Annual Report
& Accounts 2019
A diversified engineering group
with a world class reputation in
the manufacture and distribution
of machine tools, precision
engineered components and
industrial laser systems.
The number Contents
Chairman’s statement
Strategic report
Corporate governance
Audit committee report
Report of the directors
Statement of directors’ responsibilities
Remuneration report
Independent auditor’s report to the members of The 600 Group Plc
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 statement of financial position
Company statement of changes in equity
Company accounting policies
Notes relating to the company financial statements
Company information
1
2
9
12
13
15
16
19
23
24
25
26
27
28
37
71
72
73
75
80
Paul Dupee
Executive Chairman
Over the year we have seen a number of major developments, both operationally and financially, that will have a significant impact on the Group now and in the future as we pursue our growth strategy. Chairman’s statement
Overview
This has been a transformational year for the Group. Over the year we have seen a number of major developments, both operationally
and financially, that will have a significant impact on the Group now and in the future as we pursue our growth strategy.
The shackles of the Group’s UK final salary pension scheme have been thrown off, relieving the Group of a disproportionate liability
and significantly de-risking the Group’s balance sheet with the cash refund received post-period end on the wind up of the scheme
of $5.2m (net of tax) providing significantly greater financial flexibility.
The Group’s results for the 2019 fiscal year have improved in line with the Board’s expectations with continued good progress in
improving both the Group’s profitability and increasing revenues. These improved results reflect our ongoing focus on driving
operational efficiencies across the Group whilst also investing in new product development, improving our customer offering and
enhancing our sales and distribution resource.
In May 2019, the Group was pleased to announce the launch of its new European Technology Centre, marking a step forward for the
Group and demonstrating the importance of product innovation to the Group's strategy as it seeks to underpin organic growth through
a strong focus on product development, including launching new products that add to the higher end capabilities of the Group's
product range.
The enhanced financial position has provided the Group the flexibility to supplement organic growth with value-enhancing bolt-on
acquisition opportunities. The Group was able to expand its operations through successfully acquiring Control Micro Systems (CMS)
in June 2019. The acquisition of CMS is highly complementary to the Group’s existing laser business, enhancing its customer offering
by providing ever more sophisticated, value-added and custom solutions to customer requirements as the Group seeks to capture
world-wide growth in the use of industrial lasers. CMS will likewise benefit from the Group’s established sales platform and marketing
capability.
Divisional overview
The rationalisation of the UK operations of the Machine Tool division has significantly improved operating profitability. The final phase
of the outsourcing of manufacturing is in the process of being concluded with the sale of the Gamet bearings business, which has
been treated as a discontinued operation in these financial statements. This rationalisation has reduced operational risk and capital
expenditure requirements. The move of the UK operation to the new European Technology Centre and re-branding of the business
as ‘Colchester Machine Tool Solutions’ is already raising the profile of the business and helping to drive growth in the UK market and
overseas.
In the Industrial Laser division, the UK and European new direct sales function and the spares and service operations have been
consolidated into the new machine tool facilities. The launch of a new entry level product during the year has helped unit volumes
increase and provided a competitive product to combat this ever increasingly price sensitive sector of the market. It also provides a
product which can be sold through selective machine tool distributors worldwide, further driving operational benefits.
Dividend
As a result of the continued good operational performance, the current commercial outlook and the successful completion of the
pension scheme wind up, the Board has determined to continue payment of a dividend and are recommending a pay-out of 0.5p per
share payable on 30 September 2019, to shareholders on the register at 30 August 2019.
People
Our people are central in continuing the improvement of our business. During the year we continued to invest in new people as well
as strengthening our senior management team. On behalf of the Board, I would like to thank all our employees for their ongoing
support, commitment and dedication to The 600 Group. I look forward to working with them again in the coming year and welcome
our new colleagues from Control Micro Systems to the Group.
Outlook
Despite certain macro-economic and political uncertainties impacting customer sentiment, enquiry and quotation activity remains
stable with revenue visibility underpinned by an improved orderbook.
We continue our strategy to grow the Group into a global industrials business. We are constantly seeking to leverage our industry-
recognised brands and expand our worldwide distribution network. The introduction of new and innovative products to widen the
customer base continues to be a clear focus for both our divisional management teams. The Board continues to believe the strategy
of brand promotion, investment in new, higher end product capabilities, diversification into new markets and selective acquisitions
will help the business move up the value chain and lead to continued market share growth in the future.
Paul Dupee
Executive Chairman
10 July 2019
1
Strategic report
Our businesses
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 100 countries worldwide.
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 large 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 a large number of established distributors in many countries
and territories but with no major concentrations. In the year ended 30 March 2019 the top 20 customers, of which 16 were distributors,
contributed 27% of revenues.
Revenues
Revenues are generated across many diverse geographical territories:
Percentage of worldwide revenues
(by destination)
United States of America
United Kingdom
Europe (excluding UK)
Rest of the World
Total
2019
%
2018
%
65
15
10
10
100
67
15
10
8
100
Macroeconomic and industry trends
Machine tools and precision engineered components
The worldwide machine tool industry was estimated by Oxford Economics at nearly $78.5bn in annual sales in its Spring 2019 report.
The market continues to be driven 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.
The global market is dominated by China with consumption of $30bn but this is largely served domestically with China also being the
largest producer. The USA is the second largest consumer of machine tools at $8.6bn followed by Germany at $6.7bn.
The report indicated growth of nearly 7% globally in the calendar year to December 2018 but is forecasting a lower 2.3% growth rate
in 2019. Within our main markets the expectations for 2019 were for the USA to be close to 4% growth with Europe at 1.4%.
2
Strategic report
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. One of the main drivers of this industry has been legislation and the continual increase in the requirement
for traceability of products in all industries from aerospace and transport to medical and pharmaceutical.
Industry spending for the entire global industrial laser market continues to increase and reached a new estimated high of $5bn in
calendar year 2018. Growth in the overall market is estimated to rise by mid-single-digit growth in 2019 and is dominated by China
which is the largest producer and consumer of industrial lasers. The laser marking and micro-materials subset of the market (in which
the Group competes) is smaller than the macro-materials processing subset and has seen low single digit growth in recent years.
Growth is underpinned by enhanced performance in the speed, cost and quality of the systems being implemented compared to
other techniques as well as by legislative changes driving a requirement for greater traceability. The industry subset occupied by the
Group has however seen a proliferation of vendors and selling price pressure at the lower commodity end of the market and whilst
unit volumes have continued to increase, revenue has been held back.
Our main markets
The main markets we operate in are the USA, Europe and Australia. All these markets have experienced some degree of disruption
with the ongoing Brexit issues in the UK, the concern in the USA over tariffs and a trade war with China and the general election in
Australia. Despite these issues, quotation activity has remained good, but the various headwinds have had an effect on the time it is
taking customers to commit to an actual order. Order books have improved after some weakness at the start of 2019 and are currently
6.5% ahead of the prior year.
Whilst the Brexit issues will continue for some time, The 600 Group has a relatively low exposure to these risks given only 10% of
Group sales were to EU countries excluding the UK. In addition, given most of the Group’s income is in US Dollars this provides a
natural currency hedge against the majority of our purchases which are also in US Dollars.
In addition, over 10% of our total revenues are derived from the supply of spare parts and services and this revenue stream is not
dependent on achieving new sales but on servicing our existing installed base of machines.
Activity in the 2018/19 financial year
Machine tools and precision engineered components
This division operates from sites in the UK, USA, and Australia and provides solutions for metal processing through the design and
development of machine tools sold under the brand names Colchester, Harrison and Clausing and the design and supply of precision
engineering components under the brand names Pratt Burnerd and Gamet. There are also spares, accessories and service
operations which support the significant number of machines sold over the Group’s long history of supplying quality equipment. Sales
are made worldwide, with a mix of direct sales and distribution in North America, Europe, and Australia and a network of distributors
in all other key end-user markets.
The machine tools division produced excellent operating profit growth of 147% (before adjusting items) on increased revenues of
3.3%. The principal growth came from the UK operation which returned to profitable operating margins of 7.4% reflecting the benefits
of the restructuring undertaken in this business over the last two years.
The re-launch of the UK business as “Colchester Machine Tool Solutions” and the move to a new site in February 2019 gave fresh
impetus to the revised management team, led by Terry Allison who became the Group Chief Operating Officer in November 2018.
The business has developed new distributor relationships and expanded its direct sales force in the UK.
The new facility near Halifax in West Yorkshire integrates a modern, open plan office environment, enhanced manufacturing and
warehousing space as well as serving as the Group’s new European Technology Centre with a dedicated year-round product
showroom, demonstration and customer training capability to showcase the business’ increasingly innovative product range.
The new integrated facility will provide additional operational flexibility, benefitting from a more integrated logistics operation which
should provide efficiency benefits in both production and warehousing.
The move of premises was part of the restructuring of the UK operation which has seen a de-risking of operations and reduction in
the requirement for ongoing capital expenditure by the outsourcing of further manufacturing. This process is coming to a conclusion
with the sale of the Gamet Bearings operation based in Colchester. The revenue and trading results of this operation have been
excluded from the ongoing trading and disclosed as a discontinued operation in the Consolidated Income Statement and the assets
held for sale separately disclosed at their expected fair value in the Statement of Financial Position at 30 March 2019.
The US machine tool business continued to make progress in improving operating margins despite revenues remaining flat in a
difficult market where concerns over tariffs and a trade war with China slowed down customers’ decision making. The range of USA
produced machines continues to expand and sales to Mexico and Canada continue to grow.
The Australian machine tools business continued its progress with a further 9% growth in revenue and improvement in operating
profits. The business will seek to expand in Australia and the wider South East Asia, where the Group’s machine tool brands remain
well known with a good installed base and focusing on the ‘Colchester Machine Tool Solutions’ heritage. The business was
strengthened in November 2018 when Zelko Galic an experienced engineer and manager joined as the new managing director of
the operation.
3
Strategic report
The financial results of these activities were as follows:
2019
$ 000
2018
Restated*
$ 000
Revenues
44,575
43,152
Operating profit
Operating margin
3,610
8.1%
1,459
3.4%
*Restated for the results of Gamet Bearings which is shown as a discontinued operation in both financial years and for the effects of adoption of IFRS
15 and IFRS 9. See note 35.
Industrial laser systems
The industrial laser systems business has seen increased competition in the lower end commodity products and successfully
introduced a competitive product in September 2018 which has seen good volume sales. This low-cost machine is now starting to be
distributed through our machine tool distribution channels as well as the traditional laser distributors. The business has also expanded
its expertise into the higher end market where customer requirements for more specialised solutions can be satisfied as a result of
the business’s proprietary software and technical capabilities. Whilst the volume of units sold has increased year on year the move
of part of the business to the lower priced units has kept overall revenues flat but the business has been able to continue to improve
operating margins as a result of the restructuring of the UK operation and by maintaining overall gross margins.
The UK spares and service operation has been integrated into the new European Technology Centre machine tools operation which
now supports both the UK and Europe and a direct sales operation for the UK has been established based in this facility which
provides a permanent showroom to demonstrate the full range of laser machines.
The joint TYKMA ELECTROX brand provides laser solutions which includes marking, engraving and micro-material processing.
Customers are able to choose from the combined product portfolio the solution to an expanded number of applications. These
industrial laser systems are sold to an ever-increasing market diversification in the manufacturing industry among both small and
large multi-national corporate customers.
The increased requirement for traceability of all production items underpins the growth of this industry and forecasters continue to
predict growth in this activity as these products replace traditional stamping, ink and dot peen systems. Continued support from
legislation mandating increased traceability continues to be a positive driver for individual component identification.
Results for the financial year were as follows:
2019
$ 000
2018
Restated*
$ 000
Revenues
20,592
20,792
Operating profit
Operating margin
2,563
12.4%
2,100
10.1%
Group Results
Revenue from continuing operations increased by 1.9% to $65.2m (2018: $63.9m) and Group profit before tax and adjusting items
was $4.1m (2018: $0.6m) and profit before tax after adjusting items was $4.3m (2018: $3.3m).
Changes in accounting standards
The Group has adopted two new accounting standards in the year, IFRS 15, Revenue from Contracts with Customers, which
establishes a principles-based approach to revenue recognition and measurement depending on when performance obligations are
satisfied, and IFRS 9, Financial Instruments. Both of these have required additional disclosures and some small adjustments to the
opening statement of financial position. Details of these can be found in note 35.
4
Strategic report
Adjusting items
The directors have highlighted transactions which are material and unrelated to the normal trading activity of the Group.
In the opinion of the directors the disclosure of these entries should be reported separately for a better understanding of the underlying
trading performance of the Group. These underlying figures are used by the Board to monitor business performance, form the basis
of bonus incentives and are used for the purposes of the bank covenants.
These non-GAAP measures are explained in note 33 alternative performance measures and set out in note 3. All adjusting items are
taken into account in the GAAP figures in the Income Statement.
The buy-out of the Group pension scheme was completed in April 2019 but during the year ended 30 March 2019 the trustees
undertook a number of exercises to reduce the liabilities of the scheme which had an actuarial cost of $1.28m. Given these had a
beneficial effect on the ultimate buy out cost of the scheme they were supported by the Group. This amount is shown in adjusting
items.
As a result of the outsourcing of manufacturing in the UK, the existing premises were vacated, and a sublet is in the process of
negotiation. An onerous lease provision of $0.4m has been provided as a result of this and shown in adjusting items.
A credit of $1.26m (2018: credit of $1.74m) is recorded in financial income in respect of the final salary pension scheme. No cash
was paid to or received from the scheme in respect of this transaction which arises as a pension accounting entry under the required
standard due to the surplus in the scheme recorded in the balance sheet.
The adjustment to the carrying value of the amortised cost of the loan notes in the year is shown as a credit of $0.82m. This arose
as a result of the extension of these instruments by a further two years. The prior year’s amortisation has been included as an
adjusting item.
An additional credit of $1.26m was recorded in the prior year as a result of the sale of the Group’s holding in ProPhotonix Ltd at the
end of August 2017. This generated $1.97m of cash which was used to pay down UK debt.
As a result of the changes in the USA to the rates of taxation, a significant charge of $0.6m was made to adjust the deferred taxation
assets.
An amount of $0.96m has been recorded to reduce the value of the Gamet assets available for sale to bring their carrying value into
line with the expected proceeds of sale, less costs to sell.
Taxation
The current year pre-adjusting items profit resulted in a small charge of $0.066m (2018: credit of $0.53m) for taxation. The UK
businesses continue to benefit from substantial previous tax losses and no taxation is payable in the UK. There are substantial
unrecorded deferred tax assets in the UK which are released onto the balance sheet as existing recorded losses are utilised which
will help maintain a lower tax charge. There remains an unrecognised deferred tax asset of over $2m in addition to the recognised
asset of $2m in respect of UK tax losses at the year end. The US businesses are subject to taxation on their profits at the rate of 21%
(2018: composite rate of 31%). The USA businesses benefited from claims for R&D tax allowances in current and previous years
during the year.
Deferred taxation is provided on the UK pension credits at a rate of 35%, being the rate applicable to any refund from a pension
scheme and is included in adjusting items.
Following the changes in the USA to the rates of taxation in the prior year, a significant charge of $0.6m was made to adjust the
deferred taxation assets. This charge was shown in adjusting items.
Net profit and earnings per share
The total continuing profit attributable to equity holders of the parent for the current financial year amounted to $4.2m (2018: $2.6m)
with pre-adjusting items profit of $4m (2018: $1.1m). The total profits including the effects of the Gamet discontinued operation are
$3.1m (2018: $2.9m).
Underlying basic earnings from continuing operations before adjusting items and related taxation were 3.53 cents (equivalent to
2.69p) per share (2018: 1.03 cents, equivalent to 0.79p) and basic earnings per share were 3.75 cents (equivalent to 2.88p) (2018:
2.38 cents, equivalent to 1.83p) see note 9.
Financial position and utilisation of resources
Cash flow
Cash generated from operations before working capital movements was $4.8m (2018: $3.8m).
Working capital on continuing activities was little changed on the prior year with stock, trade receivables and trade payables at similar
levels. Other creditors and accruals reduced as the redundancy and restructuring provisions were defrayed in the current year.
Interest paid was similar to the previous years at $1.2m (2018: $1.2m) with the largest component being interest on the £8.5m ($9.5m)
8% loan notes.
5
Strategic report
Capital expenditure consisted of development work on the upgrading of the industrial laser division proprietary software of $0.9m,
demonstration and showroom equipment for the laser business of $0.5m, and the fit out of the new European Technology Centre in
the UK for $0.5m. Whilst the development expenditure will be similar in the next year to complete the software project, the machine
tool expenditure will not repeat and the sale of the Gamet business and outsourcing of manufacturing has significantly reduced future
capital expenditure requirements for this division.
In the prior year net proceeds of $1.97m from the ProPhotonix sale were received in September 2017.
Dividends of $1.1m were paid during the year (2018: nil).
Net borrowings
Group net debt at 30 March 2019 was reduced on prior year to $14.5m (2018: $15.6m) and comprised net bank and finance lease
indebtedness of $5m (2018: $4.3m) and the amount outstanding on the loan notes of $9.5m (2018: $11.3m). The amount
outstanding on the loan notes has reduced due to the exchange rate effect of re-translation into dollars and the reduction in the
carrying value due to the amortisation being re-stated because of the extension of the term of the notes by two years to February
2022. The loan notes are shown net of un-amortised costs and amounts disclosed in equity reserve which amount to $0.6m in the
current financial year (2018: $0.6m).
Working capital facilities were renewed with both HSBC and Bank of America during the year and the Group maintains a mixture of
term loans and revolving working capital facilities with maturities between 1 and 3 years. Headroom on bank facilities was $8.7m at
the year-end (2018: $8m) and all financial covenants in place were met during the year.
The £8.5m ($9.5m) 8% loan notes maturity were extended to February 2022 at the end of February 2019 and the warrants of equal
value to subscribe for new ordinary shares at 20p were similarly extended to the same date. As a result, the carrying value of the
loan notes were amended to reflect the extended term and the cost involved. A reduction in the carrying value of $0.98m has been
recognized at 30 March 2019.
Gearing amounted to 49% of aggregate net assets (2018: 27%) with the increase being as a result of the reduction of the UK pension
scheme asset.
Going concern
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 has 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 for the UK pension scheme has continued during the year under the requirements of IAS 19 on the basis that the
scheme trustees had secured an insurance policy to match the scheme liabilities but that this was held as an asset and valued along
with the scheme liabilities, in accordance with IAS 19 requirements, until the buy-out of the scheme was complete. The buy-out was
completed in late April 2019 and the remaining surplus in the scheme of $8m repaid to the Group after deduction of 35% tax with the
Group receiving the net $5.2m at the end of May 2019.
The accounting surplus on the UK scheme at 30 March 2019 was $7.5m (2018: $54.3m). The accounting figures are calculated using
prescribed methods and in particular use corporate bond rates to value the scheme liabilities.
The buy-out of the scheme involved securing individual annuity contracts for each member with an insurance company with all future
risks passing to the insurance company. The cost of achieving this is usually higher than either the accounting basis or the schemes
funding basis reflecting the insurer’s capital requirements to meet inherent risks of investment returns and life expectancy over the
lifetime of the members. The scheme actuary estimated a deficit of over £51m ($71m) on this buy-out basis even as late as the
actuarial valuation of 2013.
The buy-out of the scheme has been possible due to improvements in insurers pricing, the trustees’ hedging strategy, good
investment returns and the hard work of the trustees and Group in reducing scheme liabilities and costs whilst providing members
with greater flexibility in the way in which they can take their benefits. The final agreement was secured after a long period of
negotiation and an open market tender process with the market leaders in the industry.
The reduction in the accounting value of the scheme surplus has been reflected, along with the corresponding deferred taxation, in
the Consolidated Statement of Comprehensive Income. It should be noted that the scheme is held on the subsidiary company 600
UK limited balance sheet and as such the transaction will not affect the holding company reserves.
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 17% rate in the accounting entries. 35% tax was deducted from the gross
refund before the trustees paid funds to the Group in May 2019.
The US retiree health scheme and pension fund deficits remained at the same level as the previous year at $1.2m (2018: $1.2m).
The only funding of these benefits during the year was the payment of an insurance premium in respect of the retiree health scheme.
6
Strategic report
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 underlying profit, together with its associated
earnings per share.
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 against budget projections and prior year on a regular basis and this
enables the business to set and communicate its performance targets and monitor its performance against these targets.
The Group’s recent performance on these financial KPI’s is set out as follows:
KPI
Revenue (annual growth rate)
Operating margin (% of
revenue) pre adjusting items
All figures are pre adjusting items
2019
2018
1.9%
12.3%
8.1%
2.8%
These KPI’s are used to assess performance and manage the business and have been discussed in the strategic report and divisional
commentary on pages 2 to 4.
Key business risks
The Board of Directors has identified the main categories of business risk in relation to the implementation of the Group’s strategic
aims and objectives, and has considered reasonable steps to prevent, mitigate or manage these risks.
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. Such factors as
the ongoing Brexit issues and the concerns over a trade war between the USA and China during the financial year are examples of
factors which have resulted in changes in demand. 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. Key business risks are set out in the strategic review.
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 $4 billion. Taiwanese suppliers represent approximately one third of the total cost of sales for the Group. Group
businesses mitigate 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. Additionally, supply
sources in India have been developed as a consequence and an increasing amount of product is now made in the USA as well.
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 believe that they 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”) – Group 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.
7
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 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. Insurance cover is also taken where appropriate.
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. Whilst the Group results are
now reported in US Dollars the functional currency of 600 UK, 600 Inc. and 600 Machine Tools Pty Limited remain in their local
currencies respectively and the result in 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 local
currencies.
Liquidity risk is managed by the Group maintaining undrawn trade finance facilities in addition to a number of longer-term loans and
loan notes in order to provide short term flexibility.
Interest rate risk is managed by maintaining a mixture of cash and borrowings in Sterling, US Dollars and Australian Dollars at floating
rates of interest and issuing loan notes with a fixed interest rate until maturity.
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 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 have
also been put in place.
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 has risen as a result of concerns over trade wars.
Other principal risks and uncertainties
Pension funding risk was a significant risk to the Group, but this has largely been eliminated by the buy-out of the UK final salary
scheme. There remains a small closed pension arrangement in the USA and a requirement to provide health insurance cover to a
limited extent to a number of retired people in the USA. 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
liabilities and insurance premium of the retiree health scheme.
The remaining main risks faced by the Group are to its reputation as a consequence of a significant failure to comply with accepted
standards of ethical and environmental behaviour.
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
10 July 2019
8
Corporate governance
High standards of corporate governance are a key priority for the Board and provide the framework on which it seeks to deliver long
term improvement in shareholder value.
AIM companies have been required to report on corporate governance from 28 September 2018. The Company is small and has
limited resources and therefore has formulated a corporate governance policy around the principles contained in the QCA (Quoted
Companies Alliance) corporate governance code which is appropriate for smaller companies.
The QCA code was revised at the end of April 2018 and the Board has set out on the Company’s website (www.600group.com) and
in this report how it addresses the ten principles of the new code.
The Board
The Board is chaired by the Executive Chairman Paul Dupee who by virtue of being the managing partner of Haddeo Partners LLP
is also a major shareholder.
The other executive Director is Neil Carrick the Group Finance Director who also acts as the Company Secretary.
The senior non-executive Director, Derek Zissman assisted by the two other non-executive Directors, Stephen Rutherford and
Stephen Fiamma provide an adequate counterbalance and challenge to the two executive Directors and ensure no one view
dominates decisions.
Whilst Stephen Rutherford has been on the Board over 10 years, he continues to provide a valuable input into Board discussion with
his engineering and manufacturing background and significant experience in the Far East and remains independent of thought.
The Directors met regularly during the year including visits to each of the USA business facilities which provides an opportunity to
interact with the local management teams on current and future business projects. Nine meetings were held during the year which
were attended by all Directors except for Mr. Rutherford who was absent for one meeting.
The Board is served by an Audit Committee headed by Derek Zissman and consisting of the non-executive Directors. The Audit
Committee met twice during the year. Details of the Committee’s activity during the year is included in the Audit Committee Report
on page 12.
The Remuneration Committee is headed by Stephen Fiamma and consists of the non-executive directors. The Remuneration
Committee met once during the year. A separate remuneration report is included on pages 16-18.
The Board as a whole operates as the Nominations Committee as and when required.
During the year the Board took both legal and actuarial advice in respect of the UK pension scheme during the wind up process.
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. He has been
involved in the management of both public and private companies in the USA and UK over many years and has extensive experience
in corporate transactions.
Neil Carrick
Appointed to the Board as Group Finance Director on 3 October 2011. Previously Group Finance Director and Company Secretary
of Cosalt plc. He has over 29 years’ experience at board level in finance roles in public companies with overseas operations and has
substantial experience in corporate transactions.
Derek Zissman*
Appointed to the Board as a non-executive Director on 2 February 2011 and currently the senior non-executive director. He is a non-
executive director of a number of companies including Amiad Water Solutions Ltd (AIM Listed), Sureserve Group plc (AIM listed) and
HelloFresh SE (listed on the Frankfurt SE). He was a Vice Chairman of KPMG LLP and has considerable experience in both public
and private companies throughout the world and extensive City and private equity experience.
Stephen Fiamma*
Appointed to the Board as a non-executive Director on 13 May 2015. Until 2014 he was a partner in the tax practice of Allen & Overy
LLP and has significant experience of multinational tax planning, particularly involving the USA.
Stephen Rutherford*
A non-executive Director since 1 October 2007. Managing Director of Neofil Limited and Cares UK Limited. He is a Chartered engineer
by background and has managed several multinational engineering and manufacturing companies and has extensive experience in
the Far East, where a substantial proportion of the Group’s suppliers are based.
* Non-executive Director and member of the Audit and Remuneration Committees.
Directors keep their skillset up to date through membership of their respective professional bodies and as a result of interaction with
other bodies with whom they work.
9
Corporate governance
Relations with shareholders
Regular contact is maintained with major shareholders and loan note holders, who also hold warrants to subscribe for shares.
Individual shareholders attending the AGM engage directly with the Board in an open question and answer session before voting on
the various resolutions. The results of proxy votes are announced following the vote on each resolution at the AGM. The Company
updates its website for all RNS (Regulatory News Service) announcements and has commissioned analyst research which is made
available to all shareholders through the website.
Social responsibility
The Board is aware that good relations with the wider group of stakeholders such as employees, suppliers and customers contribute
to the Group’s success. Regular presentations are made to staff to keep them updated and visits are made to major suppliers and
customers to ensure any issues are addressed in a timely manner. Representation on trade bodies and feedback from trade and
training agencies helps identify changing trends or market requirements and allows the Group to plan and adapt for upcoming
changes.
Risk management
The Audit Committee has overall responsibility for the monitoring of internal controls, approving accounting policies and agreeing the
treatment of significant accounting issues. The consideration and documentation of risks and opportunities is undertaken on an
annual basis as part of the budgeting process in which the full Board takes part. These matters are then monitored and adapted as
required throughout the year by the means of regular management meetings and scheduled conference calls between the Executive
Directors and the divisional management teams around the world. The annual insurance renewal provides a further opportunity to
assess risks and provide cover in areas where risk mitigation is not possible, or levels of risk are significant.
The Board reviews monthly financial performance against budgets and forecasts and monitors bank facilities and other treasury
functions with any policy changes approved by the Board.
The Audit Committee receives feedback from the external auditors on areas of risk and accounting procedures which are used in
adapting internal control processes as required.
The QCA Code
The Company has adopted the QCA Code in compliance with AIM Rule 26 and the ten principles of the Code and how the Company
addresses these are set out below:
1. Establish a strategy and business model which promote long-term value for shareholders.
The Group strategy is to leverage our industry recognised brands through an increased worldwide distribution network and introduce
new products to widen the customer base.
The Group also intends to further develop its business interests by a programme of carefully targeted strategic acquisitions.
2. Seek to understand and meet shareholder needs and expectations.
Regular contact is maintained with major shareholders and loan note holders, who also hold warrants to subscribe for shares.
Individual shareholders attending the AGM engage directly with the Board in an open question and answer session before voting on
the various resolutions. The Company updates its website for all RNS announcements and has commissioned analyst research which
is made available to all shareholders through the website.
3. Take into account wider stakeholder and social responsibilities and their implications for long-term success.
The Board is aware that good relations with the wider group of stakeholders such as employees, suppliers and customers contribute
to the Group’s success. Regular presentations are made to staff to keep them updated and visits are made to major suppliers and
customers to ensure any issues are addressed in a timely manner. Representation on trade bodies and feedback from trade and
training agencies helps identify changing trends or market requirements and allows the Group to plan and adapt for upcoming
changes.
4. Embed effective risk management, considering both opportunities and threats, throughout the organisation.
The consideration and documentation of risks and opportunities is undertaken on an annual basis as part of the budgeting process
which the full Board takes part in. These are then monitored and adapted as required throughout the year through regular
management meetings and scheduled conference calls between the Executive Directors and the divisional management teams
around the world. The annual insurance renewal provides a further opportunity to assess risks and provide cover in areas where risk
mitigation is not possible, or risks are significant.
5. Maintain the Board as a well-functioning, balanced team led by the chair.
The Board is chaired by the Executive Chairman Paul Dupee who, by virtue of being the managing partner of Haddeo Partners LLP,
is also a major shareholder. The senior non-executive Director, Derek Zissman assisted by the two other non-executive Directors
Stephen Rutherford and Stephen Fiamma provide an adequate counterbalance and challenge to the two executive Directors and
ensure no one view dominates decisions.
Whilst Stephen Rutherford has been on the Board over 9 years, he continues to provide a valuable input into Board discussion with
his engineering and manufacturing background and significant experience in the Far East and remains independent of thought.
The Directors meet regularly during the year including visits to each of the USA business facilities which provides an opportunity to
interact with the local management teams on current and future business projects.
The Board is served by an Audit Committee headed by Derek Zissman and consisting of the non-executive Directors.
The Remuneration Committee is headed by Stephen Fiamma and consists of the non-executive Directors.
The Board as a whole operates as the Nominations committee as and when required.
10
Corporate governance
6. Ensure that between them the directors have the necessary up-to-date experience, skills and capabilities
Paul Dupee has been involved in the management of both public and private companies in the USA and UK over many years and
has extensive experience in corporate transactions.
Neil Carrick has over 29 years’ experience at board level in finance roles in public companies with overseas operations and has
substantial experience in corporate transactions.
Derek Zissman was a Vice Chairman of KPMG LLP and has considerable experience in both public and private companies throughout
the world and extensive City and private equity experience.
Stephen Rutherford is an engineer by background and has managed several multinational engineering and manufacturing companies
and has extensive experience in the Far East, where a substantial proportion of the Group’s suppliers are based.
Stephen Fiamma was a partner in the tax practice of Allen and Overy LLP and has significant experience of multinational tax planning,
particularly the USA.
Directors keep their skillset up to date through membership of their respective professional bodies and as a result of interaction with
other bodies with whom they work.
7. Evaluate board performance based on clear and relevant objectives, seeking continuous improvement
The Board undertakes periodic reviews of its performance and effectiveness and that of individual Directors and of the wider senior
management. Succession planning for both the Board and senior management is part of this review process.
8. Promote a corporate culture that is based on ethical values and behaviours
The corporate culture promoted by the Board underlies the Group’s products which have been seen by customers over decades as
reliable well-made machines. The Board promotes the Group’s corporate culture and receives feedback from employees on regular
visits to operating sites and interaction with local staff during this time.
9. Maintain governance structures and processes that are fit for purpose and support good decision-making by the Board
The Board has put in place corporate governance policies appropriate to the size and complexity of the Group. The responsibility for
corporate governance rests with the Board as a whole and policies are regularly reviewed and adapted as necessary to changing
circumstances and feedback from both internal and external sources.
10. Communicate how the company is governed and is performing by maintaining a dialogue with shareholders and other
relevant stakeholders
The Board communicates the governance policy in place through inclusion in the Annual Report and through the Group website
(www.600group.com). Regular contact is maintained with major shareholders and loan note holders, who also hold warrants to
subscribe for shares. Individual shareholders attending the AGM engage directly with the Board in an open question and answer
session before voting on the various resolutions. The Company updates its website for all RNS announcements and has
commissioned analyst research which is made available to all shareholders through the website.
11
Audit Committee report
During the year the Audit Committee met twice and there were also meetings between the Audit Committee Chair, the Group Finance
Director and the external auditor.
The Committee met the external auditor independent of executive management to ensure that a full and frank discussion of all
relevant matters took place.
The Audit Committee discussed the scope and key audit matters before the commencement of the current audit.
Financial Reporting
The Committee has reviewed with both management and the external auditor the more significant areas of judgement and the
appropriateness and application of the Group’s accounting policies. In particular, emphasis was placed on the two new accounting
standards of IFRS 15 (Revenue from Contracts with Customers) and IFRS 9 (Financial Instruments) adopted for the first time during
the year.
The adoption of IFRS 15 has required changes in the revenue recognition policies applied by the Group and the Committee has
reviewed the appropriateness of these with both management and the external auditor.
The Committee is also reviewing progress to the adoption of IFRS 16 in the next financial year which will require all leases to be
recognised on the Group’s balance sheet.
The Committee reports to the Board on whether the accounts are a fair and balanced view of the current year’s activity.
Risk management and internal control
The Audit Committee has overall responsibility for the monitoring of internal controls, approving accounting policies and agreeing the
treatment of significant accounting issues.
The consideration and documentation of risks and opportunities is undertaken on an annual basis as part of the budgeting process
which the full Board take part in. These matters are then monitored and adapted as required throughout the year by the means of
regular management meetings and scheduled conference calls between the Executive Directors and the divisional management
teams around the world. The annual insurance renewal provides a further opportunity to assess risks and provide cover in areas
where risk mitigation is not possible, or levels of risk are significant.
The Board reviews monthly financial performance against budgets and forecasts and monitors bank facilities and other treasury
functions with any policy changes approved by the Board.
The Audit Committee receives feedback from the external auditors on areas of risk and accounting procedures which are used in
adapting internal control processes as required.
The Committee reviews any proposed due diligence of acquisition targets and the selection of the professional firm carrying out the
work.
Audit Independence
The Committee is responsible for making recommendation to the Board on the appointment of the external auditor and for non-audit
services such as taxation and acquisition due diligence.
The Chair of the Committee met with the external audit partner to discuss independence before the commencement of the current
years audit.
The Audit Committee Report has been approved by the Board and signed on its behalf by:
D Zissman
Chairman of the Audit Committee
10 July 2019
12
Directors report
The Directors present their report to the members, together with the audited financial statements for the 52 week period ended 30
March 2019, which should be read in conjunction with the Chairman’s Statement on the affairs of the Group (page 1), and the Strategic
Report (pages 2 to 8). The Consolidated Financial Statements incorporate financial statements, prepared to the Saturday nearest to
the Group’s accounting reference date of 31 March, of The 600 Group Plc (the Company) and all subsidiary undertakings (collectively,
the Group). The results for 2019 are for the 52-week period ended 30 March 2019. The results for 2018 are for the 52-week period
ended 31 March 2018.
Activities of the Group
The Group is principally engaged in the design and distribution of machine tools and precision engineered components and the
design, manufacture and distribution of 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 24.
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 2 to 8. This analysis includes comments on the position of the Group at the end of the financial
period, consideration of the principal risks and uncertainties facing the business and the key performance indicators which are
monitored in relation to the achievement of the strategy of the business.
Research and development
Group policy is to design and develop products that will enable it to retain and improve its market position.
Interests in share capital
At 28 June 2019, 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 A Perloff and the Maland Pension Fund Trustees
Mr T Miller
Mr D Grimes
Miton UK MicroCap Trust plc
Percentage
of issued
ordinary
share capital
20.00
8.51
3.83
3.70
3.27
Number
23,492,535
10,000,000
4,500,000
4,350,000
3,846,154
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.
Haddeo Partners LLP (of which Paul Dupee is Managing Partner), in addition to their shareholding above, currently hold 5,050,000
warrants to subscribe for shares at 20p.
Purchase of own shares
Authority granting the Company the option to purchase 10,435,795 of its own ordinary shares in accordance with the Companies Act
2006 was given by shareholders at the Annual General Meeting of the Company on 20 September 2018. This authority remains valid
until the conclusion of the next Annual General Meeting.
13
Directors report
Directors
Details of the current Directors of the Company are shown on page 9.
The beneficial interests of the directors in the share capital of the Company at 30 March 2019 are shown in the Remuneration Report
on pages 16 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.
Dividend
The directors are recommending the payment of a dividend of 0.5p (0.7cents) per ordinary share (2018: final 0.5p (0.7cents)) payable
on 30 September 2019 to shareholders on the register at 31 August 2019
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 Group’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.
Post balance sheet events
As set out in note 34, other than the pension scheme refund and the acquisition of Control Micro Systems Inc. noted in the Strategic
Report on pages 6 and 7 and in note 34, there are no other post balance sheet events to report. The Gamet Bearings business is
held for sale at 30 March 2019 and has not been sold at the date of these financial statements.
On behalf of the Board
Neil Carrick
Finance Director
10 July 2019
14
Statement of directors’ responsibilities
The Directors are responsible for preparing the annual report and the financial statements in accordance with applicable law
and regulations.
Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors
have elected to prepare the Group financial statements in accordance with International Financial Reporting Standards
(IFRSs) as adopted by the European Union and the Company financial statements in accordance with United Kingdom
Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). Under company law
the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the
state of affairs of the group and company and of the profit or loss of the group and company for that period. The Directors
are also required to prepare financial statements in accordance with the rules of the London Stock Exchange for companies
trading securities on the Alternative Investment Market.
In preparing these financial statements, the Directors are required to:
•
select suitable accounting policies and then apply them consistently;
• make judgements and accounting estimates that are reasonable and prudent;
•
•
state whether they have been prepared in accordance with IFRSs as adopted by the European Union, 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
company will continue in business.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group’s
transactions and disclose with reasonable accuracy at any time the financial position of the Group and enable them to ensure
that the financial statements comply with the requirements of the Companies Act 2006. They are also responsible for
safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud
and other irregularities.
Website publication
The Directors are responsible for ensuring the annual report and the financial statements are made available on a website.
Financial statements are published on the company's website in accordance with legislation in the United Kingdom governing
the preparation and dissemination of financial statements, which may vary from legislation in other jurisdictions. The
maintenance and integrity of the Group's website is the responsibility of the directors. The Directors' responsibility also
extends to the ongoing integrity of the financial statements contained therein.
Neil Carrick
Finance Director
10 July 2019
15
Remuneration report
As an AIM listed company The 600 Group plc is not required to prepare a remuneration report in accordance with Directors
Report Regulations of the Companies Act 2006, however the Directors recognise the importance and support the principles
of the Regulations. The Auditor is not required to report to the shareholders on the remuneration report, but the table of
Directors’ emoluments on page 17 and the table of Directors’ share options on page 18 do form part of the audited accounts.
Unaudited Information
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 one meeting during the year. The most significant matters discussed by the Committee at its formal
meeting this year were:
•
•
•
the review of a revised contract of employment for Mr. Dupee.
the review of bonus arrangements for the current year; 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
A new bonus scheme was implemented from the start of the financial year based on financial targets around the achievement
of budgets for Executive Directors. No bonus was earned in the year under this scheme and revised targets have been set
for the year to March 2020.
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
executives. Options are exercisable at between three and ten years after grant date and may be issued as nil cost options.
850,000 nil cost options were issued to 17 senior executives during the year under this scheme.
Benefits in kind
Executive Directors’ benefits include a car allowance and medical insurance for self and family.
Service contracts
Mr N R Carrick has a service contract dated 27 May 2016 with a notice period of 12 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 12 months’ notice period. In the event of a change of control the notice period is
extended to 24 months, reducing rateably back to 12 months over a 12-month period.
Mr P Dupee has a service contract dated 14 February 2018 which was amended on 20 September 2018 to provide for a
notice period of not less than 12 months’ such notice not to expire prior to 13 February 2020, the previous fixed term of the
contract. Mr Dupee can terminate this contract on 3 months’ written notice.
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.
16
Remuneration report
Directors’ interests in shares
The interests of Directors holding office at 30 March 2019 in the ordinary shares of the Company were as follows:
P R Dupee
S J Rutherford
N R Carrick
D Zissman
S Fiamma
At
At
30 March 31 March
2019
2018
Number
Number
23,492,535
20,000
113,404
400,000
400,000
23,492,535
20,000
113,404
400,000
NIL
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 N R Carrick’s wife 250,000 warrants which can be used to
either convert their loan notes into shares or to purchase shares for a cash consideration.
Audited Information
Directors’ emoluments
Salary
$
Fees
$
Pension Bonus
$
$
in kind
$
All
benefits
Total
2019
$
Total
2018
$
P R Dupee
N R Carrick
D Zissman
S J Rutherford
S E Fiamma
Total
420,000
229,250
-
-
-
649,250
-
-
43,230
43,230
46,200
132,660
-
-
20,633 131,000
-
-
-
20,633 131,000
-
-
-
-
24,445
-
-
-
420,000
405,328
43,230
43,230
46,200
24,445 957,988
357,225
321,511
42,867
42,867
42,867
807,337
Mr Dupee’s salary was increased to £300,00 from 1 October 2017 and then fixed at a US Dollar amount from 31 March 2018, as payments
are made in US Dollars, when the exchange rate ruling was $1.40 to the £. Mr Fiamma’s salary was also fixed at a US Dollar amount at
the same time. The other directors continued to be paid in sterling and therefore amounts will be subject to the exchange variations on
translation into the reporting currency of US Dollar when compared to the previous years.
*The bonus paid to Mr Carrick in the year related to the previous several years of work in relation to the UK final salary pension scheme
where the benefits were secured in a buy-in in July 2018 and the net surplus of $5.2m was returned to the Company in May 2019.
No bonuses were earned in relation to trading activity in the current year.
The aggregate employers NIC relating to directors was $59,174 (2018: $47,788)
17
Remuneration report
Directors’ share options
Details of share options at 30 March 2019 and 31 March 2018 for each Director who held office during the year are as follows:
N Carrick
P Dupee
S Rutherford
D Zissman
S Fiamma
Number of
options at
31 March
2018
3,150,000
1,000,000
500,000
500,000
500,000
Granted
—
—
—
—
—
Exercised
—
—
—
—
—
Number of
options at
30 March
2019
3,150,000
1,000,000
500,000
500,000
500,000
Lapsed/
forfeited
—
—
—
—
—
Options were all granted under the 600 Group PLC Deferred Share Plan and are exercisable between 3 and 10 years from date of
grant.
1,750,000 options with an exercise price of 10p were granted on 19 November 2012,
3,400,000 options with an exercise price of 17p were granted on 7 April 2014,
500,000 options with an exercise price of 18p were granted on 6 August 2015
No options were granted during the year to Directors.
The charge to the Income Statement in respect of share-based payments was $45,000 (2018: $39,000).
The share price at 30 March 2019 was 13.85p (18.14cents) and the highest and lowest prices during the period were 19.45p
(25.48cents) and 13.00p (17.03cents) respectively.
On behalf of the Board
Neil Carrick
Finance Director
10 July 2019
18
Independent auditor’s report to the members of The 600 Group PLC
Opinion
We have audited the financial statements of The 600 Group Plc (the ‘parent company’) and its subsidiaries (the ‘Group’) for the year
ended 30 March 2019 which comprise the consolidated income statement, consolidated statement of comprehensive income,
consolidated and company statements of financial position, consolidated and company statements of changes in equity, consolidated
cash flow statement and the notes to the financial statements, including a summary of significant accounting policies.
The financial reporting framework that has been applied in the preparation of the financial statements is applicable law and
International Financial Reporting Standards (IFRSs) as adopted by the European Union. The financial reporting framework that has
been applied in the preparation of the Parent Company financial statements is applicable law and United Kingdom Accounting
Standards, including Financial Reporting Standard 101 Reduced Disclosure Framework (United Kingdom Generally Accepted
Accounting Practice).
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
30 March 2019 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 European
Union;
the Parent Company financial statements have been properly prepared in accordance with United Kingdom Generally
Accepted Accounting Practice; and
the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our
responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial statements
section of our report. We are independent of the Group and the Parent Company in accordance with the ethical requirements that
are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard as applied to listed entities, and
we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have
obtained is sufficient and appropriate to provide a basis for our opinion.
Conclusions relating to going concern
We have nothing to report in respect of the following matters in relation to which the ISAs (UK) require us to report to you where:
•
•
the Directors’ use of the going concern basis of accounting in the preparation of the financial statements is not
appropriate; or
the Directors have not disclosed in the financial statements any identified material uncertainties that may cast significant
doubt about the Group’s or the Parent Company’s ability to continue to adopt the going concern basis of accounting for
a period of at least twelve months from the date when the financial statements are authorised for issue.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial
statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to
fraud) we identified, including those which had the greatest effect on: the overall audit strategy, the allocation of resources in the
audit; and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
Revenue recognition
Key audit matter
Response
As detailed in note 1 to the Group financial
statements the Group has adopted IFRS 15
Revenue from contracts with customers (“IFRS 15”)
during the financial period.
The adoption of IFRS 15 has resulted in changes to
the revenue recognition policies applied by the
Group, specifically with respect to bill and hold
transactions previously recognised under IAS 18.
We reviewed the Group’s revenue recognition
policies for all revenue streams by reference to the
requirements of IFRS 15, including the five-step
approach. We evaluated management’s
assessment of the performance obligations in
relation to IFRS 15 criteria and challenged the key
judgements made by management around the
control of goods.
The Group recognises revenue at the point at which
goods are supplied or title otherwise passes to
Our approach to auditing revenue included testing
of revenue recognised throughout the year to
supporting documentation, on a sample basis, to
19
Independent auditor’s report to the members of The 600 Group PLC
customers, or when services have been completed
in full.
confirm transfer of title or completion of the
associated service in accordance with IFRS 15.
There are a number of judgements involved in the
application of this new standard. In view of the
judgements involved we determined this to be a key
audit matter.
Despatches across the year-end were tested to
documentation to check they had been recorded in
the correct accounting period, and credit notes
raised subsequent to the year-end were reviewed
for evidence that revenue may have been
recognised inappropriately.
We evaluated the transitional adjustment arising
from the adoption of IFRS 15 in relation to bill and
hold transactions to recognise that performance
obligations are only satisfied when despatch occurs
and concur with management’s assessment.
We reviewed the accuracy and completeness of the
disclosure of the transitional adjustments as set out
in note 35.
Based on the work performed we consider that
revenue has been recognised appropriately.
Carrying value of inventories
Key audit matter
Response
As described in note 31, Accounting estimates and
judgements, the Directors consider there to be
significant estimation uncertainty in the calculation
of inventory provisions.
We tested the integrity of the provision calculations
to check that it was using the underlying data
correctly and calculating provision amounts
accurately.
Given the nature of the Group’s operations, these
inventories comprise a wide variety of different
product types, some of which may be held in
inventory for a significant period before being sold.
This creates a risk that certain items of inventory
may be aged to the point where their cost cannot
be recovered through realisable value.
The Group applies a provision methodology that
reflects the age and condition of inventory held, in
particular spare parts and service inventory, based
on the historic consumption.
Due to the significant estimation uncertainty in the
calculation of the inventory provision we have
identified this as a key audit matter.
We performed sensitivity analysis over key
judgements taken by management and assessed
the impact of changes to key judgements on the
provision value.
We performed realisable value testing on a sample
of inventory lines to check that inventory was being
held at the lower of cost and net realisable value.
We challenged management on the provision
methodology and profile across the Group, in
particular for finished goods, spare parts and
service inventory, to determine the appropriateness
of the allowances made.
Based on the work performed we considered
management’s judgement on the level of inventory
provision to be reasonable.
20
Independent auditor’s report to the members of The 600 Group PLC
Our application of materiality
We apply the concept of materiality both in planning and performing our audit, and in evaluating the effect of misstatements. We
consider materiality to be the magnitude by which misstatements, individually or in aggregate and including omissions, could
reasonably be expected to influence the economic decisions of reasonable users that are taken on the basis of financial statements.
Misstatements below these levels will not necessarily be evaluated as immaterial as we also take into account the nature of identified
misstatements, and the particular circumstances of their occurrence, when evaluating their effect on the financial statements as a
whole.
Based on our professional judgement, materiality for the Group financial statements as a whole was set as follows:
The materiality for the Group financial statements as a whole was set at $200,000 (2018: $260,000). This represents 5% of statutory
profit before tax, which is deemed to be the measure of most interest to the users of the financial statements. Component materiality
was set in the range of $50,000 to $150,000.
In order to reduce to an appropriately low level the probability that any misstatements exceed materiality, we use a lower materiality
level, performance materiality, to determine the extent of testing needed. Performance materiality has been set at 70% (2018: 60%)
of materiality. This was assessed on criteria such as complexity and the control environment of the Group.
We agreed with the Audit Committee that we would report all individual audit differences in excess of $6,000 (2018: $5,000). We also
agreed to report differences below this threshold that, in our view, warranted reporting on qualitative grounds.
Company only materiality was capped at $50,000 in order to comply with Group aggregation limits and audit differences in respect
of the company in excess of $1,000 would be reported to the Audit Committee.
An overview of the scope of our audit
Our Group audit was scoped by obtaining an understanding of the Group and its environment, including the Group’s system of internal
control, and assessing the risks of material misstatement in the financial statements at the Group level. This includes certain risks
that arise in subsidiaries but have a potentially material impact at a Group level.
Financial information relating to the parent company, the two UK trading companies and the consolidation process was subject to full
scope audit by the Group audit team.
As the majority of the Group’s activity is situated in the USA at two locations, the Group audit team involved the use of BDO member
firms in these locations as component auditors. Full scope audits were conducted on these two significant components, with a high
level of involvement by the Group audit team. This included, most notably, risk identification, setting of materiality and audit response.
The Group audit team was involved in these audits from planning through to completion through engagement with both component
management and auditors at various meetings, site visits and performance of on-site review of component audit files.
The Group also operates in Australia, however this is not deemed a significant component and as such agreed upon procedures
were performed on key balances to Group materiality by a BDO member firm.
Assurance was obtained over insignificant components that were not subject to full scope audit by performing desktop review
procedures applying the Group materiality level.
Other information
The directors are responsible for the other information. The other information comprises the information included in the Annual Report
and Accounts, other than the financial statements and our auditor’s report thereon. Our opinion on the financial statements does not
cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance
conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider
whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or
otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are
required to determine whether there is a material misstatement in the financial statements or a material misstatement of the other
information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information,
we are required to report that fact. We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of the audit:
•
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; and
•
the strategic report and the directors’ report have been prepared in accordance with applicable legal requirements.
21
Independent auditor’s report to the members of The 600 Group PLC
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the Group and the parent company and its environment obtained in the course of
the audit, we have not identified material misstatements in the strategic report or the directors’ report.
We have nothing to report in respect of the following matters in relation to which 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.
Responsibilities of directors
As explained more fully in the statement of directors’ responsibilities set out on page 15, the directors are responsible for the
preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the
directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether
due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the Group’s and the parent company’s ability to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of
accounting unless the directors either intend to liquidate the Group or the parent company or to cease operations, or have no realistic
alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a
high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material
misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be
expected to influence the economic decisions of users taken on the basis of these financial statements.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s
website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
Use of our report
This report is made solely to the parent 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 parent 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 parent company and the parent company’s members as a body, for our audit work,
for this report, or for the opinions we have formed.
Gary Harding (Senior Statutory Auditor)
For and on behalf of BDO LLP, Statutory Auditor
Manchester
United Kingdom
Date:
BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).
22
Consolidated income statement
For the 52-week period ended 30 March 2019
Before
After
Before
Restated
Restated
Restated
After
Adjusting
Adjusting
Adjusting
Adjusting
Adjusting
Adjusting
Items
Items
Items
Items
Items
Items
52 weeks
52 weeks
52 weeks
52 weeks
52 weeks
52 weeks
ended
ended
ended
ended
ended
ended
30 March
30 March
30 March
31 March
31 March
31 March
Notes
2019
$000
2019
$000
2019
$000
2018
$000
2018
$000
2018
$000
Continuing
Revenue
Cost of sales
Gross profit
Net operating expenses
Operating profit/(loss)
Financial income
Financial expense
Profit on ProPhotonix disposal
Profit before tax
Income tax (charge)/credit
Profit for the period on continuing activities
attributable to equity holders of the parent
1
2
6
6
7
(Loss)/profit on discontinued activity
17
Profit for the period attributable to the equity
holders of the parent
65,167
(41,641)
23,526
-
-
-
65,167
63,944
(41,641)
(42,363)
23,526
(18,269)
(1,786)
(20,055)
5,257
(1,786)
3,471
21,581
(19,803)
1,778
-
-
-
-
-
35
2,077
(1,236)
-
-
-
2,112
(1,236)
-
-
(1,182)
-
1,741
(290)
1,256
63,944
(42,363)
21,581
(19,803)
1,778
1,741
(1,472)
1,256
4,056
291
4,347
596
2,707
3,303
(66)
3,990
(146)
3,844
(48)
243
(114)
4,233
529
(1,239)
1,125
1,468
(961)
(718)
(1,107)
3,126
312
-
1,437
1,468
(710)
2,593
312
2,905
Basic earnings per share
Diluted earnings per share
Basic earnings per share after discontinued
Diluted earnings per share after discontinued
9
9
9
9
3.53c
3.50c
3.40c
3.37c
0.22c
0.21c
(0.63c)
(0.63c)
3.75c
3.71c
2.77c
2.74c
1.03c
1.03c
1.32c
1.31c
1.35c
1.34c
1.35c
1.34c
2.38c
2.37c
2.67c
2.65c
Company Number 00196730
The accompanying accounting policies and notes on pages 28 to 70 form part of these Financial Statements.
The comparative figures have been adjusted for the result of Gamet Bearings which is shown as a discontinued operation and the effects of
the adoption of IFRS 15 and IFRS 9. See note 35.
As explained in note 3, the directors have highlighted adjusting items which are material and unrelated to the normal trading activity of the
group. The “before adjusting items” column in the consolidated income statement shows non-GAAP measures. The “after adjusting items”
column shows the GAAP measures.
23
Consolidated statement of comprehensive income
For the 52-week period ended 30 March 2019
Profit for the period
Other comprehensive income/(expense)
Items that will not be reclassified to the Income Statement:
Release of available for sale reserve on ProPhotonix disposal
Remeasurement of defined benefit asset
Deferred taxation
Total items that will not be reclassified to the Income Statement:
Items that are or may in the future be reclassified to the Income Statement:
Foreign exchange translation differences
Total items that are or may in the future be reclassified to the Income Statement:
Other comprehensive income / (expense) for the period, net of income tax
Total comprehensive income/(expense) for the period
Attributable to:
Equity holders of the Parent Company
Notes
30
14
52-week
Restated
52-week
period ended
period ended
30 March
31 March
2019
$000
3,126
2018
$000
2,905
-
(43,083)
15,071
(28,012)
(3,005)
(3,005)
(31,017)
(27,891)
(1,465)
(19,659)
6,852
(14,272)
4,109
4,109
(10,163)
(7,258)
(27,891)
(7,258)
The accompanying accounting policies and notes on pages 28 to 70 form part of these Financial Statements.
24
Consolidated statement of financial position
As at 30 March 2019
Company Number 00196730
As at
Restated
As at
Restated
As at
30 March 2019
31 March 2018
1 April 2017
Notes
$000
$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
Employee Benefits
Taxation
Assets classified as held for sale
Cash and cash equivalents
Total assets
Non-current liabilities
Employee benefits
Loans and other borrowings
Deferred tax liabilities
Current liabilities
Trade and other payables
Deferred tax liabilities
Taxation
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
Total equity
11
12
12
14
30
15
16
30
16
17
18
30
19
14
20
14
20
21
19
23
3,435
10,329
1,110
-
4,578
-
19,452
19,030
9,163
7,459
294
1,108
948
38,002
57,454
(1,239)
(10,173)
-
(11,412)
(8,095)
(2,541)
-
(447)
(5,316)
(16,399)
(27,811)
29,643
1,746
2,885
1,149
-
201
(6,524)
30,186
29,643
4,111
10,329
407
-
5,135
54,319
74,301
19,960
9,726
-
-
-
1,676
31,362
105,663
(1,225)
(12,251)
(19,020)
(32,496)
4,668
10,329
382
2,068
4,383
65,677
87,507
16,161
8,959
-
-
-
1,352
26,472
113,979
(1,289)
(11,552)
(22,770)
(35,611)
(9,205)
(6,801)
-
(291)
(53)
(5,025)
(14,574)
(47,070)
58,593
1,746
2,885
1,149
-
201
(3,519)
56,131
58,593
-
-
(486)
(6,890)
(14,177)
(49,788)
64,191
1,629
1,484
1,149
1,446
201
(7,609)
65,891
64,191
The financial statements on pages 23 to 70 were approved by the Board of Directors on 10 July 2019 and were signed on its behalf by:
NEIL CARRICK
Finance Director
10 July 2019
25
Consolidated statement of changes in equity
As at 30 March 2019
Company Number 00196730
Ordinary
Share
Available
share
premium
Revaluation
for sale Translation
Equity
Retained
capital
account
reserve
reserve
reserve
reserve
Earnings
$000
$000
1,629
1,484
-
-
-
-
$000
797
-
352
$000
$000
$000
$000
1,446
(6,724)
201
65,461
64,294
-
-
-
(885)
-
-
(103)
(103)
533
-
1,629
1,484
1,149
1,446
(7,609)
201
65,891
64,191
-
-
-
-
3,049
3,049
Total
$000
At 1 April 2017
Adjustments for the adoption of
IFRS 15 and 9*
Changes in accounting policy *
At 1 April 2017 restated
Profit for the period
Other comprehensive income:
Foreign currency translation
Net defined benefit asset movement
ProPhotonix disposal
Deferred tax
Total comprehensive income
Transactions with owners:
Share capital subscribed for
Credit for share-based payments
Total transactions with owners
At 31 March 2018 restated
Adjustments for the adoption of
IFRS 15 and 9*
Changes in accounting policy *
-
-
-
-
-
-
117
-
117
1,746
-
-
-
-
-
-
-
-
1,401
-
1,401
2,885
-
-
At 31 March 2018 restated
1,746
2,885
1,149
Profit for the period
Other comprehensive income:
Foreign currency translation
Net defined benefit asset movement
Deferred tax
Total comprehensive income
Transactions with owners:
Dividend
Credit for share-based payments
Total transactions with owners
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
At 30 March 2019
1,746
2,885
1,149
-
-
-
1,111
-
38
(38)
-
-
-
19
-
(1,465)
-
(38)
(1,446)
2,159
2,159
-
1,969
4,109
-
-
-
-
-
-
-
(19,659)
(19,659)
-
-
-
-
-
-
-
(1,465)
6,852
6,852
(7,789)
(7,114)
-
39
39
1,518
39
1,557
-
-
-
-
-
-
-
-
-
-
-
(5,450)
201
58,141
58,634
-
-
(41)
(41)
1,931
-
(1,969)
-
(3,519)
201
56,131
58,593
-
-
3,126
3,126
(3,005)
-
-
-
-
-
-
(3,005)
(43,083)
(43,083)
15,071
15,071
-
(3,005)
-
(24,886)
(27,891)
-
-
-
-
-
-
-
-
-
-
(1,104)
(1,104)
45
45
(1,059)
(1,059)
(6,524)
201
30,186
29,643
* see note 35 Impact on the financial statements of changes in accounting policies and discontinued activities
The accompanying accounting policies and notes on pages 28 to 70 form part of these Financial Statements.
26
Consolidated cash flow statement
For the 52-week period ended 30 March 2019
Cash flows from operating activities
Profit for the period
Adjustments for:
Amortisation of development expenditure
Depreciation
Net financial income
Non-cash adjusting Items
(Profit)/loss on disposal of property, plant and equipment
Profit on disposal of Prophotonix
Equity share option expense
Income tax expense/(credit)
Operating cash flow before changes in working capital and provisions
(Increase)/decrease in trade and other receivables
(Increase) in inventories
(Decrease)/increase in trade and other payables
Employee benefits contributions
Cash generated by operations
Interest paid
Income tax received/(paid)
Net cash flows from operating activities
Cash flows from investing activities
Interest received
Proceeds from sale of property, plant and equipment
Sale of investment in Prophotonix
Purchase of property, plant and equipment
Development and IT software expenditure capitalised
Proceeds from sale of development expenditure
Net cash flows from investing activities
Cash flows from financing activities
Proceeds from issue of ordinary shares
Dividends paid
Proceeds from external borrowing
Net finance lease income/(expenditure)
Net cash flows from financing activities
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the period
Effect of exchange rate fluctuations on cash held
Cash and cash equivalents at the end of the period
Notes
12
11
6
5
7
11
12
8
24
18
The accompanying accounting policies and notes on pages 28 to 70 form part of these Financial Statements.
52-week
Restated
52-week
period ended
period ended
30 March
31 March
2019
$000
2018
$000
3,126
2,905
73
540
(876)
2,238
(461)
-
45
114
4,799
(451)
(730)
(352)
(13)
3,253
(1,236)
(125)
1,892
1
514
-
(1,245)
(1,399)
639
(1,490)
-
(1,104)
2
59
(1,043)
(641)
1,676
(87)
948
71
596
(269)
991
29
(1,256)
39
710
3,816
95
(3,333)
1,213
(143)
1,648
(1,183)
-
465
-
285
1,972
(694)
(87)
-
1,476
1,517
-
(2,985)
(56)
(1,524)
417
1,352
(93)
1,676
27
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 2019 are
for the 52-week period ended 30 March 2019. The results for 2018 are for the 52-week period ended 31 March 2018.
Given two thirds of the revenues and a large proportion of expenditure is either in UD Dollars or currency tied to the US Dollar the Board
has determined to present the financial statements in US Dollars.
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 71 to 79.
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.
NEW STANDARDS, AMENDMENTS AND INTERPRETATION
The Group has adopted the following standards and interpretations which have been issued by the International Accounting Standards
Board in these financial statements for the year ended 30 March 2019:
•
•
IFRS 9 - Financial Instruments (effective for accounting periods on or after 1 January 2018); and
IFRS 15 - Revenue from Contracts with Customers (effective for periods on or after 1 January 2018).
IFRS 9 - Financial Instruments
IFRS 9 ‘Financial instruments’ replaces IAS 39 ‘Financial instruments: Recognition and Measurement’ with the exception of macro hedge
accounting. The standard is effective for accounting periods beginning on or after 1st January 2018. The standard covers three elements:
•
•
•
Classification and measurement: Changes to a more principle-based approach to classify financial assets as either
held at amortised cost, fair value through other comprehensive income (FVOCI) or fair value through profit or loss,
dependent on the business model and cash flow characteristics of the financial asset; and
Impairment: Moves to an impairment model based on expected credit losses based on a three-stage approach; and
Hedge accounting: The IFRS 9 hedge accounting requirements are designed to allow hedge accounting to be more
closely aligned with the group’s underlying risk management. A new International Accounting Standards Board
(IASB) project is in progress to develop an approach to better reflect dynamic risk management in entities’ financial
statements.
The group have applied IFRS 9 for the first time in the current year, in replacement of IAS 39. For trade receivables, the group applied
the simplified method of the expected credit loss model when calculating impairment losses on its financial assets measured at amortised
cost. This resulted in greater judgement due to the need to factor in forward-looking information when estimating the appropriate amount
of provisions.
In applying IFRS 9 the group considered the probability of a default occurring over the contractual life of its trade receivables balances
on initial recognition of those assets. Under the previous incurred loss model, the historical loss rate has typically 53% of receivables over
3 months and 100 % of receivable over 6 months based on the last 5 years’ experience. at 31 March 2018 this provision amounted to
$274,000.
The group has restated comparatives on adoption of IFRS 9 for the provision calculated under the expected loss model. Due to this there
has been an adjustment recorded in respect of the IFRS 9 transition in opening equity at 1st April 2018 of $43,000.
The classification of certain financial instruments was affected on initial application of IFRS 9. Financial assets previously categorised as
Loans and receivables under IAS 39 are now classified as Amortised cost however the measurement remains consistent subject to the
application of the expected credit loss model outlined above.
Financial liabilities continue to be recognised and measured under the Amortised cost category.
IFRS 15 Revenue from contracts with customers
IFRS 15, ‘Revenues from Contracts with Customers’ is effective for periods beginning on or after 1st January 2018. IFRS 15 introduces
a five-step approach to the timing of revenue recognition based on performance obligations in customer contracts. The group has adopted
IFRS 15 – Revenue from Contracts with Customers for the financial year starting 1st April 2018, applying the fully retrospective method
of transition.
28
Group accounting policies
As a result of a review of the contractual documentation in the UK machine tools business and consideration of control, an adjustment
has been made to revenue recognition for bill and hold machines on the adoption of IFRS 15 and details are included in note 35. With
the exception of the additional disclosure requirements, there are no further impacts on the Group’s Financial Statements.
There has been no alterations made to the accounting policies as a result of considering the following 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.
IFRS 2 (amendments) Classification and Measurement of Share-based Payment Transactions (effective from 1 January 2018)
IFRIC 22 Foreign Currency Transactions and Advance Consideration (effective from 1 January 2018)
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.
NEW STANDARDS, INTERPRETATIONS AND AMENDMENTS NOT YET EFFECTIVE
At the date of authorisation of these financial statements, the following Standards and Interpretations which have not been applied in these
financial statements were in issue but not yet effective (and in some cases had not yet been adopted by the EU):
IFRS 9 (amendments) prepayment features with negative compensation (effective 1 January 2019)
IAS 28 (amendments) long-term interests in associates and JV’s (effective 1 January 2019)
Annual Improvements to IFRSs 2015-2017 Cycle (effective from 1 January 2019)
IFRIC 23 (amendments) Uncertainty over Income Tax Treatment (effective from 1 January 2019)
IFRS 16 Leases (effective from 1 January 2019)
Adoption of IFRS 16 will result in the group recognising right-of-use assets and lease liabilities for all contracts that are, or contain, a
lease. For leases currently classified as operating leases, under current accounting requirements the group does not recognise related
assets or liabilities, and instead spreads the lease payments on a straight-line basis over the lease term, disclosing in its annual financial
statements the total commitment.
The Board has decided it will apply the modified retrospective adoption method in IFRS 16, and, therefore, will only recognise leases on
balance sheet as at 31 March 2019. In addition, it has decided to measure right-of-use asset by reference to the measurement of the
lease liability on that date. This will ensure there is no immediate impact to net asset on that date. At 30 March 2019 operating lease
commitments amounted to $13.1m (see note 29) which is not expected to be materially different to the anticipated position on 29 March
2020 or the amount which is expected to be disclosed at 29 March 2020. Assuming the group’s lease commitments remain at this level,
the effect of discounting those commitments is anticipated to result in the right-of-use assets and lease liabilities of approximately $7.5m
being recognised on 31 March 2019. However, further work still needs to be carried out to determine whether and when extension and
termination options are likely to be exercised, which may result in the actual liability recognised being different.
Instead of recognising an operating expense for its operating lease payments, the group will instead recognise interest on its lease
liabilities and amortisation on its right-of-use assets. This will increase reported EBITDA by the amount of its current operating lease cost,
which for the year ended 30 March 2019 was approximately $0.8m.
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.
BASIS OF MEASUREMENT
The consolidated financial statements are presented in US Dollars 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 recognised initially at cost and are
subject to regular revaluations.
GOING CONCERN
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 and the Strategic Report on pages 2 to 8.
The Group has a mixture of term loans and revolving working capital facilities with maturities between 1 and 3 years with HSBC in the
UK and Bank of America in the USA. Headroom on bank facilities was $7.6m at the year-end (2018: $8m) and all financial covenants in
place were met during the year. It is expected that the short-term facilities in place at the year-end will be extended on similar terms.
29
Group accounting policies
The Directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational
existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the Annual Report
and Accounts.
BASIS OF CONSOLIDATION
The Group’s financial statements consolidate the financial statements of the Company and its subsidiary undertakings. Subsidiary
undertakings are those entities that are controlled by the Group. The results of any subsidiaries sold or acquired are included in the
Group’s income statement up to, or from, the date control passes. All intra-Group balances and transactions, including unrealised profits
arising from intra-Group transactions, are eliminated fully on consolidation.
FOREIGN CURRENCY TRANSLATION
Monetary assets and liabilities are translated into US Dollars at the rate of exchange ruling at the balance sheet dates. Equity and reserves
are translated into US Dollars as the historical rate ruling when the transaction occurred. Earnings of operations in currencies other than US
Dollar are translated at the average exchange rate for the period as an approximation to actual transaction date rates. Exchange
differences arising from the re-translation of assets and liabilities in currencies other than US Dollar 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 RECOGNITION FROM CONTRACTS WITH CUSTOMERS
IFRS 15 is effective from 1 January 2018, and replaces the previous revenue recognition standards and interpretations, including IAS 18
Revenue and IFRIC 13 Customer Loyalty Programmes. IFRS 15 establishes a single approach for the recognition and measurement of
revenue and requires an entity to recognise revenue as performance obligations are satisfied. lt applies to all contracts with customers
except for transactions specifically scoped out, which includes interest, dividends, leases, and insurance contracts. Revenue is derived
from the transfer of goods and services at a point in time to customers when performance obligations to the customer have been satisfied.
Revenue represents the invoiced values of sales to customers less returns allowance and VAT.
Normal policy
The majority of the machines (either lasers or machine tools) sold by the Group are on an ‘ex-works’ basis and as such the sale is
recognised on dispatch or pick up by the customer or his appointed shipping agent.
Sales of spares are similarly recognised on shipment.
With regard to service this is normally billed after a service visit has taken place and recognised at this date.
Bill and Hold Arrangements
Customers occasionally request that a completed machine is not shipped as the college or factory facility is not yet finished to accept the
new machine. This is most common in respect of machine tools rather than lasers.
In these instances, machines are packaged ready for customer pick up and the customer acknowledges title to the machine as passed
to them.
In the USA given the larger distances to customers facilities and that the majority of sales are made through distributors for machine tool
products, machines are often in transit or held by distributors rather than at the factory and revenue recognised under the normal ‘ex-
works’ rule.
As a result of a review of the contractual documentation in the UK machine tools business and consideration of control of goods, an
adjustment has been made to revenue recognition for bill and hold machines on the adoption of IFRS 15 and details are included in note
35.
Customer deposits (contract assets and contract liabilities)
On machine sales (in both lasers and machine tools) it is usual when this sale is to an individual customer, rather than distributor or
dealer, for a deposit with order to be taken and then further payments to be received before dispatch of the goods – often 90 to 100% of
the sale price by time of dispatch. Deposits are also common with distribution sales of customer specific machines.
Customer deposits are not recognised in revenue and are shown in current liabilities within trade and other payables in the statement of
financial position and separately identified in note 20
If the contractual position arises a contract asset will be recorded to recognise entitlement for work carried out to date.
Revenue disclosures
In addition to the disaggregation of revenue provided by Geography for origin and destination a disaggregation by category of product
sold has been added to disclosures as a result of the adoption of IFRS 15.
30
Group accounting policies
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 Industrial Laser Systems. The machine tools division consists of sale of metal turning and other machine tools and
precision component parts for these tools. They are aggregated in segmental reporting due to the uniformity of the customer base and
geographical location of these sales and for consistency with internal reporting to the chief operating decision maker.
The Executive Directors assess the performance of the operating segments based on a measure of underlying operating profit/(loss).
This measurement basis excludes the effects of adjusting Items from the operating segments. Head Office and unallocated represent
central functions and costs.
OPERATING PROFIT, ADJUSTING ITEMS AND DISCONTINUED OPERATIONS
The directors have highlighted transactions which are material and unrelated to the normal trading activity of the Group.
These consist of the entries in relation to the UK final salary scheme and the profit on the disposal of the ProPhotonix shares in the
previous year. In addition, the adjustment to the carrying value of the amortised loan note expenses in the current year, as a result of the
extension of these instruments by a further two years, and the prior year’s amortisation have been included as adjusting items.
The buy-out of the Group pension scheme was completed in April 2019 but during the year ended March 2019 the trustees undertook a
number of exercises to reduce the liabilities of the scheme which had an actuarial cost. Given these had a beneficial effect on the ultimate
buy out cost of the scheme they were supported by the Group. This amount is shown in adjusting items.
In the opinion of the directors the disclosure of these entries should be reported separately for a better understanding of the underlying
trading performance of the Group. These underlying figures are used by the Board to monitor business performance, form the basis of
bonus incentives and are used for the purposes of the bank covenants.
These non-GAAP measures are explained in note 33 alternative performance measures and set out in note 3. All adjusting items are
taken into account in the GAAP figures in the Income Statement.
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. Remeasurements 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. The accounting for the UK scheme has continued during the
year under the requirements of IAS 19 on the basis that the scheme trustees had secured an insurance policy to match the scheme
liabilities but that this was held as an asset and valued along with the scheme liabilities, in accordance with IAS 19 requirements, until
the buy-out of the scheme was complete. The buy-out was completed in late April 2019 and the remaining surplus in the scheme of $8m
repaid to the Company after deduction of 35% tax with the Company receiving the net $5.2m at the end of May 2019.
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,
on the income statement;
• Gains and losses arising on settlements and curtailments – where the item that gave rise to the settlement or
curtailment is recognised within operating profit; and
• 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.
31
Group accounting policies
WITHIN THE STATEMENT OF COMPREHENSIVE INCOME
•
Remeasurements 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 is not 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
Prior to the adoption of IFRS 9, investment 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 other comprehensive income. Subsequent to the adoption of IFRS 9, investments in quoted shares are measured at fair value.
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
– 2 to 4%
Leasehold improvements
– over residual terms of the leases
Plant and machinery
– 10 to 20%
Fixtures, fittings, tools and equipment – 10 to 33.3%
Land
– nil
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.
NON-CURRENT ASSETS HELD FOR SALE AND DISPOSAL GROUPS
Non-current assets and disposal groups are classified as held for sale when:
•
They are available for immediate sale
• Management is committed to a plan to sell
•
•
•
•
It is unlikely that significant changes to the plan will be made or that the plan will be withdrawn
An active programme to locate a buyer has been initiated
The asset or disposal group is being marketed at a reasonable price in relation to its fair value, and
A sale is expected to complete within 12 months from the date of classification.
Non-current assets and disposal groups classified as held for sale are measured at the lower of:
•
Their carrying amount immediately prior to being classified as held for sale in accordance with the group's accounting
policy; and
32
Group accounting policies
•
Fair value less costs of disposal.
Following their classification as held for sale, non-current assets (including those in a disposal group) are not depreciated.
The results of operations disposed during the year are included in the consolidated statement of comprehensive income up to the date of
disposal.
A discontinued operation is a component of the Group's business that represents a separate major line of business or geographic area of
operations or is a subsidiary acquired exclusively with a view to resale, that has been disposed of, has been abandoned or that meets the
criteria to be classified as held for sale.
Discontinued operations are presented in the consolidated statement of comprehensive income as a single line which comprises the post-
tax profit or loss of the discontinued operation along with the post-tax gain or loss recognised on the re-measurement to fair value less
costs to sell or on disposal of the assets or disposal groups constituting discontinued operations.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents in the balance sheet comprise cash at bank, on deposit and in hand.
For the purpose of the consolidated cash flow statement, cash and cash equivalents consist of cash and cash equivalents as described
above, net of outstanding bank overdrafts which are repayable on demand and form an integral part of cash management.
FINANCIAL INSTRUMENTS
The group does not generally use derivative financial instruments such as hedges for foreign currency exposure. There were none in
place at either period end or used during the year.
The group has applied IFRS 9 from 1 April 2018.
The group has applied the simplified approach to recognise lifetime expected credit loses for its trade receivables as required by IFRS 9.
A small adjustment to the loss allowance for these assets at 31 March 2018 as being recorded in the opening reserves as set out in note
35.
COMPOUND FINANCIAL INSTRUMENTS
Compound financial instruments issued by the Group comprise convertible notes that can be converted to share capital at the option of
the holder, when the number of shares to be issued does not vary with changes in their fair value. The liability component of a compound
financial instrument is recognised initially at the fair value of a similar liability that does not have an equity conversion option. The equity
component is recognised initially at the difference between the fair value of the compound financial instrument as a whole and the fair
value of the liability component. Any directly attributable transaction costs are allocated to the liability and equity components in proportion
to their initial carrying amounts.
Subsequent to initial recognition, the liability component of a compound financial instrument is measured at amortised cost using the
effective interest method. The equity component of a compound financial instrument is not remeasured subsequent to initial recognition.
Interest and gains and losses related to the financial liability are recognised in profit or loss. On conversion, the financial liability is
reclassified to equity; no gain or loss is recognised on conversion.
Where the terms and conditions of compound financial instruments are modified the Group considered whether such modification is
substantial. If the modification is considered substantial, the original compound financial instrument is derecognised and a new compound
financial instrument is recognised at fair value. Where the modification is non-substantial, the movement in the fair value, measured
immediately before and after the modification, is charged to the consolidated statement of comprehensive income
On the adoption of IFRS 9 there were no adjustments to the accounting for these instruments required.
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.
FINANCIAL ASSETS AND LIABILITIES
IFRS 9 ‘Financial Instruments’ outlines the principles an entity must apply to measure and recognise financial assets and liabilities. The
following section sets out the accounting policies that were applied in the reporting period under IFRS 9.
Initial recognition of financial assets and financial liabilities
The Group recognises financial assets and liabilities when it becomes a party to the terms of the contract, which is the settlement date.
33
Group accounting policies
Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or
issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are
capitalised to the initial carrying amount of the financial asset/liability, as appropriate on initial recognition. Transaction costs directly
attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognised immediately in profit
or loss.
On initial recognition, it is presumed that the transaction price is the fair value unless there is observable information available in an active
market to the contrary. The best evidence of an instrument's fair value on initial recognition is typically the transaction price. However, if fair
value can be evidenced by comparison with other observable current market transactions in the same instrument or is based on a valuation
technique whose inputs include only data from observable markets then the instrument should be recognised at the fair value derived from
such observable market data.
For valuations that have made use of significant unobservable inputs, the difference between the model valuation and the initial transaction
price is recognised in profit or loss either on a straight line basis over the term of the transaction, or over the reporting period until all model
inputs will become observable where appropriate, or released in full when previously unobservable inputs become observable. Financial
liabilities are subsequently measured at amortised cost.
Classification
Non-derivative financial instruments comprise trade and other receivables, cash and cash equivalents, trade and other payables.
Financial assets
On initial recognition, the Group classifies its financial assets into the following measurement categories:
•
•
•
Amortised cost;
Fair value through other comprehensive income; or
Fair value through profit or loss;
The classification and subsequent measurement of financial assets depends on:
•
•
The business model within which the financial assets are managed; and
The contractual cash flow characteristics of the asset (that is, whether the cash flows represent solely payments of
principal and interest).
Business model assessment
The business model reflects how the Group manages the financial assets in order to generate cash flows and returns. The Group makes an
assessment of the objective of a business model in which a financial asset is held. The factors considered in determining the business model
include how the financial asset’s performance is evaluated and reported to management.
Assessment of whether contractual cash flows are solely payments of principal and interest (SPPI):
The Group has undergone a Solely Payments of Principal and Interest (SPPI) test to classify financial assets. The SPPI test assesses
whether the contractual cash flows of an asset gives rise to payments on specified dates that are solely payment of principal and profit on
the principal amount outstanding.
In making the assessment of whether the contractual cash flows have SPPI characteristics, the Group considers whether the cash flows are
consistent with a basic lending arrangement. That is, the contractual cash flows recovered must represent solely the payment of principal
and interest.
Principal is the fair value of the financial asset on initial recognition. Interest typically includes only consideration for the time value of money
and credit risk but may also include consideration for other basic lending risks and costs, such as liquidity risk and administrative costs.
Where the contractual terms include exposure to risk or volatility that is inconsistent with a basic lending arrangement, the cash flows would
not be considered to be SPPI and the assets would be mandatorily measured at fair value through profit or loss.
In making the assessment, the Group considers, inter alia, contingent events that would change the amount and timing of cash flows,
prepayment and extension terms, leverage features, terms that limit the Group's claim to cash flows from specified assets (e.g. non-recourse
asset arrangements), and features that modify consideration of the time value of money (e.g. tenor mismatch). Contractual cash flows are
assessed against the SPPI test in the currency in which the financial asset is denominated.
Expected credit losses on financial assets
Impairment provisions for current and non-current trade receivables are recognised based on the simplified approach within IFRS 9 using a
provision matrix in the determination of the lifetime expected credit losses. During this process the probability of the non-payment of the trade
receivables is assessed. This probability is then multiplied by the amount of the expected loss arising from default to determine the lifetime
expected credit loss for the trade receivables. For trade receivables, which are reported net, such provisions are recorded in a separate
provision account with the loss being recognised within administrative expenses in the consolidated statement of comprehensive income. On
confirmation that the trade receivable will not be collectable, the gross carrying value of the asset is written off against the associated
provision.
34
Group accounting policies
Financial liabilities and equity
Financial liabilities and equity are classified according to the substance of the financial instrument’s contractual obligations, rather than the
financial instrument’s legal form.
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.
INTEREST-BEARING BORROWINGS
Interest-bearing borrowings are recognised initially at fair value less attributable transaction costs. Subsequent to initial recognition,
interest-bearing borrowings are stated at amortised cost with any difference between cost and redemption value being recognised in the
income statement over the period of the borrowings on an effective interest basis.
PROVISIONS
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that
an outflow of resources embodying economic benefit will be required to settle the obligation, although there remains uncertainty over
timing or the amount of the obligation, and a reliable estimate can be made of the amount of the obligation.
IMPAIRMENT
The carrying amount of the Group’s assets, other than inventories and deferred tax assets (see accounting policies above), are reviewed
at each balance sheet date to determine whether there is any indication of impairment. If any such indication exists, the asset’s recoverable
amount is estimated.
For goodwill, the recoverable amount is estimated at each balance sheet date.
An impairment loss is recognised whenever the carrying amount of an asset or cash generating unit exceeds its recoverable amount.
Impairment losses are recognised in the consolidated income statement. Those relating to revalued property are treated in accordance
with IAS 16.
Impairment losses recognised in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill
allocated to cash-generating units (group of units) and then to reduce the carrying amount of the other assets of the unit (group of units)
on a pro rata basis.
BUSINESS COMBINATIONS
All business combinations are accounted for by applying the acquisition method. Business combinations are accounted for using the
acquisition method as at the acquisition date, which is the date on which control is transferred to the Group.
Acquisitions on or after 1 January 2010:
For acquisitions on or after 1 January 2010, the Group measures goodwill at the acquisition date as:
the fair value of the consideration transferred; plus
the recognised amount of any non-controlling interests in the acquiree; plus
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.
When the excess is negative, a bargain purchase gain is recognised immediately in profit or loss.
Costs related to the acquisition, other than those associated with the issue of debt or equity securities, are expensed as incurred.
Any contingent consideration payable is recognised at fair value at the acquisition date. If the contingent consideration is classified as equity,
it is not remeasured, and settlement is accounted for within equity. Otherwise, subsequent changes to the fair value of the contingent
consideration are recognised in profit or loss.
On a transaction-by-transaction basis, the Group elects to measure non-controlling interests, which have both present ownership interests
and are entitled to a proportionate share of net assets of the acquiree in the event of liquidation, either at its fair value or at its proportionate
interest in the recognised amount of the identifiable net assets of the acquiree at the acquisition date. All other non-controlling interests are
measured at their fair value at the acquisition date.
Acquisitions prior to 1 January 2010:
35
Group accounting policies
For acquisitions prior to 1 January 2010, goodwill represents the excess of the cost of the acquisition over the Group’s interest in the
recognised amount (generally fair value) of the identifiable assets, liabilities and contingent liabilities of the acquiree. When the excess was
negative, a bargain purchase gain was recognised immediately in profit or loss.
Transaction costs, other than those associated with the issue of debt or equity securities, that the Group incurred in connection with business
combinations were capitalised as part of the cost of the acquisition.
ACQUISTIONS AND DISPOSALS OF NON-CONTROLLING INTERESTS
Acquisitions and disposals of non-controlling interests that do not result in a change of control are accounted for as transactions with owners
in their capacity as owners and therefore no goodwill is recognised as a result of such transactions. The adjustments to non-controlling
interests are based on a proportionate amount of the net assets of the subsidiary. Any difference between the price paid or received and the
amount by which non-controlling interests are adjusted is recognised directly in equity and attributed to the owners of the parent.
Prior to the adoption of IAS 27 (2008), goodwill was recognised on the acquisition of non-controlling interests in a subsidiary, which
represented the excess of the cost of the additional investment over the carrying amount of the interest in the net assets acquired at the date
of the transaction.
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 accrual’s 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 26.
SHARE PREMIUM ACCOUNT
The share premium reserve comprises the premium paid over the nominal value of shares for shares issued.
REVALUATION RESERVE
The Group’s properties are valued periodically and the difference between the valuation and the carrying value of the 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.
TRANSLATION RESERVE
The translation reserve comprises all foreign exchange differences arising from the translation of the financial statements of entities
reporting in currencies other than the US Dollar.
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.
AVAILABLE FOR SALE RESERVE
The available for sale reserve was created for movements in the carrying value of the Group’s investment in ProPhotonix Ltd.
RETAINED EARNINGS
Retained earnings brought forward from prior periods along with current year result.
36
Notes relating to the consolidated financial statements
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 underlying operating profit/(loss). This
measurement basis excludes the effects of adjusting items from the operating segments. “Head Office and unallocated” represent central
functions and costs.
The following is an analysis of the Group’s revenue and results by reportable segment:
52 Weeks ended 30 March 2019
Continuing
Machine
tools
& precision
engineered
components
Industrial
laser
systems
Head Office
&
unallocated
Segmental analysis of revenue
$000
$000
$000
Total revenue
44,575
20,592
Total Discontinued
$000
$000
1,572
65,167
Group Total
66,739
Segmental analysis of operating profit/(loss)
before Adjusting Items
3,610
2,563
(916)
5,257
Adjusting Items
(1,355)
(431)
(1,786)
Group operating profit/(loss)
2,255
2,563
(1,347)
3,471
Other segmental information:
Reportable segment assets
Reportable segment liabilities
Fixed asset additions
Depreciation and amortisation
38,666
9,492
8,188
56,346
(11,560)
(4,496)
(11,755)
(27,811)
686
275
559
292
-
46
1,245
613
(146)
(961)
(1,107)
1,108
-
-
-
5,111
(2,747)
2,364
57,454
(27,811)
1,245
613
37
Notes relating to the consolidated financial statements
1. SEGMENT INFORMATION (CONTINUED)
52 Weeks ended 31 March 2018
Restated
Continuing
Machine
tools
& precision
engineered
components
Industrial
laser
systems
Head Office
& unallocated
Total
Discontinued
Group Total
Segmental analysis of revenue
$000
$000
$000
$000
Total revenue
20,792
43,152
63,944
-
$000
1,573
Segmental analysis of operating profit/(loss)
before adjusting Items
1,459
2,100
(1,781)
Group operating profit/(loss)
1,459
2,100
(1,781)
1,778
1,778
Other segmental information:
Reportable segment assets
Reportable segment liabilities
Fixed asset additions
Depreciation and amortisation
40,176
9,867
55,620
(28,153)
(5,826)
(13,091)
146
373
544
294
4
-
105,663
(47,070)
694
667
385
385
-
-
-
-
$000
65,517
2,163
2,163
105,663
(47,070)
694
667
Inter-segment pricing is determined on an arm’s length basis. Segment results, assets and liabilities include items directly attributable to
a segment as well as those that can be allocated on a reasonable basis.
Segment capital expenditure is the total cost incurred during the period to acquire segment assets that are expected to be used for more
than one period.
Disaggregation of revenue is shown by origin, destination and product group in the following two tables:
All revenue is recognised at a point in time.
Disaggregation of revenue by origin
2019
2018
UK
North America
Australasia
$000
14,249
47,387
3,531
%
21.8
72.8
5.4
65,167
100.00
$000
13,430
47,262
3,252
63,944
%
21.0
73.9
5.1
100.0
38
Notes relating to the consolidated financial statements
1. SEGMENT INFORMATION (CONTINUED)
Disaggregation of revenue by destination:
Gross sales revenue:
UK
Other European
North America (USA)
Africa
Australasia
Central America
Middle East
Far East
Disaggregation of revenue by product group:
CNC lathes
Conventional lathes
CNC other
Conventional other
Workholding
Spares & service
Lasers
Laser spares and service
2019
2018
$000
%
$000
%
9,507
6,951
42,534
644
3,370
126
485
1,550
14.6
10.7
65.2
1.0
5.2
0.2
0.7
2.4
65,167
100.0
9,677
6,707
42,694
485
3,110
8
96
1,167
63,944
15.1
10.5
66.8
0.8
4.9
0.0
0.2
1.8
100.0
2019
2018
$000
%
$000
%
4,761
13,941
1,209
11,587
7,062
5,620
19,814
1,173
65,167
7.3
21.4
1.9
17.8
10.8
8.6
30.4
1.8
100.0
4,972
12,838
1,284
11,402
6,175
6,447
18,862
1,964
63,944
7.8
20.0
2.0
17.8
9.7
10.1
29.5
3.1
100.0
There are no customers that represent 10% or more of the Group’s revenues.
Assets and liabilities related to contracts with customers:
The group has recognised the following assets and liabilities related to contracts with customers.
Current contract liabilities relating to deposits from customers
There are no assets arising from contracts with customers.
2019
$000
538
2018
$000
1,244
39
Notes relating to the consolidated financial statements
Remaining performance Obligations
The vast majority of the groups’ contracts are for the delivery of goods within the next 12 months for which the practical expedient in
paragraph 121(a) of IFRS 15 applies.
The following table shows how much of the revenue recognised in the current reporting year relates to carried forward contract liabilities:
Revenue recognised that was included in the contract liability balance at the
beginning of the year
2. NET OPERATING EXPENSES
– other operating income
Total other operating income
– administration expenses
– distribution costs
– adjusting items
Total operating expenses
Total net operating expenses
3. ADJUSTING ITEMS
2019
$’000
1,244
2019
$000
12
12
2019
$000
14,469
3,812
1,786
20,067
2018
$’000
627
2018
$000
12
12
2018
$000
16,408
3,407
-
19,815
20,055
19,803
The directors have highlighted transactions which are material and unrelated to the normal trading activity of the Group.
In the opinion of the directors the disclosure of these transactions should be reported separately for a better understanding of the
underlying trading performance of the Group. These underlying figures are used by the Board to monitor business performance, form the
basis of bonus incentives and are used for the purposes of the bank covenants.
These non-GAAP measures are explained in note 33 alternative performance measures and set out below in note 3. All adjusting items
are taken into account in the GAAP figures in the Income Statement.
These consist of the entries in relation to the UK final salary scheme in both years and the profit on the disposal of the ProPhotonix
shares in the previous year. In addition, the adjustment to the carrying value of the amortised loan note expenses in the current year, as
a result of the extension of these instruments by a further two years, and the prior year’s amortisation have been included as adjusting
items. The items below correspond to the table below;
a) The buy-out of the Group pension scheme was completed in April 2019 but during the year ended March 2019 the trustees
undertook a number of exercises to reduce the liabilities of the scheme which had an actuarial cost. Given these had a beneficial
effect on the ultimate buy out cost of the scheme they were supported by the Group. A charge of $1.28m plus $0.08m of
associated legal costs was included as a result of work by the Trustees of the UK pension scheme and the Group in reducing
pension liabilities.
b) As a result of the outsourcing of manufacturing in the UK, the existing premises were vacated, and a sublet is in the process
of negotiation. An onerous lease provision of $0.4m has been provided as a result of this and shown in adjusting items.
c) A credit of $1.26m (2018: credit of $1.74m) is recorded in financial income in respect of the final salary pension scheme. No cash
was paid to or received from the scheme in respect of this transaction which arises as a pension accounting entry under the
required standard due to the surplus in the scheme recorded in the balance sheet.
d) The adjustment to the carrying value of the amortised loan note costs in the year is shown as a credit of $0.8m in financial income
with the corresponding charge for the 2018 year shown in financial expense.
e) An additional credit of $1.26m was recorded in the prior year as a result of the sale of the Group’s holding in ProPhotonix Ltd at
the end of August 2017. This generated $1.97m of cash which was used to pay down UK debt.
f) As a result of the changes in the USA to the rates of taxation in the prior year, a significant charge of $0.6m was made to adjust
the deferred taxation assets.
g) An amount of $0.96m has been recorded against the value of the Gamet Bearings assets available for sale to bring their carrying
value into line with the expected proceeds of sale, less costs to sell.
40
Notes relating to the consolidated financial statements
3. ADJUSTING ITEMS (CONTINUED)
Adjusting items
Items included in operating profit:
Pensions charge (a)
Pensions legal costs (a)
Onerous lease charges (b)
Items included in financial income/(expense):
Pensions interest on surplus (c)
Adjustment to loan notes (d)
Financial income
Amortisation of loan note expenses
Profit on disposal of ProPhotonix Ltd (e)
Total adjusting items before tax
Taxation effect of rate range in the USA (f)
Income tax on adjusting items
Total adjusting items after tax
Loss on discontinued activity (g)
2019
$000
(1,277)
(78)
(431)
(1,786)
1,255
822
2,077
-
-
291
-
(48)
243
(961)
Restated
2018
$000
-
-
-
-
1,741
-
1,741
(290)
1,256
2,707
(630)
(609)
1,468
-
During the prior year the Group incurred costs with regard to the reorganisation of TYKMA Inc and the integration of the Electrox Laser
marking spares and service division into the UK machine tools operation and redundancy exercises were carried out in the UK machine
tools operation, Amounts of $764k and $1m were previously disclosed as adjusting items in cost of sales and administration costs
respectively but have been incorporated in normal operating costs in the comparative figures in line with the revised definition of adjusting
items. Costs of redundancy and restructuring in the current year have been included in normal activity.
4. OPERATING PROFIT/(LOSS)
Operating profit/(loss) is after charging/(crediting):
– depreciation of assets, including those held under finance leases
– amortisation of development expenditure and trademarks
– hire of plant
– other operating lease rentals
– profit / (loss) on sale of property, plant and equipment
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 the UK)
– other services relating to tax compliance
– other services relating to tax advisory
2019
$000
540
73
5
28
461
65
2018
$000
596
71
6
42
(29)
65
122
120
45
24
66
25
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.
41
Notes relating to the consolidated financial statements
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
2019
$000
2018
$000
11,616
1,370
454
30
45
12,614
1,453
473
29
39
13,515
14,608
In addition to the above staff costs, redundancy costs of $74,670 were incurred during the year (2018: $1,121,000). Directors’ emoluments
including disclosure of the highest paid director are included in the Directors’ Emoluments table and table of Directors’ share options
contained within the Remuneration report (pages 16-18).
The average number of employees of the Group (including Executive Directors) during the period was as follows:
Management and administration
Production
Sales
Total
6. FINANCIAL INCOME AND EXPENSE
Bank and other interest
Interest on employee benefit surplus
Loan note and net adjustment
Financial income
Bank overdraft and loan interest
Other loan interest
Other finance charges
Finance charges on finance leases
Interest on employee benefit liabilities
Amortisation of loan notes expenses
Financial expense
2019
Number
2018
Number
57
72
64
193
67
79
71
217
2019
$000
35
1,255
822
2,112
(236)
(948)
(1)
(6)
(45)
-
(1,236)
2018
$000
-
1,741
-
1,741
(234)
(925)
(8)
(15)
(47)
(243)
(1,472)
42
Notes relating to the consolidated financial statements
7. TAXATION
Current tax:
Corporation tax at 19% (2018: 19%):
– current period
Overseas taxation:
– current period
Total current tax credit charge
Deferred taxation:
– current period
– effect of rate change in USA
– prior period
Total deferred taxation credit/(charge) (Note 14)
Taxation charged to the income statement
2019
$000
Restated
2018
$000
-
77
77
92
-
(283)
(191)
(114)
-
(340)
(340)
358
(630)
(98)
(370)
(710)
The rate for tax in the USA was changed from 34% to 21% during the previous year requiring a remeasurement of deferred tax assets in
the USA.
Restated for Gamet Bearings now shown as a discontinued operation and the effects of IFRS 15 & 9 (see note 35).
TAX RECONCILIATION
The tax charge assessed for the period is lower than (2018: higher than) the standard rate of corporation tax in the UK of 19% (2018:
19%). The differences are explained below:
Profit before tax
Profit before tax multiplied by the standard rate of corporation tax
2019
%
$000
4,347
Restated
2018
%
$000
3,303
in the UK of 19% (2018: 19%)
826
19.0
628
19.0
Effects of:
– income not taxable and/or expenses not deductible
– overseas tax rates
– pension fund surplus taxed at higher rate
– US state taxes
– utilisation of discontinued business losses
– deferred tax prior period adjustment
– impact of rate change in the UK on deferred tax
– tax losses utilised not previously recognised
– additional deferred tax recognised on losses in the period
– R&D claims in the USA (prior periods)
– impact of rate change in the USA
Taxation charged to the income statement
Deferred taxation balances are analysed in note 14.
274
14
3
166
(140)
-
290
(912)
(124)
(283)
-
114
6.3
0.3
0.0
3.8
(3.2)
-
6.7
(20.1)
(2.8)
(6.5)
-
2.6
11
58
97
52
-
98
-
-
0.3
1.8
2.9
1.6
-
3.0
-
-
(864)
(26.2)
630
710
19.1
21.5
43
Notes relating to the consolidated financial statements
8. DIVIDENDS
A final dividend of 0.5p has been proposed, payable on 30 September 2019 to holders on the register at 30 August 2019.
Interim Dividend paid September 2018 (0.5p/share)
Final Dividend paid December 2018 (0.25p/share)
Total
2019
$000
736
368
1,104
2018
$000
-
-
-
9. EARNINGS PER SHARE
The calculation of the basic earnings per share of 3.75c (2018: 2.38c) is based on the earnings for the financial period attributable to the
Parent Company’s shareholders of a profit of $4,233,000 (2018: $2,593,000) and on the weighted average number of shares in issue
during the period of 112,973,341 (2018: 108,902,335). At 30 March 2019, there were 7,5000,000 (2018: 6,650,000) potentially dilutive
shares on option with a weighted average effect of 1,191,415 (2018: 790,601) shares giving a diluted earnings per share of 3.71c (2018:
2.37c).
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
Weighted average number of the 7,500,000 (2018: 6,650,000) potentially dilutive shares
Total Weighted average diluted shares
Total post tax earnings continuing
Total post tax earnings including discounted activity
Basic EPS
Diluted basic EPS
Total including discontinued
Basic EPS
Diluted basic EPS
Underlying earnings
Total post tax earnings continuing
Pension cost
Pensions legal costs
Onerous lease charges
Pensions Interest
Amortisation of loan notes
Adjustment to amortisation of loan notes
Profit on disposal of ProPhotonix Ltd
Tax effect of rate change in USA
Tax on adjusting items
Underlying earnings after tax
Underlying basic EPS
Underlying diluted EPS
2019
2018
112,973,341 104,357,957
- 4,544,378
112,973,341 108,902,335
1,191,415
790,601
114,164,756 109,692,936
4,233
3,126
3.75c
3.71c
2.77
2.74
$000
4,233
1,277
78
431
Restated
2,593
2,905
2.38c
2.37c
2.67
2.65
$000
2,593
-
-
-
(1,255)
(1,741)
-
(822)
-
-
48
3,990
3.53c
3.50c
290
-
(1,256)
630
609
1,125
1.03c
1.03c
44
Notes relating to the consolidated financial statements
10. EMPLOYEE SHARE OPTION SCHEMES
The Group has granted share options to employees under The 600 Group PLC Deferred Share Plan 2011. The scheme is equity-settled.
SHARE-BASED EXPENSE
The Group recognised a total charge of $45,000 (2018: $39,000) in relation to equity-settled share-based payment transactions.
The number and weighted average exercise price 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
2019
DSP
2018
DSP
6,650,000
850,000
-
-
6,650,000
-
-
-
7,500,000
6,150,000
6,650,000
5,150,000
On 19 November 2012 1,750,000 options with an exercise price of 10p were granted, and on 7 April 2014 3,400,000 options with an
exercise price of 17p were granted. On 6 August 2015 1,000,000 shares with an exercise price of 18p were granted, and on 1 September
2016 500,000 nil cost options were granted. On 27 November 2018, 800,000 nil cost options were granted and further 50,000 nil cost
options on 29 March 2019. All options are exercisable between 3 and 10 years from the date of grant.
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 is 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
2019
Grant
14p
17p
0p
5%
5%
2016
Grant
10p
10p
0p
0%
2015
Grant
4p
18p
18p
0%
2014
Grant
4p
17p
17p
0%
2012
Grant
4p
10p
10p
0%
50%
50%
25%
50%
3.0 years
3.0 years
3.0 years
3.0 years 3.0 years
1.36%
850,000
1.36%
1.36%
4.08%
4.08%
500,000 1,000,000
3,400,000 1,750,000
45
Notes relating to the consolidated financial statements
11. PROPERTY, PLANT AND EQUIPMENT
Cost or valuation
At 31 March 2018
Exchange differences
Transfers from/(to) inventory
Transfer to assets held for sale
Additions during period
Disposals during period
At 30 March 2019
Depreciation
At 31 March 2018
Exchange differences
Transfers from/(to) inventory
Transfer to assets held for sale
Charge for period
Disposals during period
At 30 March 2019
Net book value
At 30 March 2019
At 31 March 2018
Land
and buildings
Leasehold
Plant and
Fixtures,
fittings,
tools and
Freehold improvements
machinery
equipment
$000
$000
$000
$000
1,713
(125)
-
(650)
-
(17)
921
104
(6)
-
(97)
29
(3)
27
894
1,609
703
(1)
3
-
29
-
734
80
-
(2)
-
30
-
108
626
623
14,487
3,891
(917)
14
(2,961)
451
(7,873)
3,201
(22)
(17)
-
765
(260)
4,357
13,710
2,789
(873)
(118)
(2,620)
206
(7,723)
2,582
619
777
(16)
120
-
275
(107)
3,061
1,296
1,102
Total
$000
20,794
(1,065)
-
(3,611)
1,245
(8,150)
9,213
16,683
(895)
-
(2,717)
540
(7,833)
5,778
3,435
4,111
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.
The net book value of property, plant and equipment includes $270,329 (2018: $241,000) of assets held under finance leases. The
depreciation charged in the period against assets held under finance leases was $62,000 (2018: $53,000).
Various freehold properties with a net book value of $895,000 (2018: $1,609,000) are charged as security for borrowing facilities.
46
Notes relating to the consolidated financial statements
11. PROPERTY, PLANT AND EQUIPMENT (CONTINUED)
Land
and building
Leasehold
Plant and
Fixtures,
fittings,
tools and
Freehold improvements
machinery
equipment
$000
$000
$000
$000
Total
$000
Cost or valuation
At 1 April 2017
Exchange differences
Transfers from/(to) inventory
Additions during period
Disposals during period
At 31 March 2018
Depreciation
At 1 April 2017
Exchange differences
Charge for period
Disposals during period
At 31 March 2018
Net book value
At 31 March 2018
At 1 April 2017
631
13,562
3,653
19,475
1,629
84
-
-
-
5
-
67
-
1,402
(503)
185
(159)
1,713
703
14,487
68
8
28
-
104
40
2
38
-
80
12,118
1,327
296
(31)
38
(5)
442
(237)
3,891
2,581
25
234
(51)
1,529
(508)
694
(396)
20,794
14,807
1,362
596
(82)
13,710
2,789
16,683
1,609
1,561
623
591
777
1,444
1,102
1,072
4,111
4,668
47
Notes relating to the consolidated financial statements
12. GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill
Trademarks
Expenditure
Software
$000
$000
$000
$000
Development
IT
Cost
At 31 March 2018
Additions
Disposals
Foreign exchange
At 30 March 2019
Amortisation and impairment
At 31 March 2018
Amortisation
Foreign exchange
At 30 March 2019
Net book value
At 30 March 2019
At 31 March 2018
10,329
312
-
-
-
-
-
-
10,329
312
- 256
-
45
-
(1)
- 300
10,329
10,329
12
56
406
1,200
(639)
15
982
55
28
-
83
899
351
Total
$000
11,047
1,399
(639)
15
11,822
311
73
(1)
383
-
199
-
-
199
-
-
-
-
199
-
11,439
10,736
The additions to Development Expenditure of $1,200k in the period and $87k in the prior period related primarily to internal development.
Cost
At 1 April 2017
Additions
Disposals
Foreign exchange
At 31 March 2018
Amortisation and impairment
At 1 April 2017
Amortisation
Foreign exchange
At 31 March 2018
Net book value
At 31 March 2018
At 1 April 2017
Goodwill
Trademarks
Expenditure
$000
$000
$000
Total
$000
Development
10,329
312
310
10,951
-
-
87
87
-
-
-
-
-
-
9
9
10,329
312
406
11,047
-
205
35
240
-
51
20
71
-
-
-
-
-
256
55
311
10,329
56
351
10,736
10,329
107
275
10,711
Amortisation and impairment charges are recorded in the following line item in the income statement:
Operating expenses
2019
$000
73
2018
$000
71
48
Notes relating to the consolidated financial statements
12. GOODWILL AND OTHER INTANGIBLE ASSETS (CONTINUED)
IMPAIRMENT OF GOODWILL
Goodwill of $10.329m 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. The Industrial Laser Systems Division is regarded as one cash-generating unit and as such this
supports the carrying value of the goodwill. The impairment review comprised a comparison of the goodwill 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 12.9%.
Cash flows are extrapolated beyond their term (of between 1 and 4 years) using an estimated growth rate of 3% and are appropriate
because these are long term businesses. Growth rates used are consistent with the long-term average growth rates for the industries
and countries in which the CGUs are located.
Sensitivity to changes in assumptions
With regard to the assessment of value in use for the CGU, the directors believe that reasonably possible changes in any of the above key
assumptions would not cause the carrying value of the unit to exceed its recoverable amount.
13. INVESTMENTS
The 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; Coborn
Insurance Company Limited and The 600 Group Pension Trustees Limited*.
All subsidiary undertakings in England & Wales have their registered offices at Lowfields Way, Lowfields Business Park, Elland, West
Yorkshire, HX5 9DA except Coborn Insurance Company Limited, whose registered office is PO Box 34, St Martin's House, Le
Bordage, St Peter Port, Guernsey, GY1 4AU.
600 UK Limited’s principal activity is the design and distribution of machine tools and precision engineered components. Electrox Laser
Limited’s principal activity is the design, manufacture and distribution of industrial laser systems. Coborn Insurance Company Limited is
a captive insurance company and all other subsidiary undertakings in England & Wales are dormant or holding companies.
US:
600 Group Inc
Clausing Industrial, Inc
TYKMA Inc
Clausing Industrial, Inc’s principal activity is the design and distribution of machine tools and precision engineered components.
TYKMA Inc’s principal activity is the design, manufacture and distribution of industrial laser systems. 600 Group Inc is a holding
company.
Clausing Industrial, Inc and 600 Group Inc both have a registered office at 3963 Emerald Drive, Kalamazoo, Michigan 49001, US.
TYKMA Inc has a registered office at 370 Gateway Drive, Chillicothe, Ohio 45601, US.
REST OF THE WORLD:
600 Machine Tools (Pty) Ltd – (Australia)
600 Machine Tools (Pty) Ltd’s principal activity is the design and distribution of machine tools and precision engineered components. The
registered office address is 27 Foundry Road, 7 Hills, New South Wales, Australia.
All undertakings marked * are 100% owned directly by the Parent Company. The others are 100% owned through intermediate holding
companies. All undertakings above are included in the consolidated accounts.
49
Notes relating to the consolidated financial statements
14. DEFERRED TAX ASSETS AND LIABILITIES
RECOGNISED DEFERRED TAX ASSETS AND LIABILITIES
Deferred tax assets and liabilities are attributable to the following:
Decelerated capital allowances
Short-term timing differences
Tax losses
Overseas tax losses
Employee benefits
Revaluations and rolled over gains
Net tax assets/(liabilities)
Liabilities
Net
2019
2018
2019
$000
$000
1,216
-
-
-
-
-
$000
950
344
2,585
699
-
-
-
2018
Restated
$000
1,216
347
2,958
614
Assets
2019
$000
950
344
2,585
699
-
-
2018
Restated
$000
347
2,958
614
-
-
(2,292)
(18,752)
(2,292)
(18,752)
4,578
5,135
(2,541)
(19,020)
(249)
(268)
(249)
2,037
(268)
(13,885)
MOVEMENT IN DEFERRED TAX DURING THE PERIOD
Decelerated capital allowances
Short-term timing differences
Tax losses
Overseas tax losses
Employee benefits
Revaluations and rolled over gains
As at
1 April
2018
$000
1,216
314
2,958
614
(18,752)
(268)
(13,918)
IFRS
15 & 9
Adjustments
-
33
-
-
-
-
Restated
As at
1 April
2018
$000
1,216
347
2,958
614
(18,752)
(268)
Statement of
As at
Income
comprehensive
Exchange
30 March
statement
income
Fluctuations
$000
(167)
(3)
(166)
85
$000
-
-
-
-
$000
(99)
-
(207)
-
2019
$000
950
344
2,585
699
60
15,071
1,329
(2,292)
-
-
19
(249)
2,037
33
(13,885)
(191)
15,071
1,042
Deferred taxation at 35% is applied to UK pension assets, being the rate applicable to refunds from a scheme, as opposed to the normal
rate of 19%.
The rate of UK corporation tax reduced to 19% effective from 1 April 2017 and will reduce to 17% (effective from 1 April 2020. The
deferred tax assets and liabilities at the balance sheet date have been calculated based on these rates).
US deferred tax is provided at 25% (2018: 21%) including an allowance for State/local taxes of 4%
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.
2019
$000
2,588
1,986
2018
$000
2,340
3,647
50
Notes relating to the consolidated financial statements
15. INVENTORIES
Raw materials and consumables
Work in progress
Finished goods and goods for resale
2019
$000
63
1,264
17,703
19,030
2018
$000
135
2,139
17,686
19,960
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.
Inventories included within Cost of Sales amounted to $38.4m (2018: $38.1m)
During the period inventory provisions have increased by $643,000 (2018: decreased by $942,000). Following the impairment provisions,
inventories are valued at lower of cost and net realisable value.
16. TRADE AND OTHER RECEIVABLES
Trade receivables
Other debtors
Other prepayments and accrued income
Taxation
The trade receivables disclosed above are shown net of the provisions which are disclosed below.
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
2019
$000
7,599
540
1,024
9,163
2019
$000
294
2018
$000
8,113
425
1,188
9,726
2018
$000
-
2019
$000
2018
$000
5,823
6,743
1,771
11
90
40
1,671
429
31
53
7,735
8,927
51
Notes relating to the consolidated financial statements
16. TRADE AND OTHER RECEIVABLES (CONTINUED)
At 30 March 2019 the lifetime expected loss provision for trade receivables is as follows:
Expected loss ratio
current
0-3 months
3-6 months
6-12 months
0%
0%
53%
100%
Gross carrying amount
$'000
5,823
$'000
1,771
$'000
11
$'000
90
over 12
months
100%
$'000
40
Total
$'000
7,735
Loss provision
-
-
6
90
40
136
Movement in the loss provision for trade receivables has been included in cost of sales in the consolidated statement of comprehensive
income and receivables are shown net of allowance. In the previous period’s impairment was assessed under IAS 39 but has been
amended under IFRS 9 based upon the loss experience over the past five years.
The movement in the loss provision has been as follows:
At 30 /31 March under IAS 39
Restated on adoption of IFRS 9 (note 35)
Opening provision for impairment
Exchange difference on opening balance
Utilised in the period/unused provision released
Provided in the period
Closing provision
2019
$000
274
43
317
(12)
(169)
-
136
2018
$000
274
-
274
(111)
-
111
274
52
Notes relating to the consolidated financial statements
17. ASSETS CLASSIFIED AS HELD FOR SALE AND DISCONTINUED ACTIVITIES
The Gamet Bearings business is a separate operation within the UK, manufacturing precision bearings. As part of the strategy to reduce
the Group’s exposure to manufacturing and the requirement for ongoing capital expenditure the business is in the process of being sold
to another bearing manufacturer in the UK. The operations of this business are shown as discontinued in both the current and comparative
period and all revenue and costs have been removed from the Consolidated Income Statement and replaced by the after-tax profit or
loss from the discontinued operation shown after the results of continuing operations.
The directors have been in discussions for a number of months over the sale of the Gamet Bearings business and a disposal is expected
to be completed during the Autumn of 2019.The assets for sale have been classified as held for sale in the consolidated statement of
financial position at 30 March 2019 and consist of inventory, freehold property and plant equipment to the value of $1,108,000. An
impairment loss of $961,000 on the measurement of the disposal group to fair value less cost to sell has been recognised and is included
in adjusting items in loss attributable to discontinued activity in the consolidated income statement. The fair value of net asset are
categorised as level 3 non-recurring fair value measurement. The valuation techniques and unobservable inputs used in determining the
fair value of assets held for sale are market pricing data for similar assets.
Before
After
Before
After
Adjusting
Adjusting
Adjusting
Adjusting
Adjusting
Adjusting
Items
Items
Items
Items
Items
Items
52 weeks
52 weeks
52 weeks
52 weeks
52 weeks
52 weeks
ended
ended
ended
ended
ended
ended
30 March
30 March
30 March
31 March
31 March
31 March
2019
$000
2019
$000
2019
$000
2018
$000
2018
$000
2018
$000
Gamet Bearings discontinued operation
Revenue
Cost of sales
Gross profit/(loss)
Net operating expenses
(Loss)/profit before tax
Income tax (charge)
1,572
(1,382)
190
(336)
(146)
-
-
-
-
(961)
(961)
-
1,572
(1,382)
190
(1,297)
(1,107)
-
(Loss)/profit for the period
(146)
(961)
(1,107)
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
Obligations under finance leases (note 22)
NON-CURRENT:
Bank loans
8% Loan Notes
Obligations under finance leases (note 22)
1,573
(1,053)
520
(135)
385
(73)
312
-
-
-
-
-
-
-
2019
$000
818
130
948
2019
$000
5,189
127
5,316
2019
$000
572
9,517
84
10,173
1,573
(1,053)
520
(135)
385
(73)
312
2018
$000
1,536
140
1,676
2018
$000
4,984
41
5,025
2018
$000
842
11,287
122
12,251
53
Notes relating to the consolidated financial statements
19. LOANS AND OTHER BORROWINGS (CONTINUED)
The $9.5m (£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 shares or to purchase
shares at 20p for a cash consideration. The loan has both debt and equity components and $195,000 is shown in equity reserve and the
balance after deduction of associated costs and amortisation of $1.2m, is shown in non-current borrowings. Costs are amortised to the
income statement over the term of the loan. The loan notes and the warrants expiration date was extended by two years to 14 February
2022. In accordance with IFRS 9 an adjustment to the carrying value of the amortised loan note cost was made and the corresponding
amount credited to the income statement. The cost incurred will be amortised over the remaining term.
Facilities from HSBC include a $5m trade and invoice finance facility, of which $0.7m had been utilised at the year-end, and a mortgage
for the Colchester property of $0.3m which will be repaid on a monthly basis through to March 2020, but will be repaid in full from the
proceeds of the sale of the Gamet business.
US Dollar denominated term loans of $0.1m and $0.5m are to be repaid on a monthly basis through to March 2019 and April 2021
respectively in equal instalments with an interest rate of 2.25% above base, with revolving credit loans in addition of $7.5m.
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:
Trade payables
Social security and other taxes
Other creditors
Accruals
Contract liabilities
Taxation
21. PROVISIONS
Provision carried forward at 31 March 2018
Exchange differences
(Credited)/charged to income statement
Utilised in the period
Provision carried forward at 30 March 2019
2019
$000
2018
$000
4,292
199
1,323
1,743
538
8,095
2019
$000
-
Onerous lease
Warranties
$000
-
-
429
-
429
$000
53
(3)
(9)
(23)
18
4,010
405
1,347
2,199
1,244
9,205
2018
$000
291
Total
$000
53
(3)
420
(23)
447
The timing of warranty payments are uncertain in nature. The warranty provisions are calculated based on historical experience of claims
received, taking into account recent sales of items which are covered by warranty. The provision relates mainly to products sold in the
last twelve months. The typical warranty period is now twelve months.
Onerous lease provisions
Following the move of the UK business to the new facility in Elland, a sub-let of the old premises is in the process of being negotiated
and a consequent cost has been provided.
54
Notes relating to the consolidated financial statements
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
112,973,341 ordinary shares of 1p each on issue at start of the period (2018: 104,357,957 ordinary shares)
2017 - 8,615,384 ordinary shares of 1p each issued in September 2017
112,973,341 ordinary shares of 1p each on issue at end of period (2018: 104,357,957 ordinary shares of 1p)
Total Allotted, called-up and fully paid at the end of period
2019
$000
127
84
-
211
127
84
211
2019
$000
1,746
-
1,746
1,746
2018
$000
41
124
(2)
163
41
122
163
2018
$000
1,629
117
1,746
1,746
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.
8,615,384 shares were issued on 20 September 2017 at a price of 13p (17.6c) $116,687 was allocated to share capital and $1,400,241
to share premium.
The Company has raised £8.5m ($9.6m) through the issue of loan notes. The loan notes maturity was extended by two years in February
2019 to end on 14 February 2022 and carry a coupon of 8% payable quarterly in arrears. The subscribers for loan notes also received
warrants with an expiry date which was also extended by two years to 14 February 2022 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.
24. RECONCILIATION OF NET CASH FLOW TO NET DEBT
(Decrease)/increase in cash and cash equivalents
(Increase)/decrease in debt and finance leases
(Increase)/decrease in net debt from cash flows
Net debt at beginning of period
Loan note credit/(amortisation)
Exchange effects on net funds
Net debt at end of period
2019
$000
(641)
(61)
(702)
2018
$000
417
3,041
3,458
(15,600)
(17,090)
982
779
(243)
(1,725)
(14,541)
(15,600)
55
Notes relating to the consolidated financial statements
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
At
31 March
Exchange
2018
$000
1,536
140
1,676
(4,984)
(842)
(11,287)
(163)
(15,600)
movement
$000
(77)
(10)
(87)
42
25
788
11
779
At
30 March
2019
$000
818
130
948
(5,189)
(572)
Cash flows
$000
(641)
-
(641)
(247)
245
-
(9,517)
(59)
(702)
(211)
(14,541)
Other
$000
-
-
-
-
-
982
-
982
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 applies the IFRS 9 simplified approach to measuring expected credit losses using a lifetime expected credit loss provision for
trade receivables. To measure expected credit losses on a collective basis, trade receivables are grouped based on similar credit risk and
ageing. The expected loss rates are based on the Group’s historical credit losses experienced over the five-year period prior to the period
end. The historical loss rates are then adjusted for current and forward-looking information on macroeconomic factors affecting the
Group’s customers. The Group has identified the gross domestic product (GDP), purchasing managers index and inflation rate as the key
macroeconomic factors in the countries where the Group operates.
The Directors determine the appropriate capital structure of the Group between funds raised from equity shareholders (equity), through
the issue of shares and retention of profits generated, and funds borrowed from financial institutions, other businesses, individuals and
preference shareholders (debt) in order to finance the Group’s activities both now and in the future. The Board’s objectives when
managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide returns to Shareholders and
benefits to other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. In order to maintain or adjust the
capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares
or sell assets to reduce debt.
The 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.
56
Notes relating to the consolidated financial statements
26. FINANCIAL INSTRUMENTS (CONTINUED)
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 the 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 fair values of all financial instruments, throughout the reporting periods, approximate to their carrying values except for the Loan
Notes which have a carrying value net of issued costs. The fair value is deemed to be the gross loan amount.
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, have less of an influence on
credit risk. Geographically, there is a concentration of credit risk in the USA in respect of trade receivables.
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 applies the IFRS 9 simplified approach to measuring expected credit losses using a lifetime expected credit loss provision for
trade receivables. To measure expected credit losses on a collective basis, trade receivables are grouped based on similar credit risk
and ageing. The expected loss rates are based on the Group’s historical credit losses experienced over the five year period prior to the
period end. The historical loss rates are then adjusted for current and forward-looking information on macroeconomic factors affecting
the Group’s customers. The Group has identified the gross domestic product (GDP), unemployment rate and inflation rate as the key
macroeconomic factors in the countries where the Group operates.
The carrying value of financial assets represents the maximum credit exposure.
The exposure to credit risk for trade receivables at the reporting date by geographic region was:
UK
North America
Australasia
2019
$000
2,292
4,673
634
7,599
Restated
2018
$000
2,781
5,069
263
8,113
57
Notes relating to the consolidated financial statements
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 short term 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:
Bank loan
Trade finance
8% loan notes
Finance lease obligations
Interest bearing financial liabilities
Trade and other payables
Financial liabilities
Bank loan
8% loan notes
Finance lease obligations
Interest bearing financial liabilities
Trade and other payables
Financial liabilities
Contractual
Less than
2019
Carrying
Amount
$000
cash flows
$000
5,035
5,035
726
726
9,517
9,517
211
211
15,489
7,896
23,385
15,489
7,896
23,385
2018
Carrying
Amount
$000
1 year
$000
4,713
726
-
127
5,566
7,896
13,462
1–2 years
2–5 years
$000
322
-
-
84
406
-
406
$000
-
-
9,517
-
9,517
-
9,517
Contractual
Less than
cash flows
$000
1 year
$000
1–2 years
2–5 years
$000
$000
5,826
5,826
4,984
310
532
11,287
11,287
- 11,287
-
163
163
41
122
-
17,276
17,276
5,025 11,719
532
8,800
8,800
8,800
-
-
26,076
26,076
13,825
11,719
532
MARKET RISK
Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect the Group’s
income. The objective of market risk management is to manage and control market risk exposures within acceptable parameters,
while optimising the return on risk.
58
Notes relating to the consolidated financial statements
26. FINANCIAL INSTRUMENTS (CONTINUED)
CURRENCY RISK
The Group is exposed to currency risk on sales, purchases and borrowings that are denominated in a currency other than the functional
currency of the operating entity, primarily Sterling, the Euro (€) and US Dollars ($).
The Group’s exposure to foreign currency risk may be summarised as follows:
Trade receivables
Trade payables
Balance sheet exposure
2019
Sterling
US Dollars
£000
67
(10)
57
$000
361
(64)
297
Euro
€000
675
(432)
243
2018
Sterling
US Dollars
£000
236
(1)
235
$000
382
(126)
256
Euro
€000
695
(208)
487
Some Group operations on occasions 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. As at the year-end there were no
forward contracts outstanding (2018: none). Exposures arising from the translation of intra-group lending are managed through the use of
borrowings in the relevant foreign currency.
In considering the impact on the retranslation of non-functional currency monetary assets and liabilities in the Group's operations arising
from a, reasonably possible, 10% movement in the Group’s principal foreign currency exchange rates at the year-end date, the directors
have assessed the effect on the profit before tax to be insignificant to the group. As a result no further disclosure of the sensitivity to
potential exchange rate variances of the above monetary assets and liabilities is given.
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
Change if
Net cash/ interest rates
borrowings
in foreign
in foreign
Currency
currency
change by
1%
$’000
$’000
(4,216)
(370)
(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 30 March 2019, 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 $0.04m (2018: charge of $0.08m). A reduction of 100 basis points would have the equal and opposite
effect. There is no further impact on shareholders' equity.
59
Notes relating to the consolidated financial statements
26. FINANCIAL INSTRUMENTS (CONTINUED)
HEDGING OF FLUCTUATIONS IN FOREIGN CURRENCY
The Group is exposed to foreign currency risk on sales, purchases and borrowings of balances held and transactions in non-functional
currency of the operating entity.
Forward exchange contracts are occasionally used to hedge 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 functional currency of the entity, 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, loan notes, overdrafts and cash. These financial instruments are used for the
purpose of funding the Group’s operations.
In addition, the Group enters into forward currency derivative transactions on occasion which have been used in the management of risks
associated with currency exposure. There were no contracts in place at the period-end.
ASSETS AND LIABILITIES
The Group does not hedge account but occasionally uses derivative financial instruments to hedge its commercial exposure to foreign
exchange. These instruments are recognised at fair value. Any gain or loss is immediately recognised in the income statement.
The fair value of forward exchange contracts used at 30 March 2019 was a liability of $nil (2018: liability of $nil).
FINANCIAL ASSETS
The Group’s financial assets comprise cash and trade receivables. The profile of the financial assets at 30 March 2019 and 31 March
2018 was:
2019
2018 Restated
Financial
assets
Financial
assets
Floating rate
Fixed rate
on which
Floating rate
Fixed rate
on which
financial
financial
no interest
financial
financial
no interest
assets
assets
is earned
$000
734
84
-
-
$000
130
-
-
-
$000
1,547
4,784
646
758
Total
$000
2,411
4,868
646
758
assets
$000
680
460
396
-
assets
is earned
$000
140
-
-
-
$000
2,822
4,994
256
855
Total
$000
3,642
5,454
652
855
818
130
7,735
8,683
1,536
140
8,927
10,603
Currency
Sterling
US Dollars
Australian Dollars
Euros
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.
The trade receivables are shown gross and do not include bad debt provisions.
60
Notes relating to the consolidated financial statements
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 30 March 2019 and 31 March 2018 was:
2019
Floating rate
Fixed rate
Financial
liabilities
on which
Floating rate
Fixed rate
2018
Financial
liabilities
on which
Currency
Sterling
US Dollars
Australian Dollars
Euro
financial
Financial
no interest
liabilities
Liabilities
$000
1,093
4,298
370
-
$000
9,559
88
81
-
is paid
$000
3,015
3,845
278
758
Total
$000
13,667
8,231
729
758
financial
liabilities
$000
976
4,850
-
-
financial
no interest
liabilities
$000
11,316
20
114
-
is paid
$000
2,913
5,301
330
256
Total
$000
15,205
10,171
444
256
5,761
9,728
7,896
23,385
5,826
11,450
8,800
26,076
The floating rate financial liabilities comprise bank borrowings and overdrafts that bear interest rates based on local currency base interest
rates.
BORROWING FACILITIES
At 30 March 2019 and 31 March 2018, 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 loan
Other loans
Finance lease obligations
Trade payables
2019
‘000
£3,736
$3,702
2018
‘000
£3,100
$2,907
AUD$180
AUD$500
2019
$000
9,163
948
Restated
2018
$000
9,726
1,676
(5,761)
(5,826)
(11,079)
(11,908)
(211)
(7,896)
(163)
(8,800)
(14,836)
(15,295)
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 except the Loan Notes which are shown at their gross value of $11.079m (2018:
$11.908m). Their carrying value in the accounts is shown net of issue costs.
61
Notes relating to the consolidated financial statements
27. CONTINGENT LIABILITIES
Third-party guarantees
2019
$000
193
2018
$000
213
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
2019
$000
335
2018
$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
2019
$000
1,088
4,547
7,458
13,093
-
-
-
2018
$000
730
2,907
2,398
6,035
2
8
10
30. EMPLOYEE BENEFITS
The Group operates UK and USA defined benefit pension schemes. The assets of these schemes are held in separate trustee-
administered funds.
The benefits from these schemes are based upon years of pensionable service and pensionable remuneration of the employee as defined
under the respective scheme provisions. The schemes are funded by contributions from the employee and from the employing company
over the period of the employees’ service. Contributions are determined by independent qualified actuaries based upon triennial actuarial
valuations in the UK and on annual valuations in the US.
UK
In relation to the fund in the UK, the Group’s funding policy is to ensure that assets are sufficient to cover accrued service liabilities. The
liabilities of the scheme were secured with an insurance policy in July 2018 and the scheme was wound up in April 2019.
As the buy-out of the scheme was not completed until after the March 2019 year end, the accounting and disclosure for the UK Scheme
are under IAS19 on the basis that the insurance policy securing the benefit is an asset of the scheme which matches the liabilities. The
liabilities have been valued under the prescribed requirements of IAS19.
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 30 March 2019. The disclosures for the US schemes that follow refer to the US
defined benefit scheme and the retirement healthcare benefit scheme.
62
Notes relating to the consolidated financial statements
30. EMPLOYEE BENEFITS (CONTINUED)
MORTALITY RATES
The mortality assumptions for the UK scheme are based on standard mortality tables CMI_2017 as used in the previous year with 1.75%
p.a. long term improvement rates which allow for future mortality improvements.
The mortality rates for the US scheme are based on the RP-2014 Mortality Table for males and females adjusted to 2006 total dataset
with improvement factor scale MP-2018.
IAS 19
Disclosures in accordance with IAS 19 are set out below. The principal assumptions used for the purpose of the IAS 19 valuation were
as follows:
Inflation under RPI
Inflation under CPI
Rate of increase to pensions in payment – RPI max 5%
Rate of increase to pensions in payment – RPI max 2.5%
Discount rate for scheme liabilities
2019
2018
UK scheme
UK scheme
% p.a.
3.60
3.10
3.35
2.20
2.15
% p.a.
3.45
2.95
3.25
2.15
2.50
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 30 March 2019 and 31 March 2018 were:
Assets
Liabilities
(Deficit)/surplus
2019
2018
US
UK
US
UK
Schemes
Schemes
Schemes
Schemes
$000
$000
939 236,952
(2,178) (229,493)
(1,239)
7,459
$000
$000
1,007
326,135
(2,232)
(271,816)
(1,225)
54,319
63
Notes relating to the consolidated financial statements
30. EMPLOYEE BENEFITS (CONTINUED)
Movement in net defined benefit asset (UK Scheme)
Defined benefit obligation
Fair value of plan assets
Net defined benefit asset
30 March
31 March
30 March
31 March
30 March
31 March
2019
$000
2018
$000
2019
$000
2018
$000
2019
$000
2018
$000
(271,816) (240,193)
326,135 305,870
54,319 65,677
16,367 -
-
-
8,091
-
(11,565)
-
(5,849)
18,890
(9,053)
(3,620)
(6,149)
(29,006)
-
-
(17,644)
-
(1,277)
-
(40,504)
(7,048)
-
-
(40,504)
(7,048)
8,091
-
-
-
-
-
7,099
(22,458)
713
7,895
35,480
143
(11,565)
-
1,250
(3,568)
713
(9,053)
(3,620)
1,746
6,474
143
16,389
16,205
(16,389)
(16,205)
-
-
(229,493)
(271,816)
236,952
326,135
7,459
54,319
Movement in net defined benefit liability (US Schemes)
Defined benefit obligation
Fair value of plan assets
Net defined benefit liability
30 March
31 March
30 March
31 March
30 March
31 March
2019
$000
2018
$000
(2,232)
(2,374)
(58)
(24)
(30)
(61)
67
(33)
2019
$000
1,007
35
38
(5)
6
-
-
-
-
166
169
(2,178)
(2,232)
57
(166)
939
58
(169)
1,007
2018
$000
2019
$000
2018
$000
1,085
(1,225)
(1,289)
(23)
(18)
(30)
57
(23)
62
(33)
58
-
-
(1,239)
(1,225)
Opening balance:
Past service settlement cost
Remeasurement (loss)/gain
Experience gain/(loss)
Change in assumptions – financial
Change in assumptions – demographic
Interest (cost)/income
Exchange differences
Contributions paid by employer
Benefits paid
Closing balance:
Opening balance:
Current service cost
Experience gain/(loss)
Interest (cost)/income
Contributions paid by employer
Benefits paid
Closing balance:
The Group contributed $13,000 to the UK pension scheme during the current period (2018: $143,000) and no contributions were overdue
at the period-end. The monthly payments of $13,000 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 $663,000. These contributions were suspended in April 2018 due to the
surplus in the scheme. No deficit reduction payments are currently required. In the US no employer contributions were made to the US
pension scheme during the current period (2018: $nil) and no payments were overdue at the period-end.
64
Notes relating to the consolidated financial statements
30. EMPLOYEE BENEFITS (CONTINUED)
Following a change to UK scheme rules in September 2012 any surplus after all liabilities have been paid is to be repaid to the Company
and consequently the accounting surplus is recognised on the Group balance sheet under IFRIC 14. Given the net surplus after tax was
received by the Company in May 2019 the surplus has been treated as a current asset in this year’s Statement of Financial Position.
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
30 March
30 March
31 March
31 March
2019
% p.a.
-
-
2.5
-
-
-
2.5
2.5
2019
$m
-
-
8.3
-
-
228.3
0.4
237.0
2018
% p.a.
2.5
2.5
2.5
2.5
2.5
-
2.5
2.5
2018
$m
-
0.6
203.1
106.9
11.5
-
4.0
326.1
1 April
2017
% p.a.
2.55
2.55
2.55
2.55
2.55
-
2.55
2.55
Value at
1 April
2017
$m
10.5
6.3
244.4
1.6
40.2
-
2.9
305.9
Equities
Property
LDI funds
Bonds
Absolute Return
Insurance policy
Other/cash
Combined
The LDI funds referred to relate to Liability Driven Investment funds which have been increasingly utilised by the pension scheme. LDI funds
represent investments in a Liability Driven Investment fund via a Pooled Investment Vehicle. With the exception of cash, the remaining
scheme investments comprise of Pooled Investment Vehicles.
Investments are included at fair value as follows:
Pooled Investment Vehicles which are not traded on active markets, but where the investment manager has provided a monthly trading price,
are valued using the last bid price, provided by the investment manager at the year end.
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 pension scheme amount to $939m (2018: $1,007m) and are held mainly in bonds.
Amounts recognised in the income statement in respect of the defined benefit schemes before taxation are as follows:
2019
US
UK
schemes
scheme
$000
$000
8
-
-
1,277
Total
$000
8
1,277
US
schemes
$000
9
-
45
-
45
47
2018
UK
scheme
$000
-
-
-
Total
$000
9
-
47
Included within operating profit:
– current service cost
– Settlements (adjusting items)
Included within financial expense:
– interest on pension liabilities
Included within financial income:
– interest on pension surplus (adjusting items)
-
(1,255)
(1,255)
-
(1,741)
(1,741)
The settlements figure of $1,277,000 relates to liability reduction exercises during the year which had an actuarial cost but given this
had a beneficial effect on the purchase cost of the insurance policy it was supported by the Company. These resulted in actuarial
adjustments to the pension liabilities, which are processed through the Consolidated Income Statement.
65
Notes relating to the consolidated financial statements
30. EMPLOYEE BENEFITS (CONTINUED)
Amounts recognised in the statement of comprehensive income are as follows:
Return on plan assets
Experience gain/(loss) on liabilities
Change in assumptions - financial
Change in assumptions - demographic
Amounts recognised during the period
Exchange adjustment
Balance brought forward
Balance carried forward
US
schemes
$000
(6)
45
-
-
39
-
1,784
1,823
2019
UK
scheme
$000
Total
$000
(40,504)
(40,510)
8,947
8,992
(11,565)
(11,565)
-
-
(43,122)
(43,083)
(1,601)
31,312
(1,601)
33,096
(13,411)
(11,588)
US
Schemes
$000
(6)
68
-
-
62
-
1,722
1,784
2018
UK
scheme
$000
Total
$000
(7,048)
(7,054)
-
68
(9,053)
(9,053)
(3,620)
(3,620)
(19,721)
(19,659)
4,118
4,118
46,915
48,637
31,312
33,096
The history of the schemes for the current and prior period before taxation is as follows:
2019
US
UK
US
Schemes
Scheme
schemes
$000
$000
$000
2018
UK
scheme
$000
Present value of defined benefit obligation
(2,178)
(229,493)
(2,232)
(271,816)
Fair value of scheme assets
(Deficit)/surplus in the scheme
Experience adjustments on the scheme liabilities
Experience adjustments on scheme assets
Exchange differences
939
236,952
(1,239)
45
(6)
-
7,459
8,947
-
(3,568)
1,007
(1,225)
68
(6)
-
326,135
54,319
-
-
6,474
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.
Sensitivity Analysis:
The calculation of the defined benefit obligation is sensitive to the assumptions set out above.
The following table summarises how the impact on the defined benefit obligation at the end of the reporting period would have increased
(decreased) as a result of a change in the respective assumptions by 0.25%.
Discount rate
Future salary increases
RPI inflation assumption
Post-retirement mortality rate changed by one year
2019
2.8%
-
1.8%
4.2%
2018
3.0%
-
2.0%
4.0%
The above sensitivities are based on the average duration of the benefit obligation determined at the date of the last full actuarial valuation
at 30 March 2016 and are applied to adjust the defined benefit obligation at the end of the reporting period for the assumptions concerned.
Whilst the analysis does not take account of the full distribution of cash flows expected under the plan, it does provide an approximation to
the sensitivity of the assumptions shown.
66
Notes relating to the consolidated financial statements
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 28 to 36.
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 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. Provisions are reviewed on the basis of historical usage of spare parts, components and raw materials.
Calculations of these provisions requires judgements to be made, which include forecast consumer demand, the promotional, competitive
and economic environment and inventory loss trends.
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.
GOODWILL
Goodwill has been tested for impairment at the year end. Value in use calculations have been made using profit forecasts and resulting
cashflows discounted at a rate of 12.9% being the calculation of the Group’s weighted average cost of capital.
ASSETS HELD FOR SALE
The Gamet Bearings freehold property and plant equipment have been valued at fair value less cost to sell on the basis of the ongoing
negotiations for the sale of the business.
32. RELATED PARTY TRANSACTIONS
Detailed disclosure of the individual remuneration of Board members is included in the Remuneration report. The Executive Board
members are regarded as the Key Management Personnel of both the Company and the Group.
Mr P Dupee is the managing partner of Haddeo Partners LLP who have received $84,888 in interest payments during the financial year
(2018: $84,175) in respect of their respective holding of the loan notes. At the year-end Haddeo Partners LLP held £810,000 ($1,055,724)
of loan notes. In addition, the wife of Mr N Carrick, the Group Finance Director, also held £50,000 ($65,168) of loan notes. Further details
on the loan notes can be found in note 19.
Mr D Grimes, the former 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 $143,750 rent and associated property costs during the period (2018: $161,500).
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.
33. ALTERNATIVE PERFORMANCE MEASURES
The Directors assess the performance of the Group by a number of measures and frequently present results on an ‘underlying’ basis,
which excludes adjusting items. The Directors believe the use of these ‘non-GAAP measures’ provide a better understanding of underlying
performance of the Group. In addition, discontinued operations are excluded from underlying figures.
In the review of performance reference is made to ‘underlying profit’ or ‘profit before adjusting items’, and in the Consolidated Income
Statement the Group’s results are analysed between Before adjusting items and After adjusting items.
Adjusting items are detailed in note 3 and are disclosed separately on the basis that this presentation gives a clearer picture of the underlying
performance of the group.
These measures are used by the Board to assess performance, form the basis of bonus incentives and are used in the Group’s banking
covenants. In addition, the Board makes reference to orders and order book or backlog. This represents orders received from customers for
goods and services and the amount of such orders not yet fulfilled.
67
Notes relating to the consolidated financial statements
Underlying operating profit
Operating profit
Adjusting items included in net operating expenses (see note 3)
Underlying operating profit
Underlying profit for the period from continuing activities
Profit for the period
Adjusting items included in net operating expenses (see note 3)
Adjusting items included in Financial income
Adjusting items included in Financial expense
Profit on disposal of ProPhotonix
Tax effect of rate change in USA
Tax on adjusting items
Underlying profit for the period
Underlying EPS
A reconciliation of underlying EPS is included in note 9
2019
$000
3,471
1,786
5,257
4,233
1,786
(2,077)
-
-
-
48
3,990
Restated
2018
$000
1,778
-
1,778
2,593
-
(1,741)
290
(1,256)
630
609
1,125
34. POST BALANCE SHEET EVENTS
On 23 April 2019 the buyout of the UK final schemes liabilities was completed with the Pension Insurance Corporation PLC.
On the 29 May 2019, the company received $5.2m (£4.1m) from the completion of the buyout of the 600 Group Pension Scheme, after
deduction of statutory 35% tax.
On 30 May 2019 the UK final salary scheme terminated, and the scheme was wound up and trustees discharged.
On 21 June 2019 the group acquired 100% of the voting equity of Control Micro Systems Inc., a company based in Florida USA,
manufacturing Laser systems.
The book value of the net assets acquired are as follows:
Plant and equipment
Inventories
Receivables
Cash
Payables
Total
$000
790
1,541
851
2,938
(1,173)
4,947
At the date of approval of these financial statements, a detailed assessment of the fair value of the identifiable net assets had not been
completed.
Fair value of consideration paid
$000
10,000
The Gamet Bearings business is held for sale at the 30 March 2019 and has not been sold at the date of these financial statements.
68
Notes relating to the consolidated financial statements
35. IMPACT ON THE FINANCIAL STATEMENTS OF CHANGES IN ACCOUNTING POLICIES AND DISCONTINUED ACTIVITIES
As a result of changes in the group’s accounting policies, prior year financial statements had to be restated.
As explained below IFRS 9 was applied retrospectively with restatement of comparative information.
The following tables show the adjustments to each line item, but line items not affected have not been included.
In addition, the classification of the Gamet Bearings business as discontinued requires comparative information to be adjusted and this
has been included in order to provide the correct restated figures.
Revenue
Cost of sales
Gross profit
Net operating expenses
Operating Profit
Profit before Tax
Income Tax
Profit from continuing activities
Loss/profit from discontinued activities
Profit for the Period
Earnings per share
31 March 2018
IFRS 15 ($)
IFRS 9 ($)
Discontinued ($)
31 March 2018
As originally
presented
$’000
66,014
(43,736)
22,278
(19,938)
2,340
3,865
(816)
3,049
-
3,049
2.80c
$’000
(497)
363
(134)
-
(134)
(134)
25
(109)
-
(109)
-
Restated ($)
$’000
63,944
(42,363)
21,581
(19,803)
1,778
3,303
(710)
2,593
312
2,905
2.67c
$’000
(1,573)
1,053
(520)
135
(385)
(385)
73
(312)
312
-
-
$’000
-
(43)
(43)
-
(43)
(43)
8
(35)
-
(35)
-
During the year ended 1 April 2017 and 31 March 2018, the retranslation of non-US Dollar functional currency entities has been split
between equity reserves. A change in accounting policy has been adopted not to retranslate other equity reserves but to present net
assets at closing rates and income statement items at average rates within the translation reserve. As such, an adjustment has been
made between the equity reserves; there is no impact to total equity.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION (EXTRACT)
31 March 2018
IFRS 15
IFRS 15
IFRS 9 Discontinued 2017 Changes
2018 Changes
31 March 2018
As originally
presented
2017
reverse
2018
In accounting
policy
In accounting
policy
Restated
Deferred tax assets
Inventories
Trade and other receivables
Net assets
Revaluation reserve
Translation reserve
Retained earnings
Total equity
$’000
5,102
19,597
10,266
58,737
759
(4,565)
-
-
-
-
-
-
57,711
(103)
58,737
(103)
$’000
$’000
$’000
$’000
$’000
25
363
(497)
(109)
-
-
(6)
(6)
8
-
(43)
(35)
-
-
(35)
(35)
-
-
-
-
-
-
-
-
-
-
-
-
352
(885)
533
-
-
-
-
-
38
1,931
(1,969)
-
$’000
5,135
19,960
9,726
58,593
1,149
3,519
56,131
58,593
69
Notes relating to the consolidated financial statements
35. IMPACT ON THE FINANCIAL STATEMENTS OF CHANGES IN ACCOUNTING POLICIES AND DISCONTINUED ACTIVITIES
(CONTINUED)
Deferred tax assets
Inventories
Trade and other receivables
Net assets
Revaluation reserve
Translation reserve
Retained earnings
Total equity
1 April 2017
IFRS 15
IFRS 9 Discontinued
Changes
1 April 2017
As originally
presented
$’000
4,359
15,935
9,312
64,294
797
(6,724)
65,461
64,294
$’000
24
226
(353)
(103)
-
-
(103)
(103)
In accounting
policy
$’000
$’000
$’000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
352
(885)
533
-
Restated
$’000
4,383
16,161
8,959
64,191
1,149
(7,609)
65,891
64,191
70
Company statement of financial position
As at 30 March 2019
Company Number 00196730
Non-current assets
Fixed assets
Intangible assets
Investments
Current assets
Trade and other receivables
Cash and cash equivalents
Total assets
Current liabilities
Trade and other payables
Non-current liabilities
Trade and other payables
Total liabilities
Net assets
Shareholders’ equity
Called-up share capital
Share premium account
Revaluation reserve
Available for sale reserve
Equity reserve
Profit and loss account
Notes
3
4
5
5
6
As at
30 March
2019
$000
3
199
11,342
11,544
46,677
313
46,990
58,534
(2,141)
(2,141)
(9,946)
(9,946)
(12,087)
46,447
1,746
2,885
-
-
201
41,615
46,447
As at
31 March
2018
$000
4
-
12,193
12,197
50,671
120
50,791
62,988
(2,406)
(2,406)
(11,286)
(11,286)
(13,692)
49,296
1,746
2,885
-
-
201
44,464
49,296
Included in the profit and loss is a profit for the year of $871K (prior year $2,246K). The financial statements on pages 72 to 79 were
approved by the Board of Directors on 10 July 2019 and were signed on its behalf by:
NEIL CARRICK
Finance Director
10 JULY 2019
REGISTERED OFFICE
Lowfields Way
Lowfields Business Park
Elland
West Yorkshire
HX5 9DA
71
Company statement of changes in equity
As at 30 March 2019
Company Number 00196730
Ordinary
Share
Available
premium Revaluation
for sale
Equity
Retained
At 1 April 2017
Profit for the period
Other comprehensive income:
Foreign currency translation
ProPhotonix disposal
Total comprehensive income
Share capital subscribed for
Credit for share-based payments
Total transactions with owners
At 31 March 2018
Profit for the period
Other comprehensive income:
Foreign currency translation
Total comprehensive income
Transactions with owners:
Share capital subscribed for
Dividends
Credit for share-based payments
Total transactions with owners
share
capital
$000
1,629
-
-
-
-
117
-
117
1,746
-
-
-
-
-
-
-
account
$000
1,484
-
-
-
-
1,401
-
1,401
2,885
-
-
-
-
-
-
-
At 30 March 2019
1,746
2,885
reserve
reserve
reserve
Earnings
$000
$000
$000
$000
Total
$000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,446
-
201
-
38,490
43,250
2,246
2,246
19
(1,465)
(1,446)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
3,689
3,708
-
(1,465)
5,935
-
39
39
4,489
1,518
39
1,557
201
44,464
49,296
-
-
-
-
-
-
-
871
871
(2,661)
(2,661)
(1,790)
(1,790)
-
-
(1,104)
(1,104)
45
45
(1,059)
(1,059)
201
41,615
46,447
The accompanying accounting policies and notes on pages 73 to 79 form part of these Financial Statements.
72
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.
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 2018 are for the 52-week period ended
31 March 2018. The results for 2019 are for the 52-week period ended 30 March 2019.
In these financial statements, the Company has applied the exemptions available under FRS 101 in respect of the following disclosures:
•
•
•
•
•
•
•
an Income Statement, Statement of Comprehensive Income and related notes;
a Cash Flow Statement and related notes;
Comparative period reconciliations for share capital;
Disclosures in respect of transactions with wholly owned subsidiaries;
Disclosures in respect of capital management;
The effects of new but not yet effective IFRSs; and
Disclosures in respect of the compensation of Key Management Personnel.
As the consolidated financial statements include the equivalent disclosures, the Company has also taken the exemptions under FRS 101
available in respect of the following disclosures:
•
•
IFRS 2 Share Based Payments in respect of group settled share-based payments; and
Certain disclosures required by IFRS 13 Fair Value Measurement and the disclosures required by IFRS 7 Financial
Instrument Disclosures and IFRS 15 revenue from contracts with customers.
NOTES ON INTERPRETATION OF ACCOUNTING STANDARDS
REVALUATION OF FIXED ASSETS
Property, plant and equipment are held at cost, subject to triennial property revaluations.
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:
•
•
•
leasehold improvements
– over residual terms of the leases
plant and machinery
– 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.
73
Company accounting policies
TAXATION
Tax on the profit or loss for the year comprises current and deferred tax. Tax is recognised in the profit and loss account except to the extent
that it relates to items recognised directly in equity or other comprehensive income, in which case it is recognised directly in equity or other
comprehensive income.
Current tax is the expected tax payable or receivable on the taxable income or loss 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 on temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and
the amounts used for taxation purposes. The following temporary differences are not provided for: the initial recognition of goodwill; the initial
recognition of assets or liabilities that affect neither accounting nor taxable profit other than in a business combination, and differences relating
to investments in subsidiaries to the extent that they will probably not reverse in the foreseeable future. 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 the temporary
difference can be utilised.
CURRENCY TRANSLATION
Transactions are translated into US Dollars at the rates of exchange ruling on the date of the transaction. Monetary assets and liabilities
are translated into US Dollars at the year-end rates.
INVESTMENTS
Investments in respect of subsidiaries are stated at cost less any impairment in value. Prior to the adoption of IFRS 9, investment 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 other comprehensive income. Subsequent
to the adoption of IFRS 9, investments in quoted shares are measured at fair value.
DIVIDENDS
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).
IFRS 9 - FINANCIAL INSTRUMENTS
IFRS 9 ‘Financial instruments’ replaces IAS 39 ‘Financial instruments: Recognition and Measurement’ with the exception of macro hedge
accounting. The standard is effective for accounting periods beginning on or after 1st January 2018. The standard covers three elements:
•
•
•
Classification and measurement: Changes to a more principle-based approach to classify financial assets as either
held at amortised cost, fair value through other comprehensive income (FVOCI) or fair value through profit or loss,
dependent on the business model and cash flow characteristics of the financial asset; and
Impairment: Moves to an impairment model based on expected credit losses based on a three-stage approach;
Hedge accounting: The IFRS 9 hedge accounting requirements are designed to allow hedge accounting to be more
closely aligned with the company’s underlying risk management. A new International Accounting Standards Board
(IASB) project is in progress to develop an approach to better reflect dynamic risk management in entities’ financial
statements.
The company have applied IFRS 9 for the first time in the current year, in replacement of IAS 39. There is no impairment allowance for
the receivables from subsidiary undertakings and loans to subsidiary undertakings for either the year ended 30 March 2019, or the year
ended 31 March 2018.
74
Notes relating to the company financial statements
1. PERSONNEL EXPENSES
Staff costs:
– wages and salaries
– social security costs
– pension charges
– equity share options expense
2019
$000
1,053
73
25
45
2018
$000
882
58
24
39
1,196
1,003
The average number of employees of the Company (including Executive Directors) during the period was as follows:
Head office function
2019
Number
6
2018
Number
6
These staff costs related entirely to the Directors and head office staff who are all classified as administration and management.
Details of Directors’ emoluments, share option schemes and pension entitlements are given in the Remuneration Report on pages 15 to
17.
2. DIVIDENDS
A final dividend of 0.5p has been proposed, payable on 30 September 2019 to holders on the register at 31 August 2019.
Interim Dividend paid September 2018 (0.5p/share)
Final Dividend paid December 2018 (0.25p/share)
Total
2019
$000
736
368
1,104
2018
$000
-
-
-
75
Notes relating to the company financial statements
3. INVESTMENTS
Cost:
At 31 March 2018
Disposals in the period
Exchange variance
At 30 March 2019
Provisions
At 31 March 2018
Exchange variance
At 30 March 2019
Net book values
At 30 March 2019
At 31 March 2018
Cost:
At 1 April 2017
Disposals in the period
Exchange variance
At 31 March 2018
Provisions
At 1 April 2017
Exchange variance
At 31 March 2018
Net book values
At 31 March 2018
At 1 April 2017
Shares
In Group
Undertakings
$000
Total
$000
56,624
56,624
-
(3,951)
52,673
44,431
(3,100)
41,331
11,342
12,193
Shares
In Listed
Shares
In Group
Investments
Undertakings
$000
$000
2,068
(2,068)
-
-
-
-
-
-
2,068
50,557
-
6,067
56,624
39,669
4,762
44,431
12,193
10,888
-
(3,951)
52,673
44,431
(3,100)
41,331
11,342
12,193
Total
$000
52,625
(2,068)
6,067
56,624
39,669
4,762
44,431
12,193
12,956
76
Notes relating to the company financial statements
3. INVESTMENTS (CONTINUED)
The subsidiaries 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*.
All subsidiary undertakings in England & Wales have their registered offices at Lowfields Way, Lowfields Business Park, Elland, West
Yorkshire HX5 9DA except Coborn Insurance Company Limited, whose registered office is PO Box 34, St Martin's House, Le
Bordage, St Peter Port, Guernsey, GY1 4AU.
600 UK Limited’s principal activity is the design and distribution of machine tools and precision engineered components. Electrox Laser
Limited’s principal activity is the design, manufacture and distribution of industrial laser systems. Coborn Insurance Company Limited is
a captive insurance company and all other subsidiary undertakings in England & Wales are dormant or holding companies.
US:
600 Group Inc
Clausing Industrial, Inc
TYKMA Inc
Clausing Industrial, Inc’s principal activity is the design and distribution of machine tools and precision engineered components.
TYKMA Inc’s principal activity is the design, manufacture and distribution of industrial laser systems. 600 Group Inc is a holding
company.
Clausing Industrial, Inc and 600 Group Inc both have a registered office at 3963 Emerald Drive, Kalamazoo, Michigan 49001, US.
TYKMA Inc has a registered office at 370 Gateway Drive, Chillicothe, Ohio 45601, US.
REST OF THE WORLD:
600 Machine Tools (Pty) Ltd – (Australia)
600 Machine Tools (Pty) Ltd’s principal activity is the design and distribution of machine tools and precision engineered components. The
registered office is, 27 Foundry Road, 7 Hills, New South Wales, Australia.
The credit risk for receivables from subsidiary undertakings has not increased materially since the initial recognition
There is no impairment allowance for the receivables from subsidiary undertakings and loans to subsidiary undertakings for either the
year ended 30 March 2019, or the year ended 31 March 2018.
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.
4. TRADE AND OTHER RECEIVABLES
Amounts owed by subsidiary undertakings1
Deferred tax
Other debtors
1 All inter-company loans are repayable on demand and as such are recorded at their face value.
2019
$000
2018
$000
46,408
49,981
101
430
168 260
46,677
50,671
77
Notes relating to the company financial statements
5. TRADE AND OTHER PAYABLES
Current liabilities:
Trade payables
Amounts owed to subsidiary undertakings1
Accruals and deferred income
Non-current liabilities:
8% loan notes
Provisions
2019
$000
467
1,281
393
2,141
2019
$000
9,517
429
9,946
2018
$000
223
1,997
186
2,406
2018
$000
11,286
-
11,286
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 above loans and borrowings are secured by way of fixed and floating charges over the assets of the Company and its subsidiaries.
The $9.5m (£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 shares or to purchase
shares at 20p for a cash consideration. The loan has both debt and equity components and $195,000 is shown in equity reserve and the
balance after deduction of associated costs and amortisation of $1.2m, is shown in non-current borrowings. Costs are amortised to the
income statement over the term of the loan. The loan notes and the warrants expiration date was extended by two years to 14 February
2022. In accordance with IFRS 9 an adjustment to the carrying value of the amortised loan note cost was made and the corresponding
amount credited to the income statement. The cost incurred will be amortised over the remaining term.
6. SHARE CAPITAL
Allotted, called-up and fully paid:
Ordinary shares of 1p each
104,357,957 ordinary shares of 1p each on issue at start of the period (2018: 104,357,957 ordinary shares)
2017 –8,615,384 ordinary shares of 1p each issued in September 2017
112,973,341 ordinary shares of 1p each on issue at end of period (2018: 104,357,957 ordinary shares of 1p)
Total Allotted, called-up and fully paid at the end of period
2019
$000
2018
$000
1,629
117
1,746
1,746
1,629
117
1,746
1,746
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.
8,615,384 shares were issued on 20 September 2017 at a price of 13p (17.6c) $116,687 was allocated to share capital and $1,400,241
to share premium.
The Company has raised £8.5m ($11.08m) through the issue of loan notes. The loan notes maturity was extended by two years in
February 2019 to end on 14 February 2022 and carry a coupon of 8% payable quarterly in arrears. The subscribers for loan notes also
received warrants with an expiry date which was also extended by two years to 14 February 2022 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.
78
Notes relating to the company financial statements
7. CONTINGENT LIABILITIES
Bank guarantees in respect of Group undertakings
8. CAPITAL COMMITMENTS
Capital expenditure contracted for but not provided in the accounts
2019
$000
193
2019
$000
335
2018
$000
213
2018
$000
-
9. PENSION
The Company makes contributions to defined contribution schemes for certain employees. The pension contribution charge for the
Company amounted to $24,563 (2018: $24,000).
10. RELATED PARTY TRANSACTIONS
Detailed disclosure of the individual remuneration of Board members is included in the Remuneration report. The Executive Board
members are regarded as the Key Management Personnel of both the Company and the Group.
Mr P Dupee is the managing partner of Haddeo Partners LLP which has received $84,888 in interest payments during the financial year
(2018: $84,175) in respect of their respective holding of the loan notes. At the year-end Haddeo Partners LLP held £810,000 ($1,055,724)
of loan notes. In addition, the wife of Mr N Carrick, the Group Finance Director, also held £50,000 ($65,168) 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.
79
Company information
SECRETARY
Neil Carrick
REGISTERED OFFICE
Lowfields Way
Lowfields Business Park
Elland
West Yorkshire
HX5 9DA
REGISTERED NUMBER
00196730
REGISTRAR
Link Asset Services
34 Beckenham Road
Beckenham
Kent
BR3 4TU
AUDITOR
BDO LLP
BANKERS
Bank of America
HSBC Bank plc
Broker
W H Ireland
NOMINATED Advisors
Spark Advisory Partners Limited
80
90 | Annual Report & Accounts 2019
The number 600 Group PLC
Lowfields Business Park
Lowfields Way
Elland
HX5 9DA
mail@600grouphq.com
T: 01924 415000
Company Number: 00196730
The number