in Shropshire. This new
relationship provides a customer centric operation and increased presence throughout the UK and Ireland and
is in addition to the TYKMA Electrox sales and service center located in Letchworth Garden City.
As a result of these actions, operating efficiencies and savings (including those from supplier consolidation)
are evidenced in the increased margins we saw towards the end of the financial year. In addition, the
restructuring of our entire global sales structure resulted in reduced overall costs and sales operations coming
under common leadership.
The worldwide industrial laser systems business now operates under the TYKMA Electrox brand. Industrial
laser system solutions are sold for a variety of applications including marking, engraving and micro-material
processing to a wide range of industries which includes small companies to large multi-national corporate
customers.
The enlarged industrial laser systems division is headed up by David Grimes, the previous CEO of TYKMA,
who became a substantial shareholder in the Group as a result of the purchase of the remaining 20% of
TYKMA Inc. by the Group at the end of March 2016.
Revenues in this division increased by 43% following the TYKMA contribution being included for a full year for
the first time. Operating profit increased substantially but with only the last few months benefitting from the
integration of the two companies. We expect this trend will continue to grow and show through in increased
margins in the first few months of the current financial year.
Results for the financial year before special items were as follows:
2016
£ 000
13,142
1,179
8.9%
2015
£ 000
9,229
304
3.3%
Revenues
Operating profit
Operating
margin
Group revenue
Revenue from continuing operations increased by 3.4% to £45.3m (2015: £43.8m) which although
representing only a modest increase over last year was achieved despite the difficult market conditions
experienced in the machine tools business in the UK and Europe where turnover fell by 16% and in Australia
which suffered a 22% decline.
Costs and margins
Gross margins in the Industrial laser systems division improved as the year progressed and the benefits of the
TYKMA Electrox business integration began to take effect. Margins in machine tools were however inevitably
affected by the reduced volumes in the UK and European operation, particularly in the higher margin precision
components.
5
Strategic report
Profit before taxation
Group profit before tax was £1.00m (2015: £3.68m) and the underlying profit figure before special items was
£1.48m (2015: 2.02m).
Special items
During the financial year, the Group had a number of transactions, which in the opinion of the directors should
be reported seperately for a better understanding of the underlying trading performance of the Group.
A credit of £0.94m (2015: £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 pension liabilities. A number of transactions took place over
the previous and current year including a pension increase exchange, commutation of small pensions and
other flexible retirement options. This resulted in actuarial adjustments to the pension liabilities, which are
processed through the Consolidated Income Statement.
In addition, as a result of the scheme being in surplus on an accounting basis, a credit of £1.17m (2015:
£0.86m) is recorded in interest. No cash was paid to or received from the scheme in respect of these
transactions.
As a result of the settlement of the contingent deferred consideration on the acquisition of the remaining 20%
of TYKMA Inc. a credit is recorded within financial income of £2.03m. The acquisition occurred earlier than
was originally envisaged under the put and call options in place and consequently the amount paid was less
than that accrued based on the earnings of the combined industrial laser systems division over the next few
years.
Costs incurred on the acquisition of the remaining 20% of TYKMA Inc. amounted to £0.2m. Redundancy and
restructuring costs incurred on the integration of the Electrox and TYKMA businesses and the overhead and
operating cost reduction in Head Office and UK machine tools business amounted to £1.72m.
During the integration process of TYKMA and Electrox it became clear that the capitalised cost of the software
developed by Electrox was not going to be realised as originally envisaged ,would not be sold as a distinct
product and that further work would be required to integrate the software with existing systems. As a result it
has been decided to impair the value of the work so far and an impairment charge of £2.39m has been shown
within special items.
In addition share option costs, amortisation of intangible assets and amortisation of loan note costs which are
non-cash costs to the Group have been included in special items.
Taxation
The current year resulted in a small credit for taxation (2015: charge of £1.32m). Deferred taxation is provided
on the pension credits of £2.11m 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 35%.
Net profit and earnings per share
The total profit attributable to equity holders of the parent for the current financial year amounted to £1.16m
(2015: £2.33m).
Underlying earnings from continuing operations before special items and related taxation was 1.69p per share
(2015: 2.09p) and basic earnings per share was 1.26p (2015: 2.66p)
Financial position and utilisation of resources
Cash flow
Cash generated from operations before working capital movements was £3.03m (2015: £3.02m). Working
capital movement was largely due to a reduction in creditors of which part was professional costs relating to
the original purchase of 80% of TYKMA towards the end of the prior financial year. £0.94m was expended on
redundancy and restructuring costs which largely consisted of redundancy payments at Electrox, UK machine
tools and head office, including to the previous CEO.
6
Strategic report
Interest paid has increased to £0.96m as a result of a full year of interest paid on the loan notes with the final
tranche of £806k of loan notes issued in August 2015.
Capital expenditure included replacement machinery for the UK machine tools business and the fit out costs
and plant, machinery and fixtures of the two new facilities in the USA; Clausing machine tools in Michigan and
TYKMA in Ohio.
Net borrowings
Group net debt at 2 April 2016 stood at £13.89m (2015: £10.8m) comprising net bank and finance lease
indebtedness of £6.2m (2015: £4.0m) and the amount outstanding on the new loan notes of £7.70m
(2015: £6.78m). The amount outstanding is net of unamortised costs and amounts disclosed in equity reserve
of £0.8m in the current financial year (2015: £0.7m).
New increased facilities were agreed with HSBC in the UK in August 2016 following the sale of the Letchworth
property. A package of facilities to support the working capital of the UK machine tools business and a term
loan secured on the remaining freehold site in Colchester have been put in place totaling £4.95m. In the USA
Bank of America supported the 20% TYKMA acquisition in March 2016 with an additional term loan of $1.8m
in addition to their existing term and working capital facilities. The Group has a mixture of term loans and
revolving working capital facilities with maturities between 1 and 5 years. Headroom on bank facilities was
£3.2m at the year-end (2015: £4.2m) and all financial covenants in place were met during the year.
During August 2015 the Group issued the remaining £806k of New 8% loan notes with a maturity of February
2020 to bring the total gross amount issued to the £8.5m agreed under the loan note programme. These loan
notes also entitled holders to warrants of equal value to subscribe for new ordinary shares at 20p.
Gearing amounted to 34% of aggregate net assets (2015: 31%)
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.
Retirement benefits
The accounting surplus at 2 April 2016 was £40.94m (2015: £34.29m). This surplus has been calculated in
accordance with the scheme rules and recognised accounting requirements.
As a result of liability reduction exercises undertaken by the UK scheme’s Trustees in conjunction with the
company, a credit has been taken in the period in the Income Statement of £0.97m 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 Trustees 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.
The formal Actuarial Technical Provisions calculation for 31 March 2016 is currently in progress but it is
expected that a similar agreement will be reached with the Trustees following its completion.
At 2 April 2016, the subsequent performance of the scheme assets,changes in the underlying market
conditions and the various liability reduction exercises, indicate that the estimated deficit on a Technical
Provisions basis had reduced to £10.6m. On a full buy-out basis the estimated deficit had reduced to £44m by
the end of March 2016.
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.
7
Strategic report
The US retiree health scheme and pension fund deficits reduced slightly during the year due to changes in
actuarial assumptions to £1.04m (2015: £1.10m.)
Electrox site
As a result of the merger of TYKMA and Electrox, and the centralisation of manufacturing in the USA, the long
leasehold UK site in Letchworth became too large for the remaining sales and service operation which has
moved to smaller leased premises. The sale of the existing site for a net £2.0m was completed on 11 July
2016 with proceeds used to reduce the UK senior bank debt. A reduction in valuation of £0.45m down to the
net proceeds has been taken in the revaluation reserve at the year-end and the property has been classified
as an asset held for sale within current assets in the Consolidated Statement of Financial Position.
Share capital and reserves
Share capital and share premium reflect the exercise of 2.75m of share options by Nigel Rogers in August 2015 and
the issue of 12m shares at the end of March 2016 in part settlement of the consideration for the remaining 20% of
TYKMA Inc.
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)
All figures are pre special items
Key business risks
Benchmark
Target
>10%
>110%
2.0 - 3.0
>33%
>7.5%
<25%
>3.5 x
< 60
2016
2015
2014
2013
2012
3.4%
107%
1.5
34%
5.2%
5%
97%
1.4
32.9%
5.6%
25.9%
23.3%
2.6x
57
2.7x
58
(0.2)%
101.8%
1.9
33.2%
5.6%
20.0%
3.3x
54
11.2%
89.4%
2.0
4.2%
n/a
3.9
31.7%
32.3%
2.3%
0.6%
21.5%
20.7%
2.8x
55
2.8x
63
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 they operate and contract 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, TYKMA Inc. and 600 Australia Pty Limited are reported in United States dollars and
Australian dollars respectively and translated into Sterling, and as a result the Group’s Statement of Financial
Position and trading results can be affected by movements in these currencies. Part of this exposure is naturally
hedged by entering into borrowing 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.
Alternative sources of supply in different geographic regions are also being pursued.
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
31 August 2016
10
Report of the directors
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 a number of
companies including Amiad Water Solutions Ltd (AIM Listed),,Hotel Urbano Viagens e Turismo SA, and a previous vice-chairman
of KPMG LLP.
Stephen Fiamma*
Appointed to the Board as a non-executive Director on 13 May 2015. Until 2014 a partner 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 LLP
BANKERS
HSBC Bank 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 53 week period ended 2 April
2016, 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 2016 are for
the 53-week period ended 2 April 2016. The results for 2015 are for the 52-week period ended 28 March 2015.
ACTIVITIES OF THE GROUP
The Group is principally engaged in the manufacture and distribution of machine tools, precision engineered components and industrial
laser systems. 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 Strategic 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 monit ored 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 14 August 2016, 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 LLP
Mr D Grimes
Mr A Perloff and the Maland Pension Fund Trustees
Schroder Investment Management
CriSeren Investments Limited
Percentage
of issued
ordinary
Number
share capital
23,492,535
22.51
7,500,000
6,800,000
3,671,320
3,178,379
7.19
6.52
3.52
3.05
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, March and August 2015 were issued with warrants totalling
34,755,000. 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 remained in issue at the start of the financial year but expired 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 9,235,796 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 2015. 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.
There are no directors retiring by rotation this year.
The beneficial interests of the directors in the share capital of the Company at 2April 2016 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.
FINANCIAL INSTRUMENTS
An indication of the financial risk management objectives and policies and the exposure of the Group to price risk, credit risk, liquidity
risk and cash flow risk is provided in Note 26 to the financial statements.
PROVISION OF INFORMATION TO AUDITOR
All of the current directors have taken all steps that they ought to have taken to make themselves aware of any information needed by
the Company’s auditor for the purposes of their audit and to establish that the auditor is aware of that information. The directors are not
aware of any relevant audit information of which the auditor is unaware.
QUALIFYING THIRD PARTY INDEMNITY
The Company has provided an indemnity for the benefit of certain 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
31 AUGUST 2016
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) including FRS101 Reduced Disclosure
Framework.
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 t o 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
31 AUGUST 2016
14
Remuneration report
As an AIM listed company The 600 Group plc is not required to prepare a remuneration report in accordance with Directors Repo rt
Regulations of the Companies Act 2006, however the directors recognise the importance and support the principles of the Regulations.
The Auditor is not required to report to the shareholders on the remuneration report, but the table of directors emoluments on page 17
does form part of the audited accounts.
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 E Fiamma (Committee Chairman)
S J Rutherford
D Zissman
The Committee held two meetings during the year. The most significant matters discussed by the Committee at its formal meetings this
year were:
• the operation of a bonus scheme.
• the formal grant of awards under the share plans; and
• a review of directors’ salaries.
No director was present when his own remuneration arrangements were being discussed.
EXECUTIVE DIRECTORS’ REMUNERATION
POLICY
The Company aims to attract, motivate and retain the most able executives in the industry by ensuring that the executive directors are
fairly rewarded for their individual contributions to the Group’s overall performance, to the interests of the shareholders and to the
ongoing financial and commercial health of the Group. The Committee feels that including equity incentives in the total remuneration
package encourages alignment of the interests of the executive directors and senior management with those of the shareholders. The
Company’s strategy is to reward executive directors and key senior employees on both a long-term and short-term basis.
SALARIES
Salaries are established on the basis of market comparisons with positions of similar responsibility and scope in companies of a similar
size in comparable industries. Individual salaries of directors are reviewed annually by the Committee and adjusted by reference to
individual performance and market factors. With the approval of the Chairman, executive directors may take up appointments as non-
executive directors and retain payments from sources outside the Group, provided that there is no conflict of interest with their duties
and responsibilities with the Group.
BONUS SCHEME
Executive directors currently participate in a discretionary bonus scheme linked to the achievement of annual financial and personal
performance targets.
LONG-TERM INCENTIVE PLANS
THE 600 GROUP PLC 2012 DEFERRED SHARE PLAN (THE DSP)
A new scheme was introduced on 18 January 2012 which provided for deferred shares to be issued to directors and senior executive’s.
Options were granted on 19 November 2012 which are exercisable at 10p between three and ten years after grant date and further
options excercisable at 17p were issued on 7 April 2014 and at 18p on 18 August 2015
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 27 May 2016 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. In the event of a change of control the notice period will be extended to 24
months, reducing back to 12 months over a 12 month 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 (grey line) from 3 April 2011 to 2 April 2016 compared with the
AIM Index (black line), 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 the most appropriate index against which the TSR of the
Company should be measured.
RELATIVE PERFORMANCE OF FTSE AIM ALL SHARE INDEX TO 600 GROUP APRIL 2011 TO APRIL 2016
16
Remuneration report
DIRECTORS’ INTERESTS IN SHARES
The interests of directors holding office at 2 April 2016 in the ordinary shares of the Company were as follows:
P R Dupee
S J Rutherford
N R Carrick
D Zissman
At
2 April
2016
Number
At
28 March
2015
Number
23,492,535
22,792,535
20,000
113,404
400,000
20,000
113,404
300,000
P R Dupee’s interest in the 23.5m 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
Audited
P R Dupee
N F Rogers
N R Carrick
D Zissman
S J Rutherford
S E Fiamma
Total
.
Salary
Fees
Pension
Bonus
in kind
£
£
£
£
£
All
benefits
Total
2016
£
Total
2015
£
234,167
16,667
172,500
—
—
—
—
—
15,300
—
—
—
33,000
33,000
29,171
—
—
—
423,334
95,171
15,300
—
—
—
—
—
—
—
— 234,167
60,000
1,627
18,294
201,585
17,832 205,632
226,732
—
—
—
33,000
33,000
33,000
33,000
29,171
—
19,459 553,264
554,317
Mr S Fiamma was appointed on 13 May 2015.
Mr N Rogers resigned on 30 April 2015 and a termination payment of £230,000 was paid to Mr Rogers at that time.
17
Remuneration report
DIRECTORS’ SHARE OPTIONS
Details of share options at 2 April 2016 and 28 March 2015 for each Director who held office during the year are as follows:
N Carrick
P Dupee
N Rogers
S Rutherford
D Zissman
S Fiamma
Number of
options at
28 March
2015
Granted
Exercised
Number of
options at
2 April
2016
Lapsed/
forfeited
3,150,000
1,000,000
4,750,000
500,000
500,000
—
—
—
—
—
—
500,000
—
—
—
—
3,150,000
1,000,000
(2,750,000)
(2,000,000)
—
—
—
—
—
—
—
500,000
500,000
500,000
Options were all granted under the 600 Group PLC Deferred Share Plan and are exercisable between 3 and 10 years from date of
grant..
4,500,000 options with an exercise price of 10p were granted on 19 November 2012, 5,400,000 options with an exercise price of 17p
on 7 April 2014 and 500,000 options with an exercise price of 18p on 6 August 2015.
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 £64,000 (2015: £131,000).
The share price at 2 April 2016 was 9.25p and the highest and lowest prices during the period were 18.875p and 7.375p respectively.
On behalf of the Board
NEIL CARRICK
DIRECTOR
31 AUGUST 2016
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 2 April 2016 set out on pages 20 to 82. 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)
including FRS 101 Reduced Disclosure Framework.
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 s tandards
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 2 April 2016 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.
Nick Plumb (Senior Statutory Auditor)
for and on behalf of KPMG LLP, Statutory Auditor
Chartered Accountants
1 Sovereign Square
Sovereign Street
Leeds
LS1 4DA
31 August 2016
19
Consolidated income statement
For the 53-week period ended 2 April 2016
Notes
1
2,3
3,4
6
6
3
7
Continuing
Revenue
Cost of sales
Gross profit
Net operating expenses
Operating profit/(loss)
Financial income
Financial expense
Contingent consideration settlement
Profit/(loss) before tax
Income tax credit/(charge)
Profit/(loss) for the period
Attributable to equity holders of the parent
Attributable to non controlling interests
Before
Special
Items
After
Before
Special
Special
Special
Special
Items
Items
Items
Items
After
Special
Items
53 weeks
53 weeks
53 weeks
52 weeks
52 weeks
52 weeks
ended
2 April
2016
£000
ended
2 April
2016
£000
2015
£000
ended
ended
ended
28 March
28 March
28 March
ended
2 April
2016
£000
45,269
(29,899)
15,370
-
45,269
43,794
(894)
(894)
(30,793)
(29,374)
14,476
14,420
(13,014)
(2,626)
(15,640)
(11,956)
2,356
(3,520)
(1,164)
2,464
2015
£000
-
-
-
958
958
2015
£000
43,794
(29,374)
14,420
(10,998)
3,422
859
(606)
-
10
(890)
-
1,171
(150)
2,032
1,181
(1,040)
2,032
2
(451)
-
857
(155)
-
1,476
(467)
1,009
2,015
1,660
3,675
65
1,541
1,552
(11)
1,541
72
(395)
(395)
-
(395)
137
1,146
1,157
(11)
1,146
(166)
(1,159)
(1,325)
1,849
501
2,350
1,832
17
1,849
501
-
501
2,333
17
2,350
Basic earnings per share
1.69p
(0.43)p
1.26p
2.09p
0.57p
2.66p
Diluted earnings per share
1.68p
(0.43)p
1.25p
2.03p
0.55p
2.58p
Company Number 00196730
The accompanying accounting policies and notes on pages 25 to 63 form part of these Financial Statements.
52 weeks
ended
28 March
2015
£000
43,794
(29,374)
14,420
(11,998)
3,422
859
(606)
3,675
(1,325)
2,350
2,333
17
2,350
20
Consolidated statement of comprehensive income
for the 53-week period ended 2 April 2016
Profit for the period
Other comprehensive income/(expense)
Items that will not be reclassified to the Income Statement:
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
Fair valuation of assets held for sale
Fair valuation of investments
Total items that are or may in the future be reclassified to the Income Statement:
Other comprehensive income 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
30
14
53-week
52-week
period ended
period ended
2April
28 March
2016
£000
1,146
4,436
(515)
3,921
286
(450)
(29)
(193)
3,728
4,874
4,885
(11)
4,874
2015
£000
2,350
12,188
(4,296)
7,892
462
656
(622)
496
8,388
10,738
10,721
17
10,738
The accompanying accounting policies and notes on pages 25 to 63 form part of these Financial Statements.
21
Consolidated statement of financial position
As at 2 April 2016
Company Number 00196730
As at
As at
2 April 2016
28 March 2015
Notes
£000
£000
Non-current assets
Property, plant and equipment
Goodwill
Other Intangible assets
Investments
Deferred tax assets
Employee benefits
Current assets
Inventories
Trade and other receivables
Assets classified as held for sale
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
Available for sale reserve
Equity reserve
Translation reserve
Retained earnings
Non-controlling interests
Total equity
11
12
12
13
14
30
15
16
17
18
19
20
14
20
21
19
23
3,235
7,144
322
496
3,832
40,937
55,966
11,271
6,771
1,999
765
20,806
76,772
(11,376)
-
(14,538)
(25,914)
(6,318)
-
(425)
(3,275)
(10,018)
(35,932)
40,840
1,044
1,013
1,273
(651)
139
1,714
36,308
40,840
-
40,840
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)
(6,792)
(135)
(611)
(3,295)
(10,833)
(36,771)
34,726
896
-
1,494
(622)
124
1,428
31,270
34,590
136
34,726
The financial statements on pages 25 to 63 were approved by the Board of Directors on 31 August 2016 and were signed on its behalf
by:
NEIL CARRICK
GROUP FINANCE DIRECTOR
31 AUGUST 2016
22
Consolidated statement of changes in equity
As at 2 April 2016
Company Number 00196730
Ordinary
Share
Capital Available
Non
share
premium Revaluation redemption
for sale Translation Equity
Retained
Controlling
Total
capital
account
reserve
reserve[1]
reserve
reserve
reserve
Earnings
Total
Interest
Equity
£000
£000
£000
£000
£000
£000
£000
£000
£000
£000
£000
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
—
—
—
—
—
—
—
—
(622)
—
—
(622)
490
—
—
—
— —
—
—
—
—
—
490
(4)
462
—
462
12,188 12,188
— 12,188
—
—
(622)
656
—
—
(622)
656
(4,296) (4,296)
— (4,296)
10,221 10,721
17 10,738
At 29 March 2014
At 30 March 2014
Profit for the period
Other comprehensive income:
Foreign currency translation
Net defined benefit asset mvmt
Fair value of Investments
Revaluation of properties
Deferred tax
Total comprehensive income
Transactions with owners:
Share capital subscribed for
51
1,094
Cancellation in period
(13,736)
(17,979)
—
—
— (2,500)
Equity element of shareholder
loan issued in period
Credit for share-based payments
—
—
—
—
Total transactions with owners
(13,685)
(16,885)
Non controlling interest
At 28 March 2015
At 29 March 2015
Profit for the period
Other comprehensive income:
Foreign currency translation
Net defined benefit asset mvmt
Fair valuation of Investments
Fair valuation of assets held for
sale
Transfer on revalued properties
Deferred tax
Total comprehensive income
Transactions with owners:
—
896
896
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Share capital subscribed for
148
1,013
Equity element of shareholder
loan issued in period
Acquisition of NCI
Credit for share-based payments
—
—
—
—
—
—
Total transactions with owners
148
1,013
—
—
—
—
1,494
1,494
—
—
—
—
(450)
229
—
(221)
—
—
—
—
—
At 2 April 2016
1,044
1,013
1,273
—
—
(2,500)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
— —
—
—
— 1,145
—
34,215
—
(56)
104
48
—
131
131
(56)
34,450 1,324
—
—
—
—
—
—
—
—
1,145
—
48
131
1,324
—
—
—
119
119
(622)
1,428
124
31,270 34,590
136 34,726
(622)
1,428
124 31,270 34,590
136 34,726
—
—
—
—
(29)
—
—
—
286
—
—
—
—
—
(29)
286
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
15
—
15
1,157 1,157
(11)
1,146
—
286
4,436 4,436
—
(29)
—
(450)
(229)
—
(515)
(515)
—
—
—
—
—
—
286
4,436
(29)
(450)
—
(515)
4,849 4,885
(11)
4,874
— 1,161
—
15
—
—
1,161
15
—
64
— —
125
125
(125)
64
64
—
189 1,365
(125)
1,240
(651)
1,714
139
36,308 40,840
— 40,840
The accompanying accounting policies and notes on pages 25 to 63 form part of these Financial Statements.
23
Consolidated cash flow statement
For the 53-week period ended 2 April 2016
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 (credit)/expense
Operating cash flow before changes in working capital and provisions
Decrease in trade and other receivables
Decrease/(increase) in inventories
Decrease in trade and other payables
Restructuring and redundancy expenditure
Employee benefits contributions
Cash generated 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 Inc.
Investment in Prophotonix
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 income/(expenditure)
Net cash flows from financing activities
Net decrease 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
53-week
52-week
period ended
period ended
2April
2016
£000
1,146
122
548
(141)
(940)
2,363
64
(137)
3,025
463
106
(1,682)
(807)
(130)
975
(964)
(3)
8
10
—
(1,378)
—
(1,522)
(297)
—
(3,187)
275
806
1,883
67
3,031
(148)
902
11
765
Notes
24
18
28March
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
24
The accompanying accounting policies and notes on pages 25 to 63 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 2016
are for the 53-week period ended 2 April 2016. The results for 2015 are for the 52-week period ended 28 March 2015. 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. The Company has elected to prepare its parent company financial statements in accordance with FRS 101; these
are presented on pages 64 to 82.
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
1 January 2018
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 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.
New increased facilities were agreed in the UK in August 2016 with HSBC following the sale of the Letchworth property. A package of
facilities to support the working capital of the UK machine tools business and a term loan on the remaining freehold site in Colchester
have been put in place totalling £4.95m. In the USA Bank of America supported the 20% TYKMA acquisition in March 2016 with an
additional term loan of $1.8m in addition to their existing term and working capital facilities. The Group has a mixture of term loans and
revolving working capital facilities with maturities between 1 and 5 years. Headroom on bank facilities was £3.2m at the year-end
(2015: £4.2m) and all financial covenants in place were met during the year. 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 reset the translation reserve to £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 and non cash
pension transactions are separately identified.
Special Items include exceptional costs relating to reorganisation, redundancy, restructuring, acquisition costs, impairment of
development expenditure and inventory, and pension scheme costs and credits.
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 20%.
INVESTMENTS
Investments in quoted shares are classified as Available for sale and measured at fair value. Movements in fair value are recorded in
the Available for sale reserve until the shares are sold, in which case the Available for sale reserve is recycled to the income statement.
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, after reversing previous credits, 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 whe n
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 de scribed
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 financi al 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 recognit ion,
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 CLASSIFIED AS 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 in 2015 and subsequent additions relate to shares issued during
the year ended 2 April 2016.
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 previous 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 53-week period ended 2 April 2016
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 industrial laser systems.
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:
53 Weeks ended 2 April 2016
Segmental analysis of revenue
Revenue from external customers
Inter-segment revenue
Total segment revenue
Less: inter-segment revenue
Total revenue
Continuing
Machine
tools
& precision
engineered
components
Industrial
laser
systems
Head Office
& unallocated
£000
£000
£000
32,127
13,142
—
—
32,127
13,142
—
—
32,127
13,142
—
—
—
—
—
Segmental analysis of operating profit/(loss) before
Special Items
Special Items
2,073
1,179
282
(3,212)
(896)
(590)
Group profit/(loss) from operations
2,355
(2,033)
(1,486)
Total
£000
45,269
—
45,269
—
45,269
2,356
(3,520)
(1,164)
Other segmental information:
Reportable segment assets
Reportable segment liabilities
Fixed asset additions
Depreciation and amortisation
26,630
5,970
44,172
76,772
(22,078)
(3,048)
(10,806)
(35,932)
605
293
1,214
457
—
—
1,819
750
31
Notes relating to the consolidated financial statements
For the 53-week period ended 2 April 2016
1. SEGMENT INFORMATION (CONTINUED)
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/(loss) from operations
Other segmental information:
Reportable segment assets
Reportable segment liabilities
Fixed asset additions
Depreciation and amortisation
Machine
tools
& precision
engineered
components
Industrial
laser
systems
£000
34,747
—
34,747
—
34,747
2,931
1,965
4,896
£000
9,047
182
9,229
(182)
9,047
304
(772)
(468)
29,443
6,622
(19,614)
(2,619)
919
305
353
278
Head Office
& unallocated
£000
—
—
—
—
—
(771)
(235)
(1,006)
35,432
(14,538)
—
—
Total
£000
43,794
182
43,976
(182)
43,794
2,464
958
3,422
71,497
(36,771)
1,272
583
Inter-segment pricing is determined on an arm’s length basis. Segment results, assets and liabilities include items directly attributable
to a segment as well as those that can be allocated on a reasonable basis.
Segment capital expenditure is the total cost incurred during the period to acquire segment assets that are expected to be us ed for
more than one period.
Geographical segmental analysis of revenue is shown by origin and destination in the following two tables:
Segmental analysis by origin
Gross sales revenue:
UK
North America
Australasia
Total Revenue
2016
£000
14,851
28,936
1,482
45,269
2015
%
£000
%
32.8
63.9
3.3
100.0
20,806
21,083
1,905
43,794
47.5
48.1
4.4
100.0
32
Notes relating to the consolidated financial statements
For the 53-week period ended 2 April 2016
1. SEGMENT INFORMATION (CONTINUED)
Segmental analysis by destination:
Gross sales revenue:
UK
Other European
North America
Africa
Australasia
Central America
Middle East
Far East
2016
2015
£000
%
£000
%
8,498
5,905
27,291
162
1,438
163
733
1,079
45,269
18.8
13.0
60.3
0.4
3.2
0.4
1.6
2.3
100.0
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
There are no customers that represent 10% or more of the Group’s revenues.
2. NET OPERATING EXPENSES
– administration expenses
– distribution costs
Total net operating expenses
2016
£000
13,061
2,579
15,640
2015
£000
8,099
2,899
10,998
33
Notes relating to the consolidated financial statements
For the 53-week period ended 2 April 2016
3. SPECIAL ITEMS
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, amortisation of intangible assets acquired and non cash pension transactions have also been separately identified.
Special items include acquisition costs, gains and losses on the sale of properties and assets, exceptional costs relating to
reorganisation, redundancy and restructuring, asset impairments, legal disputes and inventory, asset and intangibles impairments.
Items included in operating profit:
Pensions credit
Property valuation adjustment
Redundancy and reorganisation
Impairment of intangible assets
Acquisition costs
Share option costs
Amortisation of intangible assets acquired
Items included in financial (income)/expense:
Pensions interest on surplus
Amortisation of loan note expenses
Items included in contingent consideration settlement:
TYKMA deferred consideration settlement
2016
£000
(940)
—
1,729
2,390
197
64
80
2015
£000
(2,347)
462
434
—
335
131
27
3,520
(958)
(1,171)
150
(1,021)
(2,032)
(2,032)
(857)
155
(702)
—
—
During the year the Group incurred further 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 p ensions 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.
The contingent consideration settlement of £2.03m related to the acquisition of the final 20% of TYKMA Inc.
34
Notes relating to the consolidated financial statements
For the 53-week period ended 2 April 2016
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
2016
£000
26
202
-
7
240
-
2015
£000
34
133
297
6
108
3
Special Items
–Acquisition costs,reorganisation and restructuring, inventory and property write-downs, property disposals
and abortive transaction costs (note 3)
3,520
(958)
Auditor’s remuneration:
– audit of these financial statements
– amounts receivable by auditor and its associates in respect of:
– auditing of accounts of subsidiaries 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
70
27
24
-
77
55
15
8
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)
2016
£000
7,258
983
373
12
64
2015
£000
8,292
1,142
415
16
131
8,690
9,996
In addition to the above staff costs, redundancy costs of £586,000 were incurred during the year (2015: £84,000). Director’s
emoluments including disclosure of the highest paid director are included in the Director’s Emoluments table contained within the
Remuneration report.
35
Notes relating to the consolidated financial statements
For the 53-week period ended 2 April 2016
5. PERSONNEL EXPENSES (CONTINUED)
The average number of employees of the Group (including Executive Directors) during the period was as follows:
2016
Number
2015
Number
Management and administration
Production
Sales
Total
.
6. FINANCIAL INCOME AND EXPENSE
Bank and other interest
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
52
98
84
234
2016
£000
10
1,171
1,181
(155)
—
(721)
(3)
(11)
(150)
(1,040)
39
97
76
212
2015
£000
2
857
859
(174)
(238)
(22)
—
(17)
(155)
(606)
36
Notes relating to the consolidated financial statements
For the 53-week period ended 2 April 2016
7. TAXATION
Current tax:
Corporation tax at 20% (2015: 21%):
– current period
Overseas taxation:
– current period
Total current tax charge
Deferred taxation:
– current period
– prior period
Total deferred taxation credit/(charge) (Note 14)
Taxation charged to the income statement
2016
£000
2015
£000
—
53
53
79
5
84
—
(339)
(339)
(1,060)
74
(986)
137
(1,325)
TAX RECONCILIATION
The tax charge assessed for the period is lower than the standard rate of corporation tax in the UK of 20% (2015: higher than standard
rate of 21%). The differences are explained below:
Profit before tax
Profit before tax multiplied by the standard rate of corporation tax
in the UK of 20% (2015: 21%)
Effects of:
2016
£000
1,009
%
202
20.0
–income not taxable and/or expenses not deductible
(205)
(20.3)
– overseas tax rates
– pension fund surplus taxed at higher rate
– property disposals
– state taxes
– 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 the period (2015: no dividend paid).
19
321
(52)
75
(5)
(600)
108
(137)
1.9
31.8
(5.2)
7.4
(0.5)
(59.5)
10.7
(13.6)
2015
£000
3,675
772
252
114
454
-
(74)
(193)
-
1,325
%
21.0
6.9
3.1
12.3
-
(2.0)
(5.2)
-
36.1
37
Notes relating to the consolidated financial statements
For the 53-week period ended 2 April 2016
9. EARNINGS PER SHARE
The calculation of the basic earnings per share of 1.26p (2015: 2.66p) is based on the earnings for the financial period attributable to
the Parent Company’s shareholders of a profit of £1,157,000 (2015: £2,333,000) and on the weighted average number of shares in
issue during the period of 91,684,103 (2015: 87,771,514). At 2 April 2016, there were 6,150,000 (2015: 9,900,000) potentially dilutive
shares on option with a weighted average effect of 583,333 (2015: 2,783,270) shares giving a diluted profit per share of 1. 25p (2015:
2.58p)
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
Credit on settling deferred consideration
Impairment of intangible assets
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
2016
2015
89,607,957
84,430,346
2,076,146
3,341,168
91,684,103
87,771,514
£000
1,146
64
(1,171)
150
(940)
(2,032)
2,390
80
—
1,729
197
(72)
1,476
1,541
1.69p
£000
2,350
131
(857)
155
(2,347)
—
—
27
462
434
335
1,159
2,015
1,849
2.09p
38
Notes relating to the consolidated financial statements
For the 53-week period ended 2 April 2016
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 senior executives and directors on 19 November 2012 at 10p per share, on 7 April 2014 at
17p per share and at 18p on 6 August 2015. 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 £64,000 (2015: £131,000) in relation to equity-settled share-based payment transactions.
The number and weighted average exercise prices of share options
Number of options outstanding at beginning of period
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
2016
DSP
2015
DSP
9,900,000
1,000,000
(2,000,000)
(2,750,000)
6,150,000
1,750,000
4,500,000
5,400,000
—
—
9,900,000
—
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 and on 6 August 2015 1,000,000 shares with an exercise price of 18p 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 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.
FAIR VALUE ASSUMPTIONS OF SHARE-BASED PAYMENTS
THE 600 GROUP PLC 2011 DEFERRED SHARE PLAN (DSP)
The fair value of awards granted under these Share Plans are determined using the Black Scholes valuation model. The fair val ue of
share options and assumptions are shown in the table below:
Fair value
Share price at grant
Exercise price
Dividend yield
Expected volatility
Expected life
Risk-free interest rate
Number of shares under option
2015
Grant
£000
£0.04
£0.18
18p
0%
50%
2014
Grant
£000
£0.05
£0.17
17p
0%
25%
2013
Grant
£000
£0.04
£0.13
10p
0%
50%
3.0 years
3.0 years
3.0 years
1.36%
4.08%
4.08%
1,000,000
3,400,000
1,750,000
39
Notes relating to the consolidated financial statements
For the 53-week period ended 2 April 2016
11. PROPERTY, PLANT AND EQUIPMENT
Land and buildings
Plant and
Fixtures,
fittings,
tools and
Freehold
Leasehold
machinery
equipment
£000
£000
£000
£000
Total
£000
Cost or valuation
At 29 March 2015
Exchange differences
Transfer to assets classified as held for resale
Additions during period
Disposals during period
At 2 April 2016
At professional valuation
At cost
Depreciation
At 29 March 2015
Exchange differences
Transfer to assets classified as held for resale
Charge for period
Disposals during period
At 2 April 2016
Net book value
At 2 April 2016
At 28 March 2015
1,186
2,676
10,994
2,074
22
—
—
—
1,208
1,208
—
1,208
16
—
—
18
—
34
1,174
1,170
6
(2,556)
383
(120)
389
389
—
389
78
(1)
(107)
61
(25)
6
383
2,598
40
—
758
(1,445)
10,347
—
10,347
10,347
92
—
382
(166)
2,382
—
2,382
2,382
16,930
160
(2,556)
1,523
(1,731)
14,326
1,597
12,729
14,326
10,099
1,578
11,771
36
—
314
(1,168)
9,281
1,066
895
72
—
155
(35)
1,770
612
496
107
(107)
548
(1,228)
11,091
3,235
5,159
During March 2016 the Group’s properties were revalued. The valuations were performed by independent valuers and the valuations
were determined by market rate for sale with vacant possession.
The Letchworth Garden City long leasehold property was being actively marketed at the year-end and as result this property was
transferred to assets classified as held for resale.
40
Notes relating to the consolidated financial statements
For the 53-week period ended 2 April 2016
11. PROPERTY, PLANT AND EQUIPMENT (CONTINUED)
The net book value of property, plant and equipment includes £156,028 (2015: £172,814) of assets held under finance leases. The
depreciation charged in the period against assets held under finance leases was £26,092 (2015: £34,266).
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 £3,555,000 (2015: £3,777,000) are charged as security for borrowing facilities.
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
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
41
Notes relating to the consolidated financial statements
For the 53-week period ended 2 April 2016
12. GOODWILL AND OTHER INTANGIBLE ASSETS
Cost
At 28 March 2015
Additions
Disposals
Impairment
Foreign exchange
At 2 April 2016
Amortisation and impairment
At 28 March 2015
Amortisation
Disposals
Impairment
Foreign exchange
At 2 April 2016
Net book value
At 2 April 2016
At 28 March 2015
Goodwill
Trademarks
Expenditure
£000
£000
£000
Development
7,144
—
—
—
—
7,144
—
—
—
—
—
—
7,144
7,144
445
32
(94)
—
22
405
71
92
(60)
—
9
112
293
374
2,271
264
—
(2,500)
—
35
298
110
(292)
(110)
—
6
29
1,973
Total
£000
9,860
296
(94)
(2,500)
22
7,584
369
202
(352)
(110)
9
118
7,466
9,491
The additions to Development Expenditure of £264k in the period and £299k 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 32.
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
—
Amortisation and impairment charges are recorded in the following line items in the income statement:
Operating expenses
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
2016
£000
202
2015
£000
133
42
Notes relating to the consolidated financial statements
For the 53-week period ended 2 April 2016
12. GOODWILL AND OTHER INTANGIBLE ASSETS (CONTINUED)
IMPAIRMENT OF GOODWILL
Goodwill of £7.1m arose on the acquisition of TYKMA Inc.and its carrying value has been tested for impairment at the year-end with no
provisions deemed necessary.
13. INVESTMENTS
Cost:
At 28 March 2015
Additions in the period
Disposals in the period
At 2 April 2016
Provisions:
At 28 March 2015
Impairment in the period
At 2 April 2016
Net book values
At 2 April 2016
At 28 March 2015
Shares
In listed
investments
£000
Total
£000
1,147
1,147
—
—
—
—
1,147
1,147
622
29
651
496
525
622
29
651
496
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 pro mote closer
co-operation.
The initial investment of £1.15m was adjusted down to a fair value of £0.50m at 2 April 2016 (2015: £0.53m). The £0.03m write down was
taken to the Statement of comprehensive income and expense.
During the year 600 Group Inc acquired the remaining 20% of the shares of TYKMA Inc. Further details can be found in note 32 of the
Group accounts.
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*; Electrox Laser Limited; Pratt Burnerd International Limited; Electrox Limited; The
Colchester Lathe Company Limited; Crawford Collets Limited; 600 Machine Tools Limited; 600 Controls Limited; Pratt Gamet Limited;
Gamet Bearings Limited; T S Harrison & Sons Limited; The Richmond Machine Tool Company Limited; 600 Lathes Limited; 600 SPV1
Limited*; 600 SPV2 Limited*; Coborn Insurance Company Limited and The 600 Group Pension Trustees Limited*.
US:
600 Group Inc
Clausing Industrial, Inc
TYKMA Inc
REST OF THE WORLD:
600 Machinery Australia (Pty) – (Australia)
600 Group Equipment Limited - (Canada)
All undertakings marked * are 100% owned directly by the Parent Company. The others are 100% owned through intermediate holding
companies. All undertakings above are included in the consolidated accounts.
43
Notes relating to the consolidated financial statements
For the 53-week period ended 2 April 2016
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
2016
£000
1,236
347
1,505
744
—
—
—
2015
£000
819
316
1,187
700
—
—
—
2016
£000
—
—
—
—
(14,296)
(242)
—
3,832
3,022
(14,538)
2015
£000
—
—
—
—
(12,013)
(1,246)
(99)
(13,358)
2016
£000
1,236
347
1,505
744
(14,296)
(242)
—
2015
£000
819
316
1,187
700
(12,013)
(1,246)
(99)
(10,706)
(10,336)
44
As at
2April
2016
£000
1,236
347
1,505
744
(14,296)
(242)
—
(10,706)
2015
£000
819
316
1,187
700
(12,013)
(1,246)
(99)
—
12
—
33
16
—
—
61
—
24
—
73
39
—
—
Notes relating to the consolidated financial statements
For the 53-week period ended 2 April 2016
14. DEFERRED TAX ASSETS AND LIABILITIES (CONTINUED)
MOVEMENT IN DEFERRED TAX DURING THE PERIOD
As at
Statement of
29 March
Income
comprehensive
Exchange
statement
Acquisitions
income
Fluctuations
£000
£000
£000
Accelerated capital allowances
Short-term timing differences
Tax losses
Overseas tax losses
Employee benefits
Revaluations and rolled over gains
Research and development
2015
£000
819
316
1,187
700
(12,013)
(1,246)
(99)
(10,336)
£000
417
19
318
11
—
—
—
—
—
—
—
—
(796)
—
(1,503)
16
99
84
—
—
—
988
—
(515)
MOVEMENT IN DEFERRED TAX DURING THE PRIOR PERIOD
As at
Statement of
As at
30 March
Income
comprehensive
Exchange
28 March
statement
Acquisitions
income
Fluctuations
£000
£000
Accelerated capital allowances
Short-term timing differences
Tax losses
Overseas tax losses
Employee benefits
Revaluations and rolled over gains
Research and development
2014
£000
689
301
1,137
596
(6,653)
(985)
(99)
(5,014)
£000
306
(9)
50
31
£000
(176)
—
—
—
—
—
—
—
(1,103)
—
(4,296)
—
—
—
—
(261)
—
(986)
(176)
(4,296)
136
(10,336)
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. Further reductions to 19% (effective from 1 April 2017) and to 18%
(effective from 1 April 2020) were substantially enacted on 26 October 2015. The deferred tax assets and liabilities at the balance sheet
date have been calculated based on these rates.
US deferred tax is provided at 35%.
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.
2016
£000
1,670
4,626
2015
£000
1,670
4,295
45
Notes relating to the consolidated financial statements
For the 53-week period ended 2 April 2016
15. INVENTORIES
Raw materials and consumables
Work in progress
Finished goods and goods for resale
2016
£000
546
955
9,770
11,271
2015
£000
311
760
9,965
11,036
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 £46,000 (2015: increased by £424,000). 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
2016
£000
5,534
189
1,048
6,771
2016
£000
135
3
(19)
88
207
2015
£000
6,074
160
836
7,070
2015
£000
252
15
(171)
39
135
46
Notes relating to the consolidated financial statements
For the 53-week period ended 2 April 2016
16. TRADE AND OTHER RECEIVABLES (CONTINUED)
The ageing analysis of gross trade receivables, before provisions, is as follows:
Current (not overdue)
Overdue:
– 0–3 months overdue
– 3–6 months overdue
– 6–12 months overdue
– more than 12 months overdue
Total gross trade receivables before provision
2016
£000
4,456
968
208
30
79
2015
£000
5,159
698
233
7
112
5,741
6,209
As at 2 April 2016, 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. ASSETS CLASSIFIED AS HELD FOR SALE
Transferred from property plant and equipment - cost
Transferred from property plant and equipment - depreciation
Impairment
2016
£000
2,556
(107)
(450)
1,999
The above leasehold property was written down to its net realisable value at the year-end with the £0.45m reduction in its carrying
value taken to the revaluation reserve, removing a previous valuation uplift on the same property.
On 11 July 2016 the sale of the Letchworth property was completed for net proceeds of £2.0m.
18. CASH AND CASH EQUIVALENTS
Cash at bank
Short-term deposits
Cash and cash equivalents per statement of financial position and per cash flow statement
19. LOANS AND OTHER BORROWINGS
CURRENT:
Bank loans
Other loans
Obligations under finance leases (note 22)
2016
£000
665
100
765
2016
£000
3,114
—
161
3,275
2015
£000
—
—
—
—
2015
£000
802
100
902
2015
£000
3,096
110
89
3,295
47
Notes relating to the consolidated financial statements
For the 53-week period ended 2 April 2016
19. LOANS AND OTHER BORROWINGS (CONTINUED)
NON-CURRENT:
Bank loans
8% Loan Notes
Obligations under finance leases (note 22)
2016
£000
3,596
7,699
81
11,376
2015
£000
1,539
6,783
83
8,405
The £8.5m of Loan Notes in place at the year-end were issued in three tranches in February, March and August 2015 with 43.95m
convertible 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. The loan has both debt and equity components and £139,000 is shown in equity reserve and the
balance after deduction of associated costs of £662,000, is shown in non current borrowings. Costs are amortised to the income
statement over the term of the loan.
A Term Loan of £927,000 included within Bank loans was scheduled to be repaid on a quarterly basis with payments of £153,846 on 30
June 2016 through to 30 November 2017. A further Term Loan of £612,000, also included within Bank loans, was scheduled to be
repaid on a quarterly basis with payments of £18,000 on 30 June 2016 through to 30 June 2019 and a final payment of £378,000 on 31
May 2019. £1,300,000 included within non–current borrowings related to a RCF facility with a termination date of 31 May
2017.Following the disposal of the Letchworth property in July 2016 these borrowings with Santander were reduced by the net
proceeds of £2m and on the change of bank to HSBC in August 2016 the balance of all these facilities were repaid and replaced by
facilities from HSBC.
US Dollar denominated loans of £1,984,000 are repaid on a monthly basis through to April 2021.
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.
20. 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
2016
£000
28
3,286
210
1,221
1,573
6,318
2015
£000
27
3,294
205
1,551
1,715
6,792
—
—
4,175
4,175
The contingent deferred consideration of £4.175m related to the TYKMA Inc acquisition (note 31).This amount was settled in March
2016 for £2,143,000 and the subsequent credit shown in the income statement within special items.
48
Notes relating to the consolidated financial statements
For the 53-week period ended 2 April 2016
21. PROVISIONS
Provision carried forward at 28 March 2015
Exchange differences
(Credited)/Charged to income statement
Utilised in the period
Provision carried forward at 2 April 2016
Other
Warranties
£000
556
17
39
(230)
382
£000
55
1
3
(16)
43
Total
£000
611
18
42
(246)
425
The timing of warranty payments are uncertain in nature. The warranty provisions are calculated based on historical experience of
claims received, taking into account recent sales of items which are covered by warranty. The provision relates mainly to pro ducts sold
in the last twelve months. The typical warranty period is now twelve months.
Other provisions of £382,000 relate largely to the fair value provision for the TYKMA Inc acquisition and further details on this can be
found in note 31.
22. 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
23. SHARE CAPITAL
Allotted, called-up and fully paid:
Ordinary shares of 1p each
89,607,957 ordinary shares of 1p each on issue at start of the period (2015: 84,491,886 ordinary shares )
2,750,000 ordinary shares of 1p each issued to N Rogers (2015 – 190,450 ordinary shares of 1p each
issued to N Rogers and N Carrick)
12,000,000 ordinary shares of 1p each issued in acquisition of remaining 20% of TYKMA Inc
(2015 – 4,925,621 ordinary shares of 1p each issued in ProPhotonix Limited share acquisition)
2016
£000
128
124
(10)
242
161
81
242
2016
£000
896
28
120
104,357,957 ordinary shares of 1p each on issue at end of period (2015: 89,607,957 ordinary shares of 1p)
1,044
2015
£000
95
89
(12)
172
89
83
172
2015
£000
845
2
49
896
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 (2015 – nil)
Total Allotted, called-up and fully paid at the end of period
—
—
—
1,044
13,736
(13,736)
—
896
49
Notes relating to the consolidated financial statements
For the 53-week period ended 2 April 2016
23. SHARE CAPITAL (CONTINUED)
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 2,750,000 ordinary shares of 1p
each were issued to N Rogers in July 2015 pursuant to the exercise of share options. This resulted in share capital increasing by
£27,500 with a corresponding share premium increase of £247,500. In addition, the Company issued 12,000,000 ordinary shares of 1p
each as consideration for the purchase of the remaining 20% of shares in TYKMA Inc.
During the prior 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 addition, 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 the deferred shares of 24p each were cancelled by the company without compensation following approval by the
shareholders at the AGM on 17 September 2014.
On 28 August 2015 the Company raised an additional £0.806m through the issue of loan notes. In the prior year on 16 February 2015
and 18 March 2015 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 14 February 2020 to subscribe for 43.95m 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. 43.95m warrants remained outstanding at the year-end.
In the prior year 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 allowed 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 prior year-end 2.4m warrants remained and
these all expired on 27 August 2015 (2015:2.4m warrants remained outstanding).
24. RECONCILIATION OF NET CASH FLOW TO NET DEBT
Decrease in cash and cash equivalents
Increase in debt and finance leases
Increase in net debt from cash flows
Net debt at beginning of period
Shareholder loan issue costs amortisation
Cash and debt through acquisitions
Exchange effects on net funds
Net debt at end of period
25. ANALYSIS OF NET DEBT
Cash at bank and in hand
Term deposits (included within cash and cash equivalents on the
balance sheet)
Debt due within one year
Debt due after one year
Loan notes due after one year
Finance leases
Total
2016
£000
(148)
(2,757)
(2,905)
(10,798)
(110)
—
(73)
2015
£000
(233)
(5,200)
(5,433)
(5,308)
701
(697)
(61)
(13,886)
(10,798)
At
29 March
Exchange
2015
£000
802
100
902
(3,206)
(1,539)
(6,783)
(172)
movement
£000
11
—
11
(82)
—
—
(2)
Other
£000
—
—
—
—
—
(110)
—
Cash flows
£000
(148)
—
(148)
174
(2,057)
(806)
(68)
At
2 April
2016
£000
665
100
765
(3,114)
(3,596)
(7,699)
(242)
(10,798)
(73)
(110)
(2,905)
(13,886)
50
Notes relating to the consolidated financial statements
For the 53-week period ended 2 April 2016
26. 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. £8.5m was raised through the issue of loan notes which had 43.95m
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.
The Directors determine the appropriate capital structure of the Group between funds raised from equity shareholders (equity), through
the issue of shares and retention of profits generated, and funds borrowed from financial institutions, other businesses, individuals and
preference shareholders (debt) in order to finance the Group’s activities both now and in the future. The Board’s objectives when
managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide returns to Sharehold ers and
benefits to other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. In order to maintain or adjust
the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new
shares or sell assets to reduce debt.
The 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.
FAIR VALUE OF FINANCIAL INSTRUMENTS
Non-current asset investments
The fair value of investments is based on management’s assessment of share value where the investment is not a traded security.
Trade and other payables and receivables
The fair value of these items are considered to be their carrying value as the impact of discounting future cash flows has been
assessed as not material.
Cash and cash equivalents
The fair value of cash and cash equivalents is estimated as its carrying value where the cash is repayable on demand. Where it is not
repayable on demand then the fair value is estimated at the present value of future cash flows, discounted at the market rate of interest
at the balance sheet date.
Long-term and short-term borrowings
The fair value of bank loans and other loans is based on the terms the Group has agreed for its variable rate debt.
Short-term deposits
The fair value of short-term deposits is considered to be the carrying value as the balances are held in floating rate accounts where the
interest rate is reset to market rates.
Fair value hierarchy
The following hierarchy classifies each class of financial asset or liability depending on the valuation technique applied in determining
its fair value:-
Level 1: The fair value is calculated based on quoted prices traded in active markets for identical assets or liabilities.
Level 2: The fair value is based on inputs other than quoted prices included within Level 1 that are observable for the asset or liability,
either directly or indirectly. The fair value of forward foreign exchange and commodity contracts is determined using quoted forward
exchange rates and commodity prices at the reported date and yield curves derived from quoted interest rates matching the maturities
of the forward contracts.
Level 3: The fair value is based on inputs for the asset or liability that are not based on observable market data (unobservable inputs).
The shares in the listed investment of Prophotonix plc is a level 1 fair value estimate, based on the quoted price of this AIM company.
The warrants attached to the loan notes are a level 2 fair value estimate. The contingent consideration for TYKMA Inc. was based upon
a level 3 fair value estimate.
There have been no transfers between categories in the current or preceding period.
The fair values of all financial instruments, throughout the reporting periods, approximate to their carrying values.
51
Notes relating to the consolidated financial statements
For the 53-week period ended 2 April 2016
26. 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
2016
£000
5,534
765
6,299
2016
£000
2,278
3,012
244
5,534
2015
£000
6,074
902
6,976
2015
£000
3,199
2,797
78
6,074
52
Notes relating to the consolidated financial statements
For the 53-week period ended 2 April 2016
26. 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
8% loan notes
Finance lease obligations
Interest bearing financial liabilities
Trade and other payables
Financial liabilities
Bank overdrafts
Bank loan
Other loan
8% loan notes
Finance lease obligations
Interest bearing financial liabilities
Trade and other payables
Financial liabilities
2016
Carrying
Amount
£000
646
6,064
7,699
242
14,651
6,318
20,969
2015
Contractual
Less than
cash flows
£000
646
6,064
8,500
242
15,452
6,318
21,770
1 year
£000
646
2,468
—
161
3,275
6,318
9,593
1–2 years
2–5 years
£000
—
2,248
—
57
2,305
—
2,305
£000
—
1,348
8,500
24
9,827
—
9,827
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
7,694
172
12,611
10,967
23,578
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
—
7,694
52
8,598
4,175
12,773
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.
53
Notes relating to the consolidated financial statements
For the 53-week period ended 2 April 2016
26. 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
2016
US Dollars
$000
4,312
(1,607)
2,705
Euro
€000
191
(292)
(101)
2015
US Dollars
$000
2,797
(777)
2,020
Euro
€000
227
(249)
(22)
2016
Average
rate
1.499
1.360
Year end
spot rate
1.419
1.251
2015
Average
rate
1.609
1.282
Year end
spot rate
1.488
1.366
Change if
appreciated/
Depreciated
Net assets
by 25%
in foreign
against local
currency
Currency
4,406
1,101
The Group has operations around the world and is therefore exposed to foreign exchange risk arising from net investments in foreign
operations. Where cost effective, the exposures arising from the translation of the net assets of the Group’s foreign operations are
managed through the use of borrowings or cross-currency swaps in the relevant foreign currency.
Some Group operations on occasion also enter into commercial transactions in currencies other than their functional currencies. Exposures
arising from the translation of foreign currency transactions are continually monitored and material exposures are managed where
necessary through the use of forward contracts or options once cash flows can be identified with sufficient certainty. Exposures arising
from the translation of intra-group lending are managed through the use of borrowings in the relevant foreign currency.
54
Notes relating to the consolidated financial statements
For the 53-week period ended 2 April 2016
26. FINANCIAL INSTRUMENTS (CONTINUED)
The following table shows the impact (due to the retranslation of non-functional currency monetary assets and liabilities in the Group's
operations) of a, reasonably possible, 10% movement in the Group’s principal foreign currency exchange rates at the year-end date.
2April2016
US$
AUD
28 March 2015
US$
AUD
10%
increase
Effect on
profit
before tax
Effect on
shareholders’
equity
10 %
decrease
Effect on
profit before
tax
Effect on
shareholders’
equity
(923)
(27)
90
17
441
226
911
132
923
27
(90)
(17)
(441)
(226)
(911)
(132)
The effect on profit before taxation is due to the retranslation of trade receivables, cash and cash equivalents, borrowings, trade
payables and derivative financial assets and liabilities denominated in non-functional currencies. The effect on shareholders’ equity is
due to the effect on profit as well as the effect of financial assets and liabilities denominated in foreign currencies qualified as either
cash flow or net investment hedges.
INTEREST RATE RISK
The Group holds a mixture of both fixed and floating interest borrowings to control its exposure to interest rate risk although it has no
formal target for a ratio of fixed to floating funding. The level of debt is continually reviewed by the Board. The sensitivity analysis is set
out below:
US Dollar
AUS Dollar
CAD Dollar
Net cash/
Change if
in foreign interest rates
borrowings
in foreign
in foreign
Currency
currency
change by
1%
£’000
(3,172)
134
(1)
£’000
(32)
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 2 April 2016, 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 £0.06m (2015: 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.
55
Notes relating to the consolidated financial statements
For the 53-week period ended 2 April 2016
26. 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 2 April 2016 was a liability of £nil (Note 18) (2015: liability of £nil) and the
movement has been recognised within cost of sales.
FINANCIAL ASSETS
The Group’s financial assets comprise cash, trade receivables and derivative contract assets. The profile of the financial as sets at 2
April 2016 and 28 March 2015 was:
2016
Financial
assets
2015
Financial
assets
Floating rate
Fixed rate
on which
Floating rate
Fixed rate
on which
financial
financial
no interest
financial
financial
no interest
assets
assets
is earned
Currency
Sterling
US Dollars
Australian Dollars
Euros
Canadian Dollars
£000
484
—
181
—
—
665
£000
100
—
—
—
—
£000
2,344
3,144
253
—
—
Total
£000
2,928
3,144
434
—
—
assets
£000
335
215
142
108
2
802
assets
is earned
£000
100
—
—
—
—
£000
3,672
3,305
93
—
—
Total
£000
4,107
3,520
235
108
2
100
7,070
7,972
100
5,741
6,506
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.
56
Notes relating to the consolidated financial statements
For the 53-week period ended 2 April 2016
26. 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 2 April 2016 and 28 March 2015 was:
2016
Floating rate
Fixed rate
Financial
liabilities
on which
2015
Financial
liabilities
Floating rate
Fixed rate
on which
financial
Financial
no interest
financial
financial
no interest
liabilities
Liabilities
£000
3,485
3,178
47
6,710
£000
7,787
70
83
7,940
is paid
£000
3,437
2,580
302
6,319
Total
£000
14,709
5,828
432
20,969
liabilities
liabilities
£000
3,042
1,703
—
£000
6,881
—
74
is paid
£000
4,505
6,264
198
4,745
6,955
10,967
Total
£000
14,428
7,967
272
22,667
Currency
Sterling
US Dollars
Australian Dollars
The floating rate financial liabilities comprise bank borrowings and overdrafts that bear interest rates based on local currency base
interest rates.
BORROWING FACILITIES
At 2April 2016 and 28 March 2015 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
2016
‘000
£529
$3,365
2015
‘000
£1,406
$1,949
AUD$900
AUD$900
2016
£000
6,771
765
(646)
(4,871)
(7,699)
(242)
(4,861)
(10,783)
2015
£000
7,070
902
(644)
(2,452)
(6,893)
(172)
(5,009)
(7,198)
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.
57
Notes relating to the consolidated financial statements
For the 53-week period ended 2 April 2016
27. CONTINGENT LIABILITIES
Third-party guarantees
2016
£000
92
2015
£000
92
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.
28. CAPITAL COMMITMENTS
Capital expenditure contracted for but not provided in the accounts
2016
£000
—
2015
£000
—
29. 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
2016
£000
237
861
394
2015
£000
291
901
551
1,492
1,743
49
60
109
59
23
82
30. 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 servic e 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 2016. The disclosures for the US schemes that follow refer to the US
defined benefit scheme and the retirement healthcare benefit scheme.
58
Notes relating to the consolidated financial statements
For the 53-week period ended 2 April 2016
30. 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 2016 at age 65 will live on average for a further 21.6 years (2015: 21.6 years) after
retirement if male and for a further 23.6 years (2015: 23.6 years) after retirement if female.
For a member who is currently aged 45 retiring in 2036 at age 65, the assumptions are that they will live on average for a further 22.7
years (2015: 22.7 years) after retirement if they are male and for a further 24.6 years (2015: 24.6 years) after retirement if they are
female.
The mortality rates for the US scheme are based on the RP-2014 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
2016
2015
UK scheme
UK scheme
% p.a.
2.85
1.85
n/a
n/a
2.80
2.05
3.60
% p.a.
2.85
1.85
n/a
n/a
2.80
2.10
3.30
The principal assumptions for the US schemes relate to the discount rate for scheme liabilities. The discount rate used for t he US
defined benefit scheme was 3.38% (2015: 3.24%) and for the US medical scheme was 3.38% (2015: 3.24%).
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
2April
2016
% p.a.
3.60
3.60
3.60
3.60
3.60
3.60
3.60
3.60
2April
2016
£m
52.70
9.80
72.40
n/a
23.20
44.30
17.00
219.40
28 March
28 March
29 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
Value at
29 March
2014
£m
40.10
21.20
69.60
n/a
14.60
31.20
19.00
195.70
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 £0.808m (2015: £0.846m) and are held mainly in bonds.
59
Notes relating to the consolidated financial statements
For the 53-week period ended 2 April 2016
30. 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 2 April 2016 and 28 March 2015 were:
Assets
Liabilities
(Deficit)/surplus
2016
US
UK
schemes
scheme
£000
£000
808
219,400
220,208
(1,844)
(177,427)
(179,271)
(1,036)
41,973
40,937
Total
£000
US
schemes
£000
846
(1,969)
(1,123)
2015
UK
scheme
£000
Total
£000
229,200
230,046
(193,785)
(195,754)
35,415
34,292
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)
– settlements (Special Items)
Included within financial income:
–Interest on pension surplus
12
—
—
33
2016
US
UK
schemes
scheme
£000
£000
Total
£000
12
—
—
—
(973)
(973)
(1,171)
(1,138)
US
schemes
£000
12
—
—
38
2015
UK
scheme
£000
Total
£000
—
12
(2,347)
(2,347)
—
—
(895)
(857)
60
US
Schemes
£000
25
(34)
(9)
(79)
(88)
1,175
1,087
US
schemes
£000
1,706
206
12
—
69
2015
UK
scheme
£000
44,891
(8,553)
36,338
Total
£000
44,916
(8,587)
36,329
(24,062)
(24,141)
12,276
12,715
24,991
12,188
13,890
26,078
2015
UK
scheme
£000
Total
£000
175,803
177,509
—
—
206
12
(2,347)
(2,347)
7,658
7,727
Notes relating to the consolidated financial statements
For the 53-week period ended 2 April 2016
30. 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
Amounts recognised during the period
Balance brought forward
Balance carried forward
US
schemes
£000
(4)
(26)
(30)
172
142
1,087
1,229
2016
UK
scheme
£000
4,422
(7,331)
(2,909)
7,203
4,294
24,991
29,285
Total
£000
4,418
(7,357)
(2,939)
7,375
4,436
26,078
30,514
Changes in the present value of the defined benefit obligations before taxation are as follows:
US
Schemes
£000
1,969
85
12
—
59
2016
UK
scheme
£000
Total
£000
193,785
195,754
—
—
—
85
12
—
6,160
6,219
Opening defined benefit obligation
Exchange differences
Current service cost
Past service cost credit
Interest cost
Benefits paid
Settlements
Actuarial (gains)/losses
Contributions by scheme participants
(109)
(14,342)
(14,451)
(103)
(11,391)
(11,494)
—
(172)
—
(973)
(973)
(7,203)
(7,375)
—
—
—
79
—
—
—
24,062
24,141
—
—
Closing defined benefit obligations
1,844
177,427
179,271
1,969
193,785
195,754
61
Notes relating to the consolidated financial statements
For the 53-week period ended 2 April 2016
30. EMPLOYEE BENEFITS (CONTINUED)
IAS 19 CONTINUED
Changes in the fair value of the schemes’ assets before taxation are as follows:
2016
US
UK
schemes
scheme
Opening fair value of scheme assets
Exchange differences
Expected return
Actuarial gains/(losses)
Contribution by scheme participants
Contributions by employer
Benefits paid
Closing fair value of schemes’ assets
£000
846
37
26
(30)
—
—
(71)
808
£000
Total
£000
229,200
230,046
—
7,331
(2,909)
—
120
37
7,357
(2,939)
—
120
(14,342)
(14,413)
219,400
220,208
US
schemes
£000
791
90
31
(9)
—
—
(57)
846
The history of the schemes for the current and prior period before taxation is as follows:
2016
US
UK
Schemes
Scheme
£000
£000
Total
£000
US
schemes
£000
2015
UK
scheme
£000
Total
£000
195,700
196,491
—
8,553
36,338
—
—
(11,391)
229,200
2015
UK
scheme
£000
90
8,584
36,329
—
—
(11,448)
230,046
Total
£000
Present value of defined benefit obligation
(1,844)
(177,427)
(179,271)
(1,969)
(193,785)
(199,754)
Fair value of scheme assets
(Deficit)/surplus in the scheme
Experience adjustments on the scheme liabilities
Experience adjustments on scheme assets
Exchange differences
808
219,400
220,208
(1,036)
(172)
(30)
(48)
41,973
(7,203)
(2,909)
—
40,937
(7,375)
(2,939)
(48)
846
(1,123)
79
(9)
(116)
229,200
35,415
230,046
34,292
(24,062)
(23,983)
36,338
—
36,329
(116)
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
2April
2016
£000
28March
29 March
30March
31March
2015
£000
2014
£000
2013
£000
2012
£000
220,208
230,046
196,491
204,214
188,665
(179,271)
(195,754)
(177,509)
(186,109)
(177,737)
40,937
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
40,937
34,292
18,982
18,105
(2,012)
History of experience gains and losses
Experience (losses)/ gains on scheme assets
Experience gains/ (losses) on scheme liabilities
2016
£000
2015
£000
2014
£000
2013
£000
2012
£000
(2,939)
36,329
7,375
(24,141)
(5,772)
5,685
13,766
(13,758)
1,404
(6,731)
62
Notes relating to the consolidated financial statements
For the 53-week period ended 2 April 2016
31. 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 on pages 25 to 30.
Management considers there are no critical accounting judgements made in the preparation of the financial statements. The key
sources of estimation and uncertainty are:
FINANCIAL INSTRUMENTS
Note 26 contains information about the assumptions and estimates and the risk factors relating to interest rate and foreign 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 30 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.
32. ACQUISITION
There were no acquisitions in the current year. During the prior year the group acquired 80% of the issued share capital of TYKMA Inc.,
a US laser marking company. There have been no changes in the year to the fair value of net assets acquired, and therefore no
change in the goodwill arising of £7,144,000.
The acquisition of TYKMA Inc. included contingent consideration relating to put and call options between the group and the vendor
which had a fair value at March 2015 of £4.1m. During the year the fair value was remeasured to £2.1m and was settled at this amount.
The settlement comprised of US$1.8m and the issue of 12m ordinary shares in the Group with a value at that time of £0.9m. The fair
value gain of £2,032,000 has been included as a special item given its size and nature.
33. 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 19.
Mr D Grimes, the Divisional Managing Director of Industrial Laser Systems, is party to a trust which owns the property rented by
TYKMA Inc. in the US and which received $72,000 rent during the period.
As part of the consideration for remaining 20% in TYKMA Inc. David Grimes became a beneficial holder of 7,500,000 ordinary shares in
the Group representing 7.19% of the issued share capital at 2 April 2016.
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 £120,000 to the UK pension scheme during the current period (2015: £nil) and no contributions were overdue at
the period-end. The monthly payments of £10,000 were paid by the Group to the UK pension scheme from April 2015 onwards 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 (2015:£nil) and no payments were overdue
at the period-end.
63
Company income statement
For the 53-week period ended 2 April 2016
Before
Special
Items
After
Before
Special
Special
Special
Special
Items
Items
Items
Items
After
Special
Items
53 weeks
53 weeks
53 weeks
52 weeks
52 weeks
52 weeks
ended
2 April
2016
£000
2,924
(431)
2,493
464
(776)
5,670
ended
2 April
2016
£000
-
(518)
(518)
-
(150)
-
ended
2 April
2016
£000
2,924
(949)
1,975
464
(926)
5,670
ended
ended
ended
28 March
28 March
28 March
2015
£000
618
(614)
4
2
(388)
5,184
2015
£000
-
(517)
(517)
-
(135)
-
2015
£000
618
(1,131)
(513)
2
(523)
5,184
Other operating income
Administrative expenses
Operating profit
1
Notes
Financial income
Financial expense
Income from shares in subsidiaries
Profit before tax
7,851
(668)
7,183
4,802
(652)
4,150
Income tax charge
Profit for the period from
continuing operations
(35)
7,816
-
(668)
(35)
7,148
-
-
-
4,802
(652)
4,150
Company Number 00196730
The accompanying accounting policies and notes on pages 69 to 82 form part of these Financial Statements.
64
Company statement of comprehensive income
For the 53-week period ended 2 April 2016
Profit for the period
Other comprehensive income/(expense)
Items that will not be reclassified to the Income Statement:
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:
Fair valuation of assets held for resale
Fair valuation of investments
Group property transfer
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
Notes
53-week
52-week
period ended
period ended
2 April
28 March
2016
£000
7,148
-
-
(450)
(29)
-
(479)
(479)
6,669
2015
£000
4,150
-
-
656
(622)
419
453
453
4,603
Company Number 00196730
The accompanying accounting policies and notes on pages 69 to 82 form part of these Financial Statements.
65
Company statement of financial position
As at 2April 2016
Company Number 00196730
Non-current assets
Property, plant and equipment
Investments
Current assets
Trade and other receivables
Assets classified as held for resale
Cash and cash equivalents
Total assets
Non-current liabilities
Trade and other payables
Current liabilities
Trade and other payables
Total liabilites
Net assets
Shareholders’ equity
Called-up share capital
Share premium account
Revaluation reserve
Available for sale reserve
Equity reserve
Profit and loss account
Notes
5
6
7
8
9
9
10
As at
2April
2016
£000
-
9,199
9,199
30,772
1,999
252
33,023
42,222
(9,487)
(9,487)
(1,527)
(1,527)
(11,014)
31,208
1,044
1,013
711
(651)
139
28,952
31,208
As at
28 March
2015
£000
2,500
9,228
11,728
23,147
-
-
23,147
34,875
(7,886)
(7,886)
(3,690)
(3,690)
(11,576)
23,299
896
-
1,311
(622)
124
21,590
23,299
The financial statements on pages 64 to 82 were approved by the Board of Directors on 31 August 2016 and were signed on its behalf
by:
NEIL CARRICK
GROUP FINANCE DIRECTOR
31 AUGUST 2016
REGISTERED OFFICE
1 Union Works
Union Street
Heckmondwike
West Yorkshire
WF16 0HL
66
Company statement of changes in equity
As at 2April 2016
Company Number 00196730
Ordinary
Share
Available
Capital
share
premium Revaluation
for sale redemption Equity
Retained
capital
account
reserve
reserve
reserve[1] reserve
Earnings
At 29 March 2014
At 30 March 2014
Profit for the period
Other comprehensive income:
Group property transfer
Fair value of Investments
Revaluation of properties
Total comprehensive income
Transactions with owners:
Share capital subscribed for
Cancellation of deferred shares, share
premium and capital redemption reserve
Equity element of shareholder loan issued in
the period
Credit for share-based payments
£000
£000
14,581
16,885
14,581
16,885
—
—
—
—
—
—
—
—
—
—
51
1,094
(13,736)
(17,979)
—
—
—
—
Total transactions with owners
(13,685)
(16,885)
£000
236
236
—
419
—
656
1,075
—
—
—
—
—
Total
£000
£000
£000
£000
£000
—
—
—
—
(622)
—
(622)
2,500 180
(17,010) 17,372
2,500 180
— —
(17,010) 17,372
4,150
4,150
— —
— —
— —
— —
—
—
—
419
(622)
656
4,150
4,603
—
— —
—
1,145
(2,500) —
34,215
—
(56)
104
—
48
— —
131
131
(2,500)
(56)
34,450
1,324
—
—
—
At 28 March 2015
At 29 March 2015
Profit for the period
Other comprehensive income:
Fair value of Investments
Fair valuation of assets held for sale
Transfer on revalued properties
Total comprehensive income
Transactions with owners:
Share capital subscribed for
Equity element of shareholder loan issued in
the period
Credit for share-based payments
Total transactions with owners
896
896
—
—
—
—
—
—
—
—
—
—
—
(450)
(150)
—
(600)
148
1,013
—
—
—
—
148
1,013
—
—
—
—
1,311
(622)
—
124
21,590 23,299
1,311
(622)
—
— 124
— —
21,590 23,299
7,148
7,148
—
(29)
— —
—
—
(29)
—
—
—
—
— —
— —
— —
— —
—
15
— —
15
—
—
—
—
(29)
(450)
150
—
7,298
6,669
—
—
64
64
1,161
15
64
1,240
At 2 April 2016
1,044
1,013
711
(651)
1 The capital redemption reserve was set up on cancellation and repayment of cumulative preference shares in 2001.
139
28,952 31,208
67
Company cash flow statement
For the 53-week period ended 2April 2016
Company Number 00196730
Cash flows from operating activities
Profit for the period
Adjustments for:
Depreciation
Net financial income
Other Special Items
Income tax expense
Equity share option expense
Operating cash flow before changes in working capital and provisions
(Increase)/decrease in trade and other receivables
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
Investment in Prophotonics
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 cash flows from financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the period
Cash and cash equivalents at the end of the period
53-week
52-week
period ended
period ended
2 April
2016
£000
28 March
2015
£000
Notes
7,148
4,150
51
462
454
35
64
8,214
(6,801)
(1,903)
(310)
(800)
(926)
—
(1,726)
464
—
—
464
275
806
641
1,722
460
(208)
252
3
521
386
—
131
5,191
1,293
(9,668)
(301)
(3,485)
(523)
32
(3,976)
2
391
(1,147)
(754)
1,145
7,694
(4,473)
4,366
(364)
156
(208)
68
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 FRS101 “Reduced Disclosure Framework”.
BASIS OF ACCOUNTING
The following principal accounting policies have been applied consistently in dealing with items which are considered material in
relation to the Company’s financial statements, except as detailed below.
These accounts have been prepared under the historical cost convention, modified to include the revaluation of certain proper ties, and
in accordance with applicable accounting standards. The financial statements have been prepared in accordance with FRS 101
“Reduced Disclosure Framework”.The accounts are prepared to the Saturday nearest to the Company’s accounting reference date of
31 March. The results for 2016 are for the 53-week period ended 2April 2016. The results for 2015 are for the 52-week period ended 28
March 2015.
.
NOTES ON INTERPRETATION OF ACCOUNTING STANDARDS
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 2015.
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 owne d
entities which form part of the Group (or investees of the Group qualifying as related parties).
69
Notes relating to the company financial statements
1. PERSONNEL EXPENSES
Staff costs:
– wages and salaries
– social security costs
– pension charges
– equity share options expense
2016
£000
627
48
19
64
758
2015
£000
587
66
16
131
800
The average number of employees of the Company (including Executive Directors) during the period was as follows:
Head office function
2016
Number
5
2015
Number
5
These staff costs related entirely to the Directors and head office staff who are all classified as administration and management.
Details of Directors’ emoluments, share option schemes and pension entitlements are given in the Remuneration Report on pages 16
to 19.
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 £64,000(2015: £131,000) in relation to equity-settled share-based payment transactions.
The number and weighted average exercise prices of share options
Number of options outstanding at beginning of period
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
2016
DSP
2015
DSP
9,900,000
4,500,000
1,000,000
5,400,000
(2,000,000)
(2,750,000)
—
—
6,150,000
9,900,000
1,750,000
—
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.
On 6 August 2015 Mr S Fiamma was awarded 500,000 options with an exercise price of 18p per share. The options will vest after 3
years.
During the current and prior period, the Group has not granted equity as consideration for goods or services received.
70
Notes relating to the company financial statements
2. EMPLOYEE SHARE OPTION SCHEMES (CONTINUED)
THE 600 GROUP PLC 2008 PERFORMANCE SHARE PLAN
The fair values 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 the period (2015: no dividend paid).
2015
Grant
£000
£0.04
£0.18
18p
0%
50%
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
3.0 years
1.36%
4.08%
4.08%
1,000,000
3,400,000
1,750,000
71
Notes relating to the company financial statements
4. SPECIAL ITEMS
In order for users of the financial statements to better understand the underlying performance of the Company the Board have
separately disclosed transactions which by virtue of their size or incidence, are considered to be one off in nature.
Special items include exceptional costs relating to reorganisation, redundancy and restructuring, the charge for share based payments
and impairment of investments in fellow subsidiary undertakings.
Items included in operating profit:
Impairment of investments in listed investments
Redundancy and reorganisation
Share option costs
Items included in financial expense:
Amortisation of loan note expenses
5. TANGIBLE FIXED ASSETS
CCost or valuation
At 29 March 2015
Transfer to assets classified as held for resale
At 2 April 2016
At professional valuation
At cost
Depreciation
At 29 March 2015
Charge for period
2016
£000
29
425
64
518
150
150
2015
£000
—
386
131
517
135
135
Long Lease
£000
Total
£000
2,584
(2,584)
2,584
(2,584)
—
—
—
—
84
51
—
—
—
—
84
51
Transfer to assets classified as held for resale
(135)
(135)
At 2April 2016
Net book value
At 2April 2016
At 28 March 2015
—
—
—
—
2,500
2,500
The Letchworth Garden City leasehold property was being actively marketed at the year-end and as result the written-down value of
this property was transferred to assets classified as held for resale.
On 11 July 2016 the sale of the Letchworth property was completed for net proceeds of £2.0m.
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.
Various UK properties are charged as security for borrowing facilities.
72
Notes relating to the company financial statements
6. INVESTMENTS
Cost:
At 29 March 2015
Additions in the period
Disposals in the period
At 2 April 2016
Provisions
At 29 March 2015
Impairment in the period
At 28 March 2015
Net book values
At 2 April 2016
At 28 March 2015
Shares
In Listed
Shares
In Group
Investments
Undertakings
£000
£000
Total
£000
1,147
40,413
41,560
—
—
—
—
—
—
1,147
40,413
41,560
622
29
651
496
525
31,710
32,332
—
29
31,710
32,361
8,703
8,703
9,199
9,228
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 8%. 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 in prior year related to the liquidation of Coborn Pension Trustees Limited
during the year.
During the year 600 Group Inc acquired the remaining 20% of the shares of TYKMA Inc following the acquisition of 80% of the s hares
in the prior year. Further details can be found in note 32 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 £0.50m at 2 April 2016 (2015 - £0.53m). The £0.03m (2015 - £0.62m)
write down was taken to the Assets held for sale reserve.
73
Notes relating to the company financial statements
6. INVESTMENTS (CONTINUED)
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*; Electrox Laser Limited; Pratt Burnerd International Limited; Electrox Limited; The
Colchester Lathe Company Limited; Crawford Collets Limited; 600 Machine Tools Limited; 600 Controls Limited; Pratt Gamet Limited;
Gamet Bearings Limited; T S Harrison & Sons Limited; The Richmond Machine Tool Company Limited; 600 Lathes Limited; 600 SPV1
Limited*; 600 SPV2 Limited*; Coborn Insurance Company Limited and The 600 Group Pension Trustees Limited*.
US:
600 Group Inc
Clausing Industrial, Inc
TYKMA Inc
REST OF THE WORLD:
600 Machinery Australia (Pty) – (Australia)
600 Group Equipment Limited - (Canada)
All undertakings marked * are 100% owned directly by the Parent Company. The others are 100% owned through intermediate holding
companies. All undertakings above are included in the consolidated accounts.
7. TRADE AND OTHER RECEIVABLES
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.
8. ASSETS CLASSIFIED AS HELD FOR RESALE
Transferred from property plant and equipment - cost
Transferred from property plant and equipment - depreciation
Impairment
2016
£000
2015
£000
29,946
22,221
749
77
—
809
117
—
30,772
23,147
2016
£000
2,556
(107)
(450)
1,999
2015
£000
—
—
The above leasehold property was written down to its net realisable value at the year-end with the £0.4m reduction in its carrying value
taken to the revaluation reserve. The sale was subsequently completed on 11 July 2016.
74
Notes relating to the company financial statements
9. TRADE AND OTHER PAYABLES
Current liabilities:
Bank overdraft
Bank loans
Trade payables
Amounts owed to subsidiary undertakings1
Corporation tax
Other creditors
Accruals and deferred income
Non-current liabilities:
Shareholder loan
Bank loans
Deferred taxation
2016
£000
—
615
189
316
—
137
270
2015
£000
208
769
511
1,331
101
292
478
1,527
3,690
2016
£000
7,699
1,612
176
9,487
2015
£000
6,783
927
176
7,886
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.
The £8.5m of Loan Notes in place at the year-end were issued in three tranches in February, March and August 2015 with 43.95m
convertible 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. The loan has both debt and equity components and £139,000 is shown in equity reserve and the
balance after deduction of associated costs of £662,000, is shown in non current borrowings. Costs are amortised to the income
statement over the term of the loan.
A Term Loan of £927,000 included within Bank loans was scheduled to be repaid on a quarterly basis with payments of £153,846 on 30
June 2016 through to 30 November 2017. A further Term Loan of £612,000, also included within Bank loans, was scheduled to be
repaid on a quarterly basis with payments of £18,000 on 30 June 2016 through to 30 June 2019 and a final payment of £378,000 on 31
May 2019. £1,300,000 included within non–current borrowings related to a RCF facility with a termination date of 31 May
2017.Following the disposal of the Letchworth property in July 2016 these borrowings with Santander were reduced by the net
proceeds of £2m and on the change of bank to HSBC in August 2016 the balance of all these facilities were repaid and replaced by
facilities from HSBC.
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.
75
Notes relating to the company financial statements
10. 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
89,607,957 ordinary shares of 1p each on issue at start of the period (2015: 84,491,886 ordinary shares )
2,750,000 ordinary shares of 1p each issued to N Rogers (2015 – 190,450 ordinary shares of 1p each
issued to N Rogers and N Carrick)
12,000,000 ordinary shares of 1p each issued in acquisition of remaining 20% of Tykma Inc
(2015 – 4,925,621 ordinary shares of 1p each issued in ProPhotonix Limited share acquisition
2016
£000
6,264
—
6,264
896
28
120
104,357,957 ordinary shares of 1p each on issue at end of period (2015: 89,607,957 ordinary shares of 1p)
1,044
2015
£000
6,264
—
6,264
845
2
49
896
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 (2015 – nil)
Total Allotted, called-up and fully paid at the end of period
—
—
—
1,044
13,736
(13,736
—
896
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 2,750,000 ordinary shares of 1p
each were issued to N Rogers in July 2015 pursuant to the exercise of share options. This resulted in share capital increasing by
£27,500 with a corresponding share premium increase of £247,500. In addition, the Company issued 12,000,000 ordinary shares of 1p
each as consideration for the purchase of the remaining 20% of shares in TYKMA Inc.
During the prior 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 addition, 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 the deferred shares of 24p each were cancelled by the company without compensation following approval by the
shareholders at the AGM on 17 September 2014.
On 28 August 2015 the Company raised an additional £0.806m through the issue of loan notes. In the prior year on 16 February 2015
and 18 March 2015 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 14 February 2020 to subscribe for 43.95m 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 the prior year 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 allowed 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 prior year-end 2.4m warrants remained and
these all expired on 27 August 2015 (2015:2.4m warrants remained outstanding).
76
Notes relating to the company financial statements
11. RECONCILIATION OF NET CASH FLOW TO NET DEBT
Increase/(decrease) in cash and cash equivalents
Increase in net debt from cash flows
Net debt at beginning of period
Shareholder loan deferred costs
Net debt at end of period
12. ANALYSIS OF NET DEBT
Cash at bank and in hand
Debt due within one year
Debt due after one year
Shareholder loan due after one year
Loan notes due after one year
Total
2016
£000
460
(1,337)
(877)
(8,687)
(110)
(9,674)
At
29 March
Exchange
2015
£000
(208)
(769)
(927)
(6,783)
—
(8,687)
movement
£000
—
—
—
—
—
—
Other
£000
—
—
—
(110)
Cash flows
£000
460
154
(685)
6,893
—
(7,699)
(110)
(877)
2015
£000
(364)
(3,766)
(4,130)
(5,258)
701
(8,687)
At
2 April
2016
£000
252
(615)
(1,612)
—
(7,699)
(9,674)
13. FINANCIAL INSTRUMENTS
OVERVIEW
The Group’s exposure to the risks from its use of financial instruments is detailed in note 26 of the Group accounts.
CREDIT RISK
Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual
obligations. As such, the Company has a minimal number of external customers and as such its credit risk is minimal.
The carrying value of financial assets represents the maximum credit exposure. The maximum exposure at the reporting date was:
Cash and cash equivalents
2016
£000
252
252
2015
£000
—
—
77
Notes relating to the company financial statements
13. FINANCIAL INSTRUMENTS (CONTINUED)
LIQUIDITY RISK
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. Liquidity risk is managed on a
Group-wide basis and further details can be found in note 26 of the Group accounts.
The following are the contractual maturities of financial liabilities:
Bank loan
Loan notes
Interest bearing financial liabilities
Trade and other payables
Financial liabilities
Bank overdrafts
Bank loan
Shareholder loan
Interest bearing financial liabilities
Trade and other payables
Financial liabilities
2016
Carrying
Amount
£000
2,227
7,699
9,926
594
Contractual
Less than
cash flows
£000
2,227
7,699
9,926
594
1 year
£000
615
—
615
594
10,520
10,520
1,209
2015
Carrying
Contractual
Less than
1–2 years
2–5 years
£000
1,612
—
1,612
—
1,612
£000
—
7,699
7,699
—
7,699
Amount
cash flows
£000
208
1,696
6,783
8,687
1,281
9,968
£000
208
1,696
6,783
8,687
1,281
9,968
1 year
£000
208
769
—
977
1,281
2,258
1–2 years
2–5 years
£000
—
615
—
615
—
615
£000
—
312
6,783
7,095
—
7,095
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.
78
Notes relating to the company financial statements
13. FINANCIAL INSTRUMENTS (CONTINUED)
CURRENCY RISK
The Company is exposed to currency risk primarily on its US Dollar loan to a fellow group undertaking. This currency risk is largely
managed on a Group wide basis. Further details can be found in note 26 of the Group accounts.
The Company’s exposure to foreign currency risk may be summarised as follows:
Intra-group receivables
Trade payables
Balance sheet exposure
The following exchange rates applied during the year:
US Dollar
Euro
US Dollar
2016
US Dollars
$000
10,063
—
10,063
2015
US Dollars
$000
4,701
—
4,701
Euro
€000
—
—
—
Euro
€000
—
—
—
2016
Average
rate
1.499
1.360
Year end
spot rate
1.419
1.251
2015
Average
rate
1.609
1.282
Year end
spot rate
1.488
1.366
Change if
appreciated/
Depreciated
Net assets
by 25%
in foreign
against local
currency
Currency
7,092
1,773
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.
79
Notes relating to the company financial statements
13. FINANCIAL INSTRUMENTS (CONTINUED)
FINANCIAL INSTRUMENTS
The Company’s financial instruments include bank loans, overdrafts and cash. These financial instruments are used for the purpose of
funding the Company’s operations.
In addition, the Company 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 Company 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 2 April 2016 was a liability of £nil (2015: liability of £nil) and the movement
has been recognised within cost of sales.
FINANCIAL ASSETS
The Company’s financial assets comprise cash,trade and intra-group receivables. The profile of the financial assets at 2 April 2016
and 28 March 2015 was:
2016
Financial
assets
2015
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
£000
252
7,092
7,344
—
—
—
22,854
23,106
—
7,092
22,854
30,198
assets
assets
is earned
£000
£000
Total
£000
There is no interest received on Sterling floating rate financial assets.
The US Dollar floating rate financial assets relate to the loan to 600 Group Inc.
assets
£000
—
3,159
3,159
assets
is earned
£000
£000
Total
£000
—
—
—
19,062
19,062
—
3,159
19,062
22,221
80
Notes relating to the company financial statements
13. FINANCIAL INSTRUMENTS (CONTINUED)
FINANCIAL LIABILITIES
Financial liabilities comprise short-term loans, overdrafts, trade payables, obligations under finance leases, and other creditors. The
profile of the Company’s financial liabilities at 2 April 2016 and 28 March 2015was:
2016
Floating rate
Fixed rate
Financial
liabilities
on which
2015
Financial
liabilities
Floating rate
Fixed rate
on which
financial
Financial
no interest
financial
financial
no interest
liabilities
Liabilities
£000
2,227
2,227
£000
7,699
7,699
is paid
£000
596
596
Total
£000
10,522
10,522
liabilities
liabilities
£000
1,904
1,904
£000
6,783
6,783
is paid
£000
1,281
1,281
Total
£000
9,968
9,968
Currency
Sterling
The floating rate financial liabilities comprise bank borrowings and overdrafts that bear interest rates based on local currency base
interest rates.
BORROWING FACILITIES
At 2 April 2016 and 28 March 2015 the Company had undrawn committed borrowing facilities as follows:
UK
FAIR VALUES OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES
Trade and other receivables
Cash and cash equivalents
Bank overdrafts
Bank loan
Other loans
Trade payables
2016
‘000
£252
2015
‘000
£1,406
2016
£000
2015
£000
30,772
23,147
252
—
(2,227)
(7,699)
(1,209)
19,889
—
(208)
(1,696)
(6,783)
(3,690)
10,770
Given the nature of the Group’s financial assets and liabilities, it is the Directors’ opinion that there is no material diff erence between
their reported book values and estimated fair values.
14. CONTINGENT LIABILITIES
Bank guarantees in respect of Group undertakings
15. PENSION
2015
£000
92
2014
£000
92
The Company makes contributions to defined contribution schemes for certain employees. The pension contribution charge for the
Company amounted to £19,000 (2015: £16,000).
81
Notes relating to the company financial statements
16. 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 19.
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 £120,000 to the UK pension scheme during the current period (2015: £nil) and no contributions were overdue at
the period-end. The monthly payments of £10,000 were paid by the Group to the UK pension scheme from April 2015 onwards in
respect of an augmentation to benefits made in 2008/09 of £510,971. No deficit reduction payments are currently required.
82
167892 600 Group R&A (Cover)_167892 600 Group R&A (Cover) 31/08/2016 15:07 Page 1
The 600 Group PLC
Union Street
Heckmondwike
West Yorkshire
WF16 0HL
T: +44 (0)1924 415000
W: www.600group.com
ANNUAL REPORT & ACCOUNTS 2016
The 600 Group PLC