Annual Report
& Accounts 2020
A diversified engineering group
with a world class reputation in
the manufacture and distribution
of machine tools, precision
engineered components and
industrial laser systems.
Company Number 00196730
The number Contents
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
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The number Chairman’s statement
Overview
Chairman’s statement
People
Our people are central in continuing the improvement of our business and their safety has been paramount in the recent months. I
would like to thank all our employees for their ongoing support, commitment and dedication to The 600 Group during these difficult
times. I am hopeful that the sacrifices made will help us to keep our teams together and come out of this well placed to reap the
benefits when markets return to some normality.
Outlook
Despite the short-term end-market weaknesses and macroeconomic uncertainty created by the Coronavirus pandemic, the Board
continues to believe in the long-term fundamentals of the Group; in brand promotion, investment in new, higher end product
capabilities and diversification into new markets and selective acquisitions. Whilst there continues to be reduced activity, the level of
order backlog has returned to acceptable levels, given the circumstances, compared to the previous year. The Board have taken
decisive action to reduce costs and to keep the workforce and technical competencies together to ensure the Group can react quickly
as markets improve.
Paul Dupee
Executive Chairman
19 November 2020
The Group made significant strides forward in the first half of the FY20 year, eliminating the Group’s UK final salary pension scheme,
significantly de-risking the Group’s balance sheet, opening the European Technology Centre in May 2019 as the new home of the
re-launched Colchester Machine Tool Solutions and in June 2019 acquiring Control Micro Systems (CMS), a business highly
complementary to the Group’s existing laser division and bringing ever more sophisticated, value-added and custom solutions in the
use of industrial lasers.
The second half of the year has , unfortunately, been dominated by the downturn in economic conditions, led by the global slowdown
in the auto industry, concerns over a trade war between the USA and China and the significant worldwide disruption from the
Coronavirus pandemic.
Divisional overview
The benefits of the rationalisation of the UK Machine Tool division resulted in much improved performance for the year with revenues
up 14% and increased operating margins. The final phase of this process was completed in the second half of the year with the sale
of the Gamet bearings business and its associated freehold property. This rationalisation has also reduced operational risk and future
capital expenditure requirements. The US Machine Tool business, however, suffered in an industry wide slowdown of some 12% and
in addition with the Coronavirus pandemic affecting all areas in the last few months of the financial year, the Machine Tool division
overall was unable to match the performance of the prior year.
The Industrial Laser division for the first time in over a decade encountered a contracting market place with global laser sales falling
in the region of 12% and increased competition and price deflation in the standard laser sector of the industry. The acquisition of
CMS helped revenue from June onwards and the existing TYKMA Electrox brand made significant moves into more custom and
higher specification work where its strengths in design and proprietary software provide greater opportunities for growth and enhanced
margins. The acquisition of CMS has significantly enhanced capabilities and brought reduced cyclical customers into the Group.
Whilst the move into higher specification work helped maintain gross margins it could not compensate for the fall in volumes in the
standard product and the general market issues created in the last few months of the period by the Coronavirus pandemic. As a
result, operating profit was lower than the prior year.
Response to COVID-19
The Group has responded quickly to the Coronavirus pandemic adopting short time and home working. To help mitigate the financial
effects, the Group has used government stimulus packages, post March 2020, including loans under the USA Government Paycheck
Protection Program and the UK Coronavirus Large Business Interruption Scheme (CLBILS). Some staff have been furloughed under
the UK Coronavirus Job Retention Scheme and many employees accepted temporary salary reductions. The Board has taken action
to reduce overheads and deferred all non-critical capital expenditure.
The de-risking of the Group with the receipt of the surplus from the successful pension scheme buy out and the sale of the Gamet
business and property has helped stabilise debt levels. Group debt is currently at $13.8m, excluding lease liabilities but including the
government loan assistance, which is broadly in line with that at the end of March 2020 and the Group is covenant compliant with
adequate banking facilities.
Given the current circumstances no dividend will be paid this year.
Group restructure
The Board has taken the decision to expand and enhance growth and oversight of the operations in the US by opening an office in
Orlando, Florida. Orlando leads the US in photonics technology. Consequently, certain management functions will relocate there
during the course of 2021. The Group will also continue to realise the synergies between the laser businesses in Ohio and Florida
throughout 2021. The Group will remain UK domiciled and listed in London.
Neil Carrick, CFO, has decided that for personal reasons he will be unable to relocate to Orlando and will leave 600 Group. Neil
joined the business in 2011 and has made a great contribution since his arrival, particularly in overseeing the buyout of the UK
pension scheme and strengthening the Group’s financial position. I would like to personally thank him for all his hard work. He leaves
the business well-placed for the future.
I am pleased to announce that G. Mitchell (Mitch) Krasny, CPA, formerly CFO of technology companies, Ucell and Kcell, subsidiaries
of Telia Company, Bulgaria Telecom, TV 3 Russia and CFO Eastern Europe and Russia for Millicom and Metromedia International
will succeed Neil and be appointed a Director with effect from the end of the next Annual General Meeting. Mitch brings over 35 years
of financial and operational experience in public and private companies.
To ensure an orderly handover, Neil will stay with the business and remain a Director until the conclusion of the next Annual General
Meeting, which is expected to be held no later than 31 December 2020.
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Strategic report
Strategic report
Our businesses
The 600 Group PLC ("the Group") is a leading engineering group with a world class reputation in the design, manufacture and
distribution of industrial laser systems and design and distribution of machine tools and associated precision engineered components.
The Group operates from locations in North America, Europe and Australia selling into more than 100 countries worldwide.
Group businesses serve customers across a very broad range of industry sectors, from medical, pharmaceutical and education
through to automotive, aerospace and defence equipment. A large proportion of revenue is derived from sales via third party
distribution channels who support these industries locally.
The Group products are noted for their quality and reliability and consequently the Group benefits from a high degree of loyalty and
repeat business. Given the large number of customers and established distributors in many countries there are no major sales
concentrations of customers or products. In the year ended 28 March 2020 the top 20 customers, of which 15 were distributors,
contributed 26% (2019 - 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
Macroeconomic and industry trends
2020
%
2019
%
66
17
7
10
100
65
15
10
10
100
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.
The global industrial laser market is estimated to be in the region of $5bn but given this is just the laser sources, the actual market
for systems incorporating these lasers and associated equipment and software is estimated to be much larger in the region of $15-
$20bn. The industry had seen mid-single digit increases until 2019 when a fall was recorded. Metal cutting is by far the largest
application by value and the market is dominated by China which is the largest producer and consumer of industrial lasers. The fall
in the overall market in 2019 is estimated to be in the region of 12% and largely driven by Chinese decline in cutting systems which
mirrors the decline in machine tools, both of which are heavily influenced by Chinese demand.
The laser marking and micro-materials processing 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. It is for this reason the Group has focused on the higher end custom products where its strengths in design and
proprietary software provide greater opportunities to grow and enhance margin and where the acquisition of CMS during the year
has significantly enhanced these capabilities.
The Coronavirus pandemic industry predictions for the laser industry are similar to machine tools with a rapid decline followed by
recovery later in 2020 and a return to normal growth through 2021.
Machine tools and precision engineered components
The worldwide machine tool industry was estimated by Oxford Economics at nearly $85bn in annual sales in its Spring 2020 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 which typically lag the main cycle of the economy. 2019 had already seen a
global decline of 10% in machine tool consumption and the industry has been severely affected by the Coronavirus pandemic, with
estimates of a fall of 28% in World machine tool consumption in the calendar year 2020. However, growth is expected to return in
2021 with a predicted rebound of 33% improvement.
The global market is dominated by China with consumption of $29bn but this is largely served domestically with China also being the
largest producer. The USA is the second largest consumer of machine tools at $9.6bn followed by Germany at $7.8bn.
Our main markets
The main markets we operate in are the USA, Europe and Australia. All these markets had already seen a degree of demand
weakness towards the end of 2019 led by Global automotive weakness and the GM strike in the USA and then Boeing’s decision to
halt production of its 737 MAX aircraft in January 2020. The Global effects of the Coronavirus pandemic have impacted all areas in
which the Group operates and it remains to be seen if the predicted pick up in 2021 becomes reality. In addition the possibility of
disruption remains due to the ongoing Brexit issues in the UK, and concerns in the USA over tariffs and a trade war with China.
Activity in the 2019/20 financial year
Industrial laser systems
The existing TYKMA Electrox business continued to see increased competition and price deflation in the lower end standard products
sector and although there was a significant increase in custom higher specification sales and a further improvement in gross margins,
this was not sufficient to offset the effects of the volume decline from the standard products. The standard product business was also
affected by the overall decline in the laser market for the first time in over a decade with Europe and the Far East sales being affected
in particular by the decline in the automotive sector. The US market weakened with trade war concerns with China, the General
Motors strike and latterly Boeing halting aircraft production. The Coronavirus pandemic further compounded these problems and
affected the last few months of the financial year and into the FY21 year.
The acquisition of Control Micro Systems Inc. (CMS) in June 2019 significantly enhanced the Laser Division’s competencies in the
more sophisticated value-add custom solutions for customers. The business brought vision and robotic capabilities and industry
leading positions in the high growth precision medical equipment and pharmaceuticals markets. Whilst these industries are less
affected by the capital goods cycles the economic conditions and effects of the Coronavirus pandemic slowed the pace of new
projects in this part of the business. The sales organisation has integrated well with the existing business and engineering and
software capabilities are being shared to improve services and capabilities for customers.
The UK spares and service operation and legacy Electrox business was integrated into the new European Technology Centre
machine tools operation which now supports both the UK and Europe. A direct sales operation was established in the UK based in
this facility which provides a permanent showroom to demonstrate the full range of laser machines.
Results for the financial year were as follows:
2020
$ 000
2019
$ 000
Revenues
23,695
20,592
Underlying operating profit
Underlying operating margin
1,689
7.1%
2,563
12.4%
Underlying operating profit is before adjusting items, which are explained in note 32 Alternative Performance Measurers and set out
in note 3.
Machine tools and precision engineered components
This division operates from sites in the UK, USA, and Australia providing 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 name Pratt Burnerd. 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’s overall revenue was down on the prior year by 2.4%, but this was against the backdrop of a Global
industry fall of over 10% in the year to December 2019 and the beginning of the Coronavirus pandemic shutdowns in the last few
months of the financial year. Consequently operating margins reduced to 7.4% from the prior year’s 8.1%.
The UK operation performed very well in its first full year of business as the re-launched “Colchester Machine Tool Solutions” from
the new site in West Yorkshire. The new European Technology Centre integrates a modern, open plan office environment, enhanced
manufacturing and warehousing space as well as serving as a dedicated year-round product showroom, demonstration and customer
training capability to showcase the business’ increasingly innovative product range.
Revenue was up 14% and operating margins improved again from 6.7% to 7.9%. The business had a good order book at the start
of 2020 as a result of increased direct sales in the UK which allowed it to continue to operate fairly normally until the end of April
when the business then took advantage of Government assistance and furloughed a number of employees as orders reduced with
many customers shutting down or restricting site access.
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Strategic report
Strategic report
The move of premises was part of the restructuring of the UK operation which saw a de-risking of operations and reduction in the
requirement for ongoing capital expenditure by the outsourcing of further manufacturing. The process was completed towards the
end of the year with the sale of the Gamet Bearings operation and its associated property 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. The assets held for sale were separately disclosed at their expected fair value in the Statement of
Financial Position at 30 March 2019.
The US machine tool business struggled in a weak market place affected by concerns over tariffs and a trade war with China, the
General Motors strike late in 2019 and the Boeing delay to production of its 737 MAX aircraft in January 2020. As a result of COVID
shutdowns in the USA, orders started to reduce towards the end of the FY20 financial year and action has been taken to reduce
costs and take advantage of Government schemes. As a result of the near 10% fall in revenues in FY20, operating margins reduced
to 8.1% from the previous year’s 9.3%.
The Australian machine tools business also struggled in an Asian market that bore the brunt of the Global machine tool contraction
in addition to difficult economic conditions within Australia. Consequently, a small operating loss was generated for the year. The
business is restructuring following a number of retirements and will aim to leverage the Colchester Machine Tool Solutions rebranding
in areas where the brand name remains well known.
The financial results of these activities were as follows:
2020
$ 000
2019
$ 000
Revenues
43,511
44,575
Underlying operating profit
Underlying operating margin
3,216
7.4%
3,610
8.1%
Group Results
Revenue from continuing operations increased by 3.1% to $67.2m (2019: $65.2m) and Group profit before tax and adjusting items
was $1.1m (2019: $4.1m). The loss before tax after adjusting items was $0.63m (2019: profit $4.3m).
Changes in accounting standards
The Group has adopted the new leasing accounting standard in the year, IFRS 16, which has required all former operating leases to
now be recognised on the balance sheet as right of use assets and a corresponding liability created for the future payments. The
new standard has been adopted from 31 March 2019 under the modified retrospective approach and therefore comparative figures
have not been restated. The rental payments for these leases are no longer reported in the Consolidated Income Statement and are
replaced by depreciation of the right of use asset and an interest charge on the lease liabilities. Full details of the effects of this
change can be found in note 22.
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 32 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 and a profit of $0.8m has been recorded in the Income
Statement as the final cash refund of surplus of $5.2m, net of tax, was higher than originally expected.
As a result of the outsourcing of manufacturing in the UK, the existing premises were vacated and a sublet was in the process of
being completed when the premises flooded in February 2020. Given this issue and the uncertainty over economic conditions as a
result of the Coronavirus pandemic it is not known if a sub-let can now be achieved and consequently the right of use asset has been
impaired resulting in a further charge in the year of $0.4m. A further provision has been recognised in the year relating to the
unavoidable costs associated with the ongoing lease, resulting in a charge of $0.4m.
Acquisition costs on CMS and abortive costs on a further two acquisitions in the year were $0.7m and costs in relation to duty and
tariff misdeclarations between 2016 and 2019 which were discovered in TYKMA were $0.3m. Amortisation of the intangible assets
acquired through the CMS deal of $0.3m is also included in adjusting items.
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In the prior year before the buy-out of the Group pension scheme was completed 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 was shown in adjusting items within operating profit in the
prior year.
In the prior year a credit of $1.26m was 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 arose as a pension accounting entry under the required standard
due to the surplus in the scheme recorded in the balance sheet.
In the prior year the carrying value of the amortised cost of the loan notes was re-assessed and a net credit of $0.82m arose in
financial income as a result of the extension of these instruments by a further two years. The current year includes amortisation cost
of $0.5m as an adjusting item in financial expense.
An amount of $0.5m (2019 $0.96m) has been recorded to reduce the value of the Gamet assets sold in line with proceeds of sale.
Taxation
As a result of adjustments to deferred taxes and taxable losses in the current year there is a credit for taxation of $1.2m (2019 charge
of $0.07m) on pre adjusting items profit.
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 that 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 Federal taxation on their profits at the rate of
21% but also suffer State taxes which increases their overall composite rate to 25%.
Net profit and earnings per share
The total continuing amount attributable to equity holders of the parent for the current financial year amounted to a profit of $0.6m
(2019: $4.2m profit) with pre-adjusting items profit of $2.3m (2019: $4m). The total loss including the effects of the Gamet discontinued
operation is $0.4m (2019: profit $3.1m).
Underlying basic earnings from continuing operations before adjusting items and related taxation were 1.97 cents (equivalent to
1.55p) per share (2019: 3.53 cents, equivalent to 2.69p) and basic earnings per share were a profit of 0.51 cents (equivalent to 0.40p)
(2019: 3.75 cents profit, equivalent to 2.88p) see note 9.
Financial position and utilisation of resources
Cash flow
Cash generated from operations before working capital movements was $3.1m (2019: $4.8m).
Working capital remains under control and stock levels were unchanged from the prior year despite the acquisition of CMS during
the year. Trade receivables and payables decrease reflects the deterioration in trading conditions in the last quarter of the year which
was exacerbated by the start of the Coronavirus pandemic.
Interest paid (excluding the effect of lease accounting) reduced slightly to $1.1m (2019: $1.2m) although the largest component of
this is fixed, being the interest on the £8.5m ($9.6m) 8% loan notes.
Capital expenditure consisted of the final stages of development work on the upgrading of the industrial laser division proprietary
software of $0.4m, demonstration and showroom equipment for the laser business of $0.1m, and machine shop equipment and
fixtures to finalise the new European Technology Centre in the UK for $0.3m. The development and fit out expenditure will not repeat
and the sale of the Gamet business and outsourcing of manufacturing has significantly reduced future capital expenditure
requirements.
The business and asset sale of the discontinued Gamet Bearings operation was concluded in October 2019 with the receipt of $0.45m
and the Colchester property sale completed in February 2020 with a further $0.5m of proceeds received.
The $10m consideration for CMS was funded by $4m of the $5.2m of pension scheme refund along with the utilisation of existing
credit lines and a new $3.25m 5-year term loan from Bank of America plus the issue of $1m of shares to the CMS founder, Tim Miller,
who remains with the business.
Dividends of $1.1m were paid during the year (2019: $1.1m).
Net borrowings
Group net debt at 28 March 2020 excluding lease liabilities is largely unchanged on the prior year at $14.2m (2019 $14.5m)and
comprised net bank indebtedness of $4.8m (2019: $5m) and the discounted amount outstanding on the loan notes of $9.4m (2019:
$9.5m). The loan notes are shown net of un-amortised discounting and costs and also amounts disclosed in equity reserve which
amount to $0.2m in the current financial year (2019: $0.2m).
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Strategic report
Strategic report
Working capital facilities totaling $10.6m were renewed with HSBC and Bank of America during the year and are due to be reviewed
in the normal course over the next few months and are expected to be continued on the same basis. An additional term loan of
$3.25m was taken out to help fund the acquisition of CMS in June 2019. The mortgage on the Gamet building of $0.3m was repaid
on the sale of the property in February 2020. The Group maintains a mixture of term loans and revolving working capital facilities with
maturities between 1 and 4 years. Headroom on bank facilities was $8.7m at the year-end (2019: $8.7m) and all financial covenants
in place were met during the year.
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 revenue and underlying operating profit.
At individual business unit level, KPI’s also include working capital control, and customer related performance measures such as on-
time delivery and minimisation of warranty concerns.
Subsequent to the year end the Group has taken advantage of Government schemes and has received $2.2m of loans across our
three USA businesses under the Paycheck Protection Program. These loans may be forgiven dependent on expenditure on certain
items and employment numbers with any amount not forgiven repayable as a 2 year loan at 1% interest rate. The UK machine tools
business received a $1.5m loan under the Coronavirus Large Business Interruption Loan Scheme with a 3 year bullet repayment in
September 2023 and 1.92% interest.
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. Revenue
targets are to outperform the market forecasts by 1% (3% market forecast for 2020) and achieve a 10% underlying operating margin
target.
The Group’s recent performance on these financial KPI’s is set out as follows:
The £8.5m ($9.6m) 8% loan notes maturity was 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.
KPI
Gearing (excluding lease accounting) amounted to 50% of aggregate net assets (2019: 49%).
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 pages 1 to 2 and the Strategic Report on pages 3 to 9.
The financial position of the Group, liquidity, cash flows and borrowing facilities are described in the Strategic Report. Note 26 to the
Financial Statements also sets out the Group’s objectives, policies and processes for measuring and managing its capital and financial
risk management. Details of its financial instruments, exposure to foreign exchange, credit and interest rate risk is also covered in note
26. Further details on the Group’s cash and bank borrowings are included in notes 18,19 and 25.
The UK bank facilities with HSBC have no specific financial covenants. Trade loans and invoice financing need to be backed by the
assets they are funding. There are no covenants in respect of the new Coronavirus Large Business Interruption Loan scheme (CL BILS)
taken out in August 2020.The borrowings with Bank of America are subject to adjusted EBITDA to a fixed charge and to senior debt and
an overall asset cover test. The short term trade and credit facilities are due to be reviewed over the coming months and are expected to
continue in the ordinary course of business on the same terms.
The Director’s believe that the Group is well placed to manage its business risks and, after making enquiries including a rev iew of
forecasts and assumptions, which take account of reasonably possible changes in trading activity and considering the existing banking
facilities, including discussion with the Bank of America on the possibility of covenant adjustments should this be required, have a
reasonable expectation that the Group has adequate resources to continue in operational existence for the next 12 months following the
date of approval of the financial statements.
The continuing uncertainty of the impact of the Covid-19 pandemic on the Group has been considered as part of the Group’s adoption of
the going concern basis. Whilst all facilities remain open there are reduced working hours and staffing levels in place in certain a reas.
Operating costs have been reduced, government employment assistance schemes and government loans have been utilised where
available.
As part of their assessment the Directors have considered downside scenarios that reflect the current unprecedented uncertainty in the
worldwide markets the Group operates in and which are considered to be severe but plausible. Revenue deductions of 25% against the
2020 financial year and 30% against the pre pandemic 2019 year have been considered against which mitigating actions of headcount
reduction, utilisation of government assistance, pay reductions and cash preservation actions including reductions in capital expenditure
and deferral of taxation have been applied.
Revenue (annual growth rate)
Underlying operating margin
(% of revenue)
All figures are pre adjusting items
2020
2019
3.1%
1.9%
4.1%
8.1%
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 3 to 5.
S172 of the Companies Act
Disclosures relating to S172 of the Companies Act came into force on 1 January 2019 and require specific reference to how the
Directors promote the success of the Company for the benefit of its members as a whole.
The Group takes decisions for the long term and aims to uphold the highest standards of conduct and expect all employees, at every
level, to do the same. The Directors are aware that in order for the business to grow in the longer term the needs and views of
customers, employees and local communities in which we operate have to be considered as well as our suppliers and the
shareholders to whom we are accountable. This report and that of corporate governance sets out how we manage our relationships
with these groups.
The Directors consider the effects of S172 in all its decisions and the impact on any specific group in relation to the subject matter is
also considered. The key decision in the year was the acquisition of CMS which required the Directors to consider in particular not
only the funders of the acquisition but the employees of the existing laser business and how the CMS operation would integrate into
the existing structures, with particular emphasis on the sales and marketing capabilities of TYKMA Electrox. The acquisition
significantly enhanced the technical capabilities of the laser division and as such was seen to provide longer term prospects in the
high growth medical and pharmaceutical markets which would benefit shareholders in the long term.
The Directors consider the interest of the Group’s employees and other stakeholders, including the impact of its activities on the
community, environment and the Group’s reputation when making decisions. The directors, acting fairly between members, and
acting in good faith, considers what is most likely to promote the success of the Group for its shareholders in the long term.
The results of these scenarios show that there is sufficient liquidity in the businesses for a period of at least 12 months from the date of
approval of these financial statements. Lenders remain supportive and have indicated a willingness to assist with covenant changes in
the event that flexibility may be required in the short term.
Further information in relation to each specific consideration of the Directors is set out below:
Consideration Further information
In the most severe case where revenue falls are greater than 30% and lenders elect not to provide covenant flexibility, and trigger a
repayment of outstanding debt, then without further mitigating actions or additional funding the Group maybe unable to realis e assets
and discharge liabilities in the normal course of business.
Having undertaken this work, the Directors are of the opinion 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 consolidated
financial statements.
Retirement benefits
The UK pension scheme buy-out was completed in late April 2019 and the remaining surplus in the scheme of $8.3m repaid to the
Group after deduction of 35% tax with the Group receiving the net $5.2m at the end of May 2019. As a result of the accounting surplus
on the UK scheme at 30 March 2019 being $7.5m, a profit on disposal of the pension scheme of $0.8m is recorded in the consolidated
income statement in adjusting items and associated taxation of $0.3m is recognised through other comprehensive income.
The US retiree health scheme and pension fund deficits increased slightly to $1.3m (2019: $1.2m).
The likely consequence of any decision in the long term;
The interests of the company’s employees
The need to foster the company’s business relationships with
suppliers, customers and others,
The impact of the company’s operations on the community and
the environment
The desirability of the company maintaining a reputation for high
standards of business conduct, and
The need to act fairly as between members of the company
Page 10 sets out the corporate governance and management
framework and the strategy update is included in the Outlook
section of the Executive Chairman’s statement on page 1 and
point 1 of the QCA code on page 11
Page 11 sets out the consideration of the interests of the
employees
The operating review on pages 3 to 6 discusses the need to
foster the business’s external relationships
The operating review on 3 pages 6 to discusses these issues
along with the environmental reporting within the Director’s
report on page 15
The corporate governance report on pages 10 to 12 sets out
how the Directors promote this.
Pages 8 to 9 set out the company’s values whilst the corporate
governance report on pages 10 to 12 considers relations with
members
7
7
8
8
Strategic report
Corporate governance
Principal 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 and the Coronavirus pandemic during the
financial year are examples of factors which have resulted in changes in demand. The Directors seek to ensure that 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. Delays in the shipment of goods as a result of Brexit may
affect lead times and create some disruption. 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 eighth largest producer nation of machine tools, with global production valued at almost
US $2.1 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.
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.
Other 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
19 November 2020
9
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 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 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 13.
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 17-19.
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
10
10
Corporate governance
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 is a New York-qualified lawyer and was a partner in the tax practice of Allen and Overy LLP. He has significant
experience of multinational tax planning, particularly involving 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.
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.
Details of the Board members and how it functions are included in The Board description in the Corporate Governance report on
page 10.
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.
11
11
12
12
Audit Committee report
Directors 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.
The Directors present their report to the members, together with the audited financial statements for the 52 week period ended 28
March 2020, 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.
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 new lease accounting
standards of IFRS 16 and the application of IFRS 15 (Revenue from contracts with customers) to the emerging new revenue stream
of custom laser jobs in both the newly acquired CMS and in TYKMA.
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.
One of the key priorities of the Audit Committee is the safeguarding of the Group’s assets, both physical, such as inventory and
intangible, such as software and intellectual property. This is achieved through implementation of policies and procedures and regular
checks to ensure these are in operation.
In response to the Covid-19 pandemic, implementation of daily reporting of key business metrics and staff attendances and sickness
was overseen by the Audit Committee with a particular emphasis on cash control and forecasting.
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
19 November 2020
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 25.
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 9. 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 30 October 2020, 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
Miton UK MicroCap Trust plc
Percentage
of issued
ordinary
share capital
20.00
9.02
3.83
3.27
Number
23,492,535
10,600,000
4,500,000
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 25 September 2019. This authority remains valid
until the conclusion of the next Annual General Meeting.
13
13
14
14
Directors report
Directors
Details of the current Directors of the Company are shown on page 10.
The beneficial interests of the directors in the share capital of the Company at 28 March 2020 are shown in the Remuneration Report
on pages 17 to 19.
No Director has a beneficial interest in the shares or debentures of any other Group undertaking.
Social, Community and human rights employment policies
The group remains committed to developing policies in line with best practice. Equal opportunities are provided for all, irrespective of
gender, age, sexual orientation, ethnic origin, religious beliefs or disability.
All reasonable efforts are made to support employees who become disabled, either in their current role or in alternative suitable work.
Sustainability 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 including consideration of alternatives in the design of new products and processes
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 and recycle material wherever possible.
Annual quantity of emissions
The data for the annual quantity of emissions has been collated for all subsidiaries and the group is considered to be a low energy
user.
Dividend
Dividends of 0.5p (0.7cents) per ordinary share was paid on 30 September 2019 and of 0.25p (0.325cents) was paid on 10 January
2020. Given the current situation no dividend is recommended for the remainder of the year.
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.
Reappointment of auditor
A resolution reappointing BDO LLP as the statutory auditor will be proposed at the Annual General Meeting in December 2020.
On behalf of the Board
Neil Carrick
Finance Director
19 November 2020
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
19 November 2020
15
15
16
16
Remuneration report
Remuneration report
Non-executive Directors have contracts of service terminable on 3 months’ notice and are not eligible for pension benefits.
Directors’ interests in shares
The interests of Directors holding office at 28 March 2020 in the ordinary shares of the Company were as follows:
P R Dupee
S J Rutherford
N R Carrick
D Zissman
S Fiamma
At
28 March
2020
Number
23,492,535
20,000
113,404
400,000
400,000
At
30 March
2019
Number
23,492,535
20,000
113,404
400,000
400,000
P R Dupee’s interest in the 23.5m shares arises from his position as Managing Partner of Haddeo Partners LLP, which owns
these shares.
In addition, Haddeo Partners LLP holds 5,050,000 warrants and 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
P R Dupee
N R Carrick
D Zissman
S J Rutherford
S E Fiamma
Total
Salary
$
Fees Pension
$
$
o
416,500
220,572
-
-
-
-
-
41,593
41,593
45,815
637,072 129,001
-
20,018
-
-
-
20,018
o
Bonus
$
o
-
-
-
-
-
-
All
benefits
in kind
$
o
Total
2020
$
- 416,500
25,364 265,954
41,593
41,593
45,815
25,364 811,455
-
-
-
Total
2019
$
o
420,000
405,328
43,230
43,230
46,200
957,988
o
Mr Dupee’s salary was increased to £300,000 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 aggregate employers NIC relating to directors was $39,765 (2019: $59,174)
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 18 and the table of Directors’ share options on page 19 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 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
No bonus was earned in the year under this scheme and the scheme has been suspended as a result of the Coronavirus
pandemic.
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.
900,000 nil cost options were issued to 11 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 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. 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.
17
17
18
18
Remuneration report
Independent auditor’s report to the members of The 600 Group PLC
Directors’ share options
Details of share options at 28 March 2020 and 30 March 2019 for each Director who held office during the year are as follows:
Opinion
N Carrick
P Dupee
S Rutherford
D Zissman
S Fiamma
Number of
options at
30 March
2019
3,150,000
1,000,000
500,000
500,000
500,000
Granted
-
-
-
-
-
o
o
o
Exercised
-
-
-
-
-
o
o
Lapsed/
o
forfeited
-
-
-
-
-
o
Number of
o
options at
28 March
2020
3,150,000
1,000,000
500,000
500,000
500,000
Options were all granted under the 600 Group PLC Deferred Share Plan and are exercisable between 3 and 10 years from date of
grant.
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 $93,000 (2019: $45,000).
We have audited the financial statements of The 600 Group Plc (the ‘parent company’) and its subsidiaries (the
‘Group’) for the year ended 28 March 2020 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 Group 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 28 March 2020 and of the Group’s loss 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.
The share price at 28 March 2020 was 7.38p (9.37cents) and the highest and lowest prices during the period were 21.60p
(27.45cents) and 7.38p (9.37cents) respectively.
Basis for opinion
On behalf of the Board
Stephen Fiamma
Chairman of the Remuneration Committee.
19 November 2020
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 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) that 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 33 to the Group financial
statements, the Group acquired a subsidiary, Control
Micro Systems Inc. (“CMS”), during the current
financial year.
We considered
revenue streams and
associated contractual obligations within CMS
IFRS 15. This
against
the requirements of
the
19
19
20
20
Independent auditor’s report to the members of The 600 Group PLC
Independent auditor’s report to the members of The 600 Group PLC
Whilst the adoption of IFRS 15 Revenue from
contracts with customers (“IFRS 15”) was applied by
the Group during the previous financial year CMS,
being a privately owned US-incorporated company,
had not previously applied this accounting standard.
The application of IFRS 15 in respect of revenue
earned by CMS resulted in changes to the pattern of
recognition of
this component,
specifically with respect to the sale of higher value
‘bespoke’ laser machines.
revenue within
There are judgements involved in the application of the
revenue recognition policy to CMS, including the
pattern of recognition over the contract term and the
estimation of contract margin.
In view of the time spent by the group and component
audit teams on this area and the judgements involved
we determined this to be a key audit matter.
highlighted a key distinction between ‘standard’
and ‘bespoke’ laser machines.
We evaluated management’s assessment of the
to
performance obligations
these
in relation
the key
revenue streams, and challenged
judgements made by management around the
control of goods.
Specifically, we ensured there was sufficient
evidence of the fact that bespoke machines cannot
be sold to alternative parties, and that the
contractual terms support this and the Group’s
right to receive payment for work done to date.
Contract costs, which determine the stage of
completion of the contract, were substantively
tested for a sample of contracts. Contract values
were verified
to underlying agreements and
revenue in the year was recalculated.
Billings to date were also tested to confirm the
contract asset or
the
reporting date.
liability recognised at
Based on the work performed we considered
revenue in respect of the bespoke contract sales
to have been appropriately recognised.
Carrying value of inventories
Key audit matter
Response
As described in note 30, 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 they were 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 consumption rate and the stockholding at the
reporting date.
This policy provides against inventory on an
incremental basis reflecting the expected time to
sell the goods in normal operating cycles.
Judgements are present in the level of provision
applied to each year of ‘excess’ stock, as well as
the number of years beyond which provision is
introduced.
Due to the significant value of inventory at the
reporting date, and the estimation uncertainty in the
calculation of the inventory provision, we have
identified this as a key audit matter.
In doing this we attended inventory counts at all
material stockholding locations, to verify the
accuracy of underlying quantity data, as well as the
overall condition of stock at the reporting date. We
also performed substantive testing of inventory cost
to confirm the accuracy and age.
We performed sensitivity analysis over the key
judgements by testing the impact of reasonable
changes in the level of provision applied to each
age bracket, and by changing the period of time
after which inventory provisions are introduced. In
doing this we shortened the period of consumption
and challenged management as to whether
provisions were required against a sample of
inventory lines that were not written down under the
existing policy.
We also 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.
Based on the work performed we considered
management’s judgement on the level of inventory
provision to be reasonable.
Impairment of goodwill
Key audit matter
Response
As described in note 30, Accounting estimates and
judgements, the Directors have assessed the
recoverable value of goodwill at the reporting date.
The group’s goodwill is classified into two cash
generating units (‘CGUs’) corresponding to the
operations supporting those assets. This results in
recognition of $10.3m of goodwill relating to the
Tykma subsidiary, and a further $2.8m relating to
CMS, at 28 March 2020.
The discounted cash flow calculations used to
consider the recoverable value of goodwill are
based on the forecast future performance for these
business areas. Following the Covid-19 outbreak
there is increased uncertainty in these forecasts.
Other estimates are made in the impairment review
calculations, including the discount rate applied to
the cash flows and the growth rate into perpetuity.
Due to the estimation uncertainty in the calculation
of the recoverable value of goodwill we have
identified this as a key audit matter.
We reviewed the mechanical accuracy of
management’s goodwill impairment calculations,
and considered the accuracy of key inputs including
forecast cash flows and discount rate.
We performed an assessment of the cash flow
forecasts by comparing them to the current year
and using the post balance sheet period to
retrospectively evaluate management’s ability to
forecast accurately.
We also considered the growth rate applied to the
cash flow forecasts, challenging management on
the basis of this and calculating the sensitivity of
reasonable changes in this estimate.
We validated the inputs to the discount rate against
external and internal sources of information as
applicable, and performed sensitivity analysis on
this to determine the discount rate required to
change the impairment conclusion.
We did not identify any impairment of goodwill
within reasonable sensitivities on the key areas of
estimation.
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.
Materiality for the Group financial statements as a whole was set at $170,000 (2019: $200,000). This represents
5% of statutory profit or loss before tax, averaged over the current and previous three financial years. Profit or loss
before tax is deemed to be the measure of most interest to the users of the financial statements. Component
materiality was set in the range of $25,000 to $130,000 (2019: $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 was set at 70% (2019: 70%) 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 $3,000 (2019:
$4,000). We also agreed to report differences below this threshold that, in our view, warranted reporting on
qualitative grounds.
Materiality for the parent company financial statements was capped at $25,000 (2019: $50,000) and it was agreed
that 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.
21
21
22
22
Independent auditor’s report to the members of The 600 Group PLC
Independent auditor’s report to the members of The 600 Group PLC
Financial information relating to the parent company, the UK trading company and the consolidation process was
subject to full scope audit by the Group audit team.
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.
As the majority of the Group’s activity is conducted in the USA at three locations, the Group audit team involved
local BDO member firms in these locations as component auditors. Full scope audits were conducted on these
three significant components, with a high level of involvement by the Group audit team. This included, most notably,
setting of materiality, risk identification 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 stages. In previous years this has included site visits and file
reviews alongside component audit teams, however due to travel restrictions imposed as a result of the Covid-19
outbreak the required engagement was obtained through remote mechanisms for the current year audit. This
included conference/video calls at planning, execution and completion stages of the audit with all BDO component
audit teams and the local management teams. Remote file reviews were performed alongside component audit
teams at the three significant locations, with subsequent calls and resolution of findings prior to reporting.
The Group also operates in Australia, however this is not considered a significant component and agreed upon
procedures were performed on key balances by a BDO member firm.
Assurance was obtained over other non-significant components 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.
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:
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: 19 November 2020
BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).
•
•
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 16, the directors are
responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view,
23
23
24
24
Consolidated income statement
For the 52-week period ended 28 March 2020
Consolidated statement of comprehensive income
For the 52-week period ended 28 March 2020
(Loss)/profit for the period
Other comprehensive income/(expense)
Items that will not be reclassified to the Income Statement:
Remeasurement of defined benefit asset
Property revaluation
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 expense for the period, net of income tax
Total comprehensive expense for the period
Attributable to:
Equity holders of the Parent Company
Notes
29
11
14
52-week
52-week
period ended
period ended
28 March
30 March
2020
$000
(365)
(36)
199
(282)
(119)
(606)
(606)
(725)
2019
$000
3,126
(43,083)
-
15,071
(28,012)
(3,005)
(3,005)
(31,017)
(1,090)
(27,891)
(1,090)
(27,891)
The accompanying accounting policies and notes on pages 30 to 73 form part of these Financial Statements.
The Group has initially applied IFRS16 using the modified retrospective method. Under this method, the comparative information is not
restated. See Accounting Policies note on page 36 and note 22.
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
28 March
28 March
28 March
30 March
30 March
30 March
Notes
2020
$000
2020
$000
2020
$000
2019
$000
2019
$000
2019
$000
Continuing
Revenue
Cost of sales
Gross profit
Net operating expenses
Profit on disposal of pension scheme
Operating profit/(loss)
Financial income
Financial expense
Profit/(loss) before tax
Income tax (charge)/credit
Profit for the period on continuing activities
attributable to equity holders of the parent
1
2
29
6
6
7
Loss on discontinued operations
17
Profit/(loss) for the period attributable to the
equity holders of the parent
Basic earnings per share - continuing activities
Diluted earnings per share - continuing activities
Basic earnings per share
Diluted earnings per share
9
9
9
9
67,206
(43,491)
23,715
-
67,206
65,167
(254)
(43,745)
(41,641)
(254)
23,461
23,526
-
-
-
65,167
(41,641)
23,526
(20,988)
(1,742)
(22,730)
(18,269)
(1,786)
(20,055)
-
809
2,727
(1,187)
809
1,540
-
-
-
5,257
(1,786)
3,471
5
22
27
35
2,077
2,112
(1,664)
(536)
(2,200)
(1,236)
-
(1,236)
1,068
(1,701)
(633)
4,056
291
4,347
1,228
2,296
(417)
1,879
1.97c
1.92c
1.61c
1.57c
-
(1,701)
(543)
(2,244)
1,228
595
(960)
(365)
(66)
3,990
(146)
3,844
(48)
243
(961)
(718)
(114)
4,233
(1,107)
3,126
0.51c
0.50c
(0.31c)
(0.31c)
3.53c
3.50c
3.40c
3.37c
3.75c
3.71c
2.77c
2.74c
Company Number 00196730
The accompanying accounting policies and notes on pages 30 to 73 form part of these Financial Statements.
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.
The Group has initially applied IFRS16 using the modified retrospective method. Under this method, the comparative information is not
restated. See Accounting Policies note on page 36 and note 22.
25
25
26
26
Consolidated statement of financial position
As at 28 March 2020
Company Number 00196730
Consolidated statement of changes in equity
As at 28 March 2020
Company Number 00196730
Non-current assets
Property, plant and equipment
Goodwill
Other Intangible assets
Right of use assets
Deferred tax assets
Current assets
Inventories
Trade and other receivables
Employee Benefits
Taxation
Deferred tax assets
Assets classified as held for sale
Cash and cash equivalents
Total assets
Non-current liabilities
Employee benefits
Loans and other borrowings
Lease liabilities
Current liabilities
Trade and other payables
Lease liabilities
Deferred tax liabilities
Provisions
Loans and other borrowings
Total liabilities
Net assets
Shareholders’ equity
Called-up share capital
Share premium account
Revaluation reserve
Equity reserve
Translation reserve
Retained earnings
Total equity
As at
As at
28 March 2020
30 March 2019
Notes
$000
$000
11
12
12
22
14
15
16
29
16
14
17
18
29
19
22
20
22
14
21
19
23
4,060
13,174
3,868
9,060
4,415
34,577
19,054
8,084
-
222
1,148
-
2,878
31,386
65,963
(1,261)
(11,654)
(8,344)
(21,259)
(8,298)
(1,608)
(236)
(590)
(5,414)
(16,146)
(37,405)
28,558
1,803
3,828
1,348
201
(7,130)
28,508
28,558
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
At 31 March 2018
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
Loss for the period
Other comprehensive income:
Foreign currency translation
Property revaluation
Net defined benefit movement
Deferred tax
Total comprehensive income
Transactions with owners:
Share capital subscribed for
Dividend
Credit for share-based payments
Total transactions with owners
Ordinary
Share
share
capital
$000
premium Revaluation
Translation
Equity
account
reserve
reserve
reserve
$000
$000
$000
1,746
2,885
1,149
(3,519)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(3,005)
-
-
(3,005)
-
-
-
Retained
Earnings
$000
Total
$000
56,131
58,593
3,126
3,126
-
(3,005)
(43,083)
(43,083)
15,071
15,071
(24,886)
(27,891)
(1,104)
(1,104)
45
45
(1,059)
(1,059)
$000
201
-
-
-
-
-
-
-
-
1,746
2,885
1,149
(6,524)
201
30,186
29,643
-
-
-
-
-
-
57
-
-
57
-
-
-
-
-
-
-
199
-
-
-
-
(365)
(365)
(606)
-
-
(606)
-
-
-
-
-
-
-
(36)
(282)
199
(36)
(282)
-
199
(606)
-
(683)
(1,090)
943
-
-
943
3,828
-
-
-
-
-
-
-
-
-
-
-
-
-
1,000
(1,088)
(1,088)
93
(995)
93
5
1,348
(7,130)
201
28,508
28,558
At 28 March 2020
1,803
The accompanying accounting policies and notes on pages 30 to 73 form part of these Financial Statements.
The Group has initially applied IFRS16 using the modified retrospective method. Under this method, the comparative information is not
restated. See Accounting Policies note on page 36 and note 22.
The financial statements on pages 25 to 73 were approved by the Board of Directors on 19 November 2020 and were signed on its behalf by:
NEIL CARRICK
Finance Director
19 November 2020
27
27
28
28
Consolidated cash flow statement
For the 52-week period ended 28 March 2020
Cash flows from operating activities
(Loss)/profit for the period
Adjustments for:
Amortisation
Depreciation
Depreciation of right of use assets
Net financial expense/(income)
Non-cash adjusting items
Loss/(profit) on disposal of property, plant and equipment
Loss on assets held for resale
Profit on disposal of pension fund
Equity share option expense
Income tax (credit)/expense
Operating cash flow before changes in working capital and provisions
Decrease/(increase) in trade and other receivables
Decrease/(increase) in inventories
Decrease in trade and other payables
Employee benefits contributions
Proceeds from Pension fund disposal
Cash generated by operations
Interest paid
Lease interest
Income tax received/(paid)
Net cash flows from operating activities
Cash flows used in investing activities
Interest received
Proceeds from sale of property, plant and equipment
Proceeds from assets held for sale
Payment for acquisition of subsidiary, net of cash acquired
Purchase of property, plant and equipment
Development and IT software expenditure capitalised
Proceeds from sale of development expenditure
Net cash flows used in investing activities
Cash flows used in financing activities
Dividends paid
Proceeds from external borrowing
Lease payments
Net finance (expenditure)/income
Net cash flows used in financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the period
Effect of exchange rate fluctuations on cash held
Cash and cash equivalents at the end of the period
The accompanying accounting policies and notes on pages 30 to 73 form part of these Financial Statements
29
52-week
52-week
period ended
period ended
28 March 2020
30 March 2019
Notes
$000
$000
12
11
6
17
29
5
7
29
17
33
11
12
8
24
18
(365)
325
651
1,254
2,173
879
32
127
(809)
93
(1,228)
3,132
2,587
67
(973)
(78)
5,213
9,948
(1,141)
(375)
-
8,432
5
57
926
(6,072)
(649)
(351)
-
(6,084)
(1,088)
1,928
(1,212)
-
(372)
1,976
948
(46)
2,878
3,126
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
29
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 2020 are
for the 52-week period ended 28 March 2020. The results for 2019 are for the 52-week period ended 30 March 2019.
Given two thirds of the revenues and a large proportion of expenditure is either in US 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 74 to 83.
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 28 March 2020:
•
IFRS 16- Leases (effective for accounting periods on or after 1 January 2019)
Adoption of IFRS 16 has resulted in the group recognising right-of-use assets and lease liabilities for all contracts that are, or contain, a
lease. For leases previously classified as operating leases, under previous accounting requirements the group did 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 applied the modified retrospective adoption method in IFRS 16, and, therefore, only recognised leases on balance sheet
as at 31 March 2019. In addition, it has decided to measure right-of-use assets by reference to the measurement of the lease liability on
that date.
Instead of recognising an operating expense for its operating lease payments, the group will instead recognise interest on its lease
liabilities and depreciation on its right-of-use assets.
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 30.
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 17 insurance contracts including amendments to IFRS 17 (issued 25 June 2020) (effective from 1 January 2023
IAS 1 (amendments) classification of liabilities as current and non-current (effective from 1 January 2022)
Annual Improvements to IFRSs 2018-20 Cycle (effective from 1 January 2022)
IFRS 3 (amendments) Business combinations (effective from 1 January 2022)
IAS 16 (amendments) Property, plant and equipment (effective from 1 January 2022)
IAS 37 (amendments) Provisions, contingent liabilities and contingent assets (effective from 1 January 2022)
IFRS 4 (amendments) Insurance contracts – deferral of IFRS 9 (effective from 1 January 2021)
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.
30
30
Group accounting policies (continued)
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 3 to 9.
The financial position of the Group, liquidity, cash flows and borrowing facilities are described in the Strategic Report. Note 26 to the
Financial Statements also sets out the Group’s objectives, policies and processes for measuring and managing its capital and financial
risk management. Details of its financial instruments, exposure to foreign exchange, credit and interest rate risk is also covered in note
26. Further details on the Group’s cash and bank borrowings are included in notes 18,19 and 25.
The UK bank facilities with HSBC have no specific financial covenants. Trade loans and invoice financing need to be backed by the
assets they are funding. There are no covenants in respect of the new Coronavirus Large Business Interruption Loan scheme (CLBILS)
taken out in August 2020.The borrowings with Bank of America are subject to adjusted EBITDA to a fixed charge and to senior debt and
an overall asset cover test. The short term trade and credit facilities are due to be reviewed over the coming months and are expected to
continue in the ordinary course of business on the same terms.
The Director’s believe that the Group is well placed to manage its business risks and, after making enquiries including a review of forecasts
and assumptions, which take account of reasonably possible changes in trading activity and considering the existing banking facilities,
including discussion with the Bank of America on the possibility of covenant adjustments should this be required, have a reasonable
expectation that the Group has adequate resources to continue in operational existence for the next 12 months following the date of
approval of the financial statements.
The continuing uncertainty of the impact of the Covid-19 pandemic on the Group has been considered as part of the Group’s adoption of
the going concern basis. Whilst all facilities remain open there are reduced working hours and staffing levels in place in cer tain areas.
Operating costs have been reduced, government employment assistance schemes and government loans have been utilised whe re
available.
As part of their assessment the Directors have considered downside scenarios that reflect the current unprecedented uncertainty in the
worldwide markets the Group operates in and which are considered to be severe but plausible. Revenue deductions of 25% against the
2020 financial year and 30% against the pre pandemic 2019 year have been considered against which mitigating actions of headc ount
reduction, utilisation of government assistance, pay reductions and cash preservation actions including reductions in capital expenditure
and deferral of taxation have been applied.
The results of these scenarios show that there is sufficient liquidity in the businesses for a period of at least 12 months from the date of
approval of these financial statements. Lenders remain supportive and have indicated a willingness to assist with covenant changes in
the event that flexibility may be required in the short term.
In the most severe case where revenue falls are greater than 30% and lenders elect not to provide covenant flexibility, and trigger a
repayment of outstanding debt, then without further mitigating actions or additional funding the Group maybe unable to realise assets and
discharge liabilities in the normal course of business.
Having undertaken this work, the Directors are of the opinion 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 consolidated
financial statements.
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 at 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.
REVENUE RECOGNITION FROM CONTRACTS WITH CUSTOMERS
IFRS 15 establishes a single approach for the recognition and measurement of revenue and requires an entity to recognise reve nue 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.
Group accounting policies (continued)
Given that these machines are built to customers individual specific requirements and could not practically be sold or used by anyone
else without significant modification and there is an enforceable right to payment for performance on the machine completed to date they
have been treated differently from the standard products. These machines are produced over an extended period, often several months,
with the efforts to complete this work judged to be made evenly over the design and build process. As a result the Group has adopted a
policy of accounting for the revenue on these custom jobs over a period of time. Any installation, commissioning or spares in connection
with these machines are recognised at the point of provision of those services or materials and are not spread over the build process.
Sales of spares are 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. There were no such machines treated in this way at the year end (2019: none).
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 is recognised under the normal ‘ex-
works’ rule.
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 ‘custom’ machines.
Customer deposits are not recognised in revenue and are shown in current liabilities within trade and other payables in the s tatement of
financial position and separately identified in note 20.
If the revenue recognised to date on custom machines exceeds the invoiced value a contract asset will be recorded to recognis e the
excess contractual entitlement for work carried out to date. Contract assets are reviewed at the period end for any indications of
impairment in value.
Revenue disclosures
In addition to the disaggregation of revenue provided by geography for origin and destination, a disaggregation by category o f product
sold and product sold at a point in time compared to over time is included in note 1.
SEGMENT ANALYSIS
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 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 the 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.
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 32 alternative performance measures and set out in note 3. All adjusting items are
taken into account in the GAAP figures in the Income Statement.
Sale of goods and services
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 the appointed shipping agent.
As a result of the acquisition of CMS during the year and the shift in sales in the TYKMA Electrox business to higher specification jobs a
number of custom machines are now produced to customers’ specific requirements and can take several months to complete.
PENSIONS AND POST-RETIREMENT HEALTH BENEFITS
The Group operates both defined benefit and defined contribution pension schemes. It also operates a retirement healthcare be nefit
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 calculations are performed by a qualified actuary using the projected unit method. Remeasurements are recognised
31
31
32
32
Group accounting policies (continued)
Group accounting policies (continued)
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. The buy-out of the UK scheme 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.
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 proportio n 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%.
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. In the year to March 2020 the Group’s properties were revalued. The valuations were performed by independent
valuers, CRBE Valuations Pty Limited, 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 lease
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:
•
•
33
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
33
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
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 of 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 the simplified approach to recognise lifetime expected credit loses for its trade receivables as required by IFRS 9.
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.
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 u sing the
effective interest method. The equity component of a compound financial instrument is not remeasured subsequent to initial recognition.
Interest and gains and losses related to the financial liability are recognised in profit or loss. On conversion, the financi al liability is
reclassified to equity; no gain or loss is recognised on conversion.
Where the terms and conditions of compound financial instruments are modified the Group considers 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
34
34
Group accounting policies (continued)
Group accounting policies (continued)
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.
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 thro ugh 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 recogni sed 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 init ial 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. F inancial
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 and contract
assets and liabilities.
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 interest 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.
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
The Group has initially adopted IFRS 16 Leases from 31 March 2019. The effect of initially applying this standard is to increase both the
assets and liabilities of the Group through the recognition on the balance sheet of the operating leases in respect of rented properties and
vehicles.
The group has adopted IFRS 16 using the modified retrospective approach from 31 March 2019 and therefore has not restated comparatives
for the 2019 reporting period, as permitted under the specific transitional provisions in the standard. The reclassifications and the adjustments
arising from the new leasing rules are therefore recognised in the opening balance sheet on 31 March 2019.
Details of the accounting policy for leases is shown in note 22.
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 amo unt.
Impairment losses are recognised in the consolidated income statement. Those relating to revalued property are treated in accordance
with IAS 16.
35
35
36
36
Group accounting policies (continued)
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.
Identified intangible assets with a finite life are valued under IFRS 3 using estimates of useful lives and discounted cash f lows of expected
income.
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. In accordance with IFRS 3 intangibles with a finite life are amortised, between 1-8 years on a
straight line basis.
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:
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 accruals basis. Equity dividends are recognised as
a liability in the period in which they are declared (appropriately authorised and no longer at the discretion of the Company).
RESERVES
A consolidated statement of changes in equity is shown on page 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 propert y is taken
to revaluation reserve. Any impairments in property valuation in excess of credits made to the revaluation reserve for that property are
charged to the consolidated 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.
RETAINED EARNINGS
Retained earnings brought forward from prior periods along with current year result.
37
37
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 28 March 2020
Continuing
Machine
tools
& precision
engineered
components
Industrial
laser
systems
Head Office
&
unallocated
Segmental analysis of revenue
Total revenue
$000
$000
43,511
23,695
$000
-
Total Discontinued
$000
$000
830
67,206
Group Total
68,036
Segmental analysis of operating
profit/(loss) before Adjusting Items
Adjusting Items
Group operating profit/(loss)
Other segmental information:
Reportable segment assets
Reportable segment liabilities
Fixed asset additions
Depreciation and amortisation
3,216
-
3,216
1,689
(254)
1,435
(2,178)
2,727
(933)
(1,187)
(3,111)
1,540
(417)
(543)
(960)
2,310
(1,730)
580
35,073
(18,085)
368
901
14,164
(6,990)
330
883
16,726
65,963
(12,330)
(37,405)
302
446
1,000
2,230
-
-
-
-
65,963
(37,405)
1,000
2,230
38
38
Notes relating to the consolidated financial statements
Notes relating to the consolidated financial statements
1. SEGMENT INFORMATION (CONTINUED)
52 Weeks ended 30 March 2019
Continuing
Machine
tools
& precision
engineered
components
Industrial
laser
systems
Head Office
&
unallocated
Segmental analysis of revenue
Total revenue
$000
44,575
$000
20,592
$000
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
28,126
9,492
18,728
56,346
(11,131)
(4,496)
(12,184)
(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
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:
Disaggregation of revenue by origin
UK
North America
Australasia
2020
2019
$000
%
$000
16,453
48,094
2,659
67,206
24.5
71.6
3.9
100.0
14,249
47,387
3,531
65,167
%
21.8
72.8
5.4
100.0
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:
Sector
CNC lathes
Conventional lathes
CNC other
Conventional other
Workholding
Spares & service
Lasers
Laser spares and service
Total
Timing of revenue recognition
Products and services transferred at a point in time
Products and services transferred over time
Total
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
Current contract assets relating to amounts due from customers
39
39
2020
2019
$000
%
$000
%
11,500
5,032
43,804
538
2,561
1,101
1,346
1,324
67,206
17.1
7.5
65.2
0.8
3.8
1.6
2.0
2.0
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
100.0
65,167
100.0
2020
2019
$000
%
$000
%
9.4
20.8
2.0
13.6
9.8
4.6
34.6
5.2
100.0
6,282
13,968
1,351
9,126
6,611
3,120
23,263
3,485
67,206
57,811
9,395
67,206
4,761
13,941
1,209
11,587
7,062
5,620
19,814
1,173
65,167
65,167
-
65,167
2020
$000
385
2020
$000
246
7.3
21.4
1.9
17.8
10.8
8.6
30.4
1.8
100.0
2019
$000
538
2019
$000
-
40
40
Notes relating to the consolidated financial statements
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:
3. ADJUSTING ITEMS (CONTINUED)
Adjusting items
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 (note 3)
Total operating expenses
2020
$’000
538
2020
$000
14
14
2020
$000
17,221
3,781
1,742
22,744
2019
$’000
1,244
2019
$000
12
12
2019
$000
14,469
3,812
1,786
20,067
Total net operating expenses
22,730
20,055
3. 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 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 32 alternative performance measures and set out below. All adjusting items are taken
into account in the GAAP figures in the Income Statement.
. The items below correspond to the table below;
a) The buy-out of the Group pension scheme was completed in April 2019 and a profit of $0.8m was recorded as the amount received
was higher than the carrying value of the asset previously recognised. 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 and 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 in the prior year, the existing premises were vacated, and a sublet was in
the process of negotiation. However due to flooding at the site these negotiations failed to be completed and as a result a right of
use asset impairment charge of $0.4m has been recognised in the year, in addition to a provision for associated unavoidable costs,
including amortisation and interest under IFRS 16 totaling $0.4m. In the prior year an onerous lease charge of $0.4m was
recognised and was subsequently incorporated into the right of use asset impairment on adoption of IFRS 16.
c) A credit of $22K (2019: credit of $1.26m) 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 net adjustment to the carrying value of the amortised loan note costs on their extension in the prior year is shown as a credit
of $0.8m in financial income with the corresponding charge of $0.5m for the year shown in financial expense. These are non cash
movements and relate to the discounting of the loan notes and associated costs which unwind over the term of the notes.
e) A charge of $0.7m was incurred as a result of the acquisition of Control Micro Systems Inc for legal and professional fees.
f) A charge of $0.3m arose as a result of amortisation of intangible assets acquired through the Control Micro Systems Inc deal.
g)
In the prior period a charge of $0.96m has been recorded against the value of the Gamet Bearings assets held for sale to bring
their carrying value into line with the expected proceeds of sale, less costs to sell. In the current year a charge has been incurred
of $0.5m which included additional costs of the closure of the Gamet business in October 2019 as well as a loss on disposal as a
result of receiving less than originally anticipated.
h) A charge of $0.3m was expensed in cost of sales relating to US duty and tariff charges from prior years
Items included in cost of sales:
US Tariffs & Duty charges relating to prior years (h)
Items included in operating expenses:
Pensions charge (a)
Pensions legal costs (a)
Onerous lease provision (b)
Unavoidable lease costs (b)
Right of use asset impairment (b)
Acquisition costs (e)
Amortisation of intangible assets acquired (f)
Profit on sale of pension (a)
Items included in financial (income)/expense:
Pensions interest on surplus (c)
Adjustment to loan notes (d)
Financial income
Amortisation of Loan notes and costs (d)
Total adjusting items before tax
Income tax on adjusting items
Total adjusting items after tax
Loss on discontinued activity (g)
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
- amortisation of acquisition intangible
– amortisation of Right of use assets
– short term and low value leases
– hire of plant
– other operating lease rentals
– 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
2020
$000
(254)
(254)
-
-
-
(378)
(392)
(684)
(288)
809
(933)
22
-
22
(536)
(1,701)
-
(1,701)
(543)
2020
$000
651
37
288
1,254
91
-
-
32
70
273
12
14
2019
$000
-
-
(1,277)
(78)
(431)
-
-
-
-
(1,786)
1,255
822
2,077
-
291
(48)
243
(961)
2019
$000
540
73
-
-
-
5
28
461
65
122
45
24
41
41
42
42
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.
Notes relating to the consolidated financial statements
Notes relating to the consolidated financial statements
5. PERSONNEL EXPENSES
7. TAXATION
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
2020
$000
13,671
1,358
394
18
93
2019
$000
11,616
1,370
454
30
45
15,534
13,515
In addition to the above staff costs, redundancy costs of $341,551 were incurred during the year due to the closure of the Gamet business
(2019: $74,670). 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 17-19).
The average number of employees of the Group (including Executive Directors) during the period was as follows:
Current tax:
- UK Corporation tax at 19% (2019: 19%):
Overseas taxation:
– current period
Total current tax credit
Deferred taxation:
– current period
– effect of rate change in UK
– prior period
Total deferred taxation credit/(charge) (Note 14)
Taxation credited/(charged) to the income statement
2020
$000
2019
$000
151
151
891
143
43
1,077
1,228
77
77
92
-
(283)
(191)
(114)
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
Loan note interest
Other finance charges
Finance charges
Lease interest
Interest on employee benefit liabilities
Financial expense
2020
2019
Number
Number
77
64
68
209
2020
$000
5
22
-
27
(315)
(918)
(536)
-
(12)
(375)
(44)
57
72
64
193
2019
$000
35
1,255
822
2,112
(236)
(948)
-
(1)
(6)
-
(45)
The rate for deferred tax in UK was changed from 17% to 19% in the current year. The rate for Federal tax in the USA is 21%.
TAX RECONCILIATION
The tax (credit)/charge assessed for the period is higher than (2019: lower than) the standard rate of corporation tax in the UK of 19 %
(2019: 19%). The differences are explained below:
(Loss)/profit before tax
(Loss)/profit before tax multiplied by the standard rate of corporation tax
in the UK of 19% (2019: 19%)
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)
Taxation (credited)/charged to the income statement
2020
$000
2019
$000
(633)
4,347
(120)
826
68
55
-
60
(243)
(43)
(143)
(4)
(858)
-
(1,228)
274
14
3
166
(140)
-
290
(912)
(124)
(283)
114
(2,200)
(1,236)
Deferred taxation balances are analysed in note 14.
43
43
44
44
Notes relating to the consolidated financial statements
Notes relating to the consolidated financial statements
8. DIVIDENDS
No dividends have been proposed this year. In the prior year a final dividend of 0.5p was paid on 30 September 2019 to holders on the
register at 30 August 2019.
10. EMPLOYEE SHARE OPTION SCHEMES
The Group has granted share options to employees under The 600 Group PLC Deferred Share Plan 2011 (DSP). The scheme is equity-
settled.
Final Dividend paid September 2019 (0.5p/share)
Interim Dividend paid January 2020 (0.25p/share)
Final Dividend paid September 2018 (0.5p/share)
Interim Dividend paid December 2018 (0.25p/share)
Total
2020
$000
725
363
-
-
1,088
2019
$000
-
-
736
368
1,104
9. EARNINGS PER SHARE
The calculation of the basic earnings per share of 0.51c (2019: 3.75c) is based on the earnings for the financial period attributable to the
Parent Company’s shareholders of a profit of $595,000 (2019: $4,233,000) and on the weighted average number of shares in issue
during the period of 116,450,053 (2019: 112,973,341). At 28 March 2020, there were 8,400,000 (2019: 7,500,000) potentially dilutive
shares on option with a weighted average effect of 2,877,486 (2019: 1.191,415) shares giving a diluted earnings per share of 0.50c
(2019: 3.71c).
SHARE-BASED PAYMENTS EXPENSE
The Group recognised a total charge of $93,000 (2019: $45,000) 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
2020
DSP
2019
DSP
7,500,000
900,000
6,650,000
850,000
-
-
-
-
8,400,000
6,650,000
7,500,000
6,150,000
On 27 November 2018, 800,000 nil cost options were granted and further 50,000 nil cost options on 29 March 2019. During the year on
21 June 2019 400,000 nil cost options were granted and a further 500,000 nil cost options on 17 July 2019.
2020
2019
All options are exercisable in 3 years from the date of grant.
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 8,400,000 (2019: 7,500,000) potentially dilutive shares
Total weighted average diluted shares
112,973,341
112,973,341
3,476,712
-
116,450,053
112,973,341
2,877,486
1,191,415
119,327,539
114,164,756
Total post tax earnings - continuing operations
Total post tax earnings including discontinued operations
Basic EPS
Diluted EPS
Total including discontinued operations
Basic EPS
Diluted EPS
Underlying earnings
Total post tax earnings - continuing operations
Adjusting items – per note 3
Underlying earnings after tax
Underlying basic EPS
Underlying diluted EPS
45
595
(365)
0.51c
0.50c
(0.31c)
(0.31c)
$000
595
1,701
2,296
1.97c
1.92c
4,233
3,126
3.75c
3.71c
2.77
2.74
$000
4,233
(243)
3,990
3.53c
3.50c
45
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
18p
0p
5%
6%
2018
Grant
14p
17p
0p
5%
5%
2016
2015
Grant
Grant
10p
10p
0p
0%
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
3.0 years
1.36%
1.36%
1.36%
1.36%
4.08%
4.08%
900,000
850,000
500,000 1,000,000 3,400,000 1,750,000
46
46
Notes relating to the consolidated financial statements
Notes relating to the consolidated financial statements
11. PROPERTY, PLANT AND EQUIPMENT
11. PROPERTY, PLANT AND EQUIPMENT (CONTINUED)
Cost or valuation
At 30 March 2019
Exchange differences
Revaluation
Transfers between classes
Additions during period
Addition on acquisition
Disposals during period
At 28 March 2020
Depreciation
At 30 March 2019
Exchange differences
Transfers between classes
Charge for period
Disposals during period
At 28 March 2020
Net book value
At 28 March 2020
At 30 March 2019
Land
and buildings
Leasehold
Plant and
Fixtures,
fittings,
tools and
Freehold
Improvements
machinery
equipment
$000
$000
$000
$000
921
(139)
199
-
-
-
-
734
(12)
-
-
79
46
-
981
847
3,201
(17)
-
7
284
544
(107)
3,912
27
(15)
-
6
-
18
963
894
108
2,582
(1)
-
52
-
(64)
(2)
217
(59)
159
2,674
3,340
688
626
1,238
619
1,171
1,296
4,357
(104)
-
(7)
286
85
(106)
4,511
3,061
(34)
2
376
(65)
Total
$000
9,213
(272)
199
-
649
675
(213)
10,251
5,778
(114)
-
651
(124)
6,191
4,060
3,435
Cost or valuation
At 31 March 2018
Exchange differences
Transfers between classes
Transfer to assets held for sale
Additions during period
Disposals during period
At 30 March 2019
Depreciation
At 31 March 2018
Exchange differences
Transfers between classes
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
The freehold property has been revalued at year end based on market value. The freehold property had a net book value of $963,000
(2019: $894,000) and is charged as security for borrowing facilities.
47
47
48
48
Notes relating to the consolidated financial statements
Notes relating to the consolidated financial statements
Total
$000
11,822
351
5,588
(13)
17,748
383
325
(2)
706
Total
$000
11,047
1,399
(639)
15
11,822
311
73
(1)
383
12. GOODWILL AND OTHER INTANGIBLE ASSETS
Tykma
CMS
Goodwill
relationships
Trademarks
Expenditure
Software
Other intangible
Total
Customer
Development
IT
Total
$000
$000
$000
$000
$000
$000
$000
$000
Cost
At 30 March 2019
10,329
Additions
Acquisition
Foreign exchange
-
-
-
-
-
10,329
-
-
-
2,845
2,845
2,743
-
-
-
312
-
-
-
982
51
-
(3)
At 28 March 2020
10,329
2,845
13,174
2,743
312
1,030
Amortisation and
impairment
At 30 March 2019
Amortisation
Foreign exchange
At 28 March 2020
Net book value
-
-
-
-
-
-
-
-
-
-
-
-
-
288
-
288
At 28 March 2020
10,329
2,845
13,174
2,455
At 30 March 2019
10,329
-
10,329
-
300
12
-
312
-
12
83
25
(2)
106
924
899
199
300
-
(10)
489
-
-
-
-
1,493
351
2,743
(13)
4,574
383
325
(2)
706
489
199
3,868
1,110
17,042
11,439
The additions to Development Expenditure of $51k in the period and $1,200k in the prior period related primarily to internal development.
Tykma
Development
IT
Goodwill
Trademarks
Expenditure
Software
$000
$000
$000
$000
-
199
-
-
199
-
-
-
-
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
Amortisation and impairment charges are recorded in the following line item in the income statement:
Operating expenses
49
12. GOODWILL AND OTHER INTANGIBLE ASSETS (CONTINUED)
IMPAIRMENT TESTING OF GOODWILL
The Group has undertaken its annual impairment testing of Goodwill as at 28 March 2020 which compares the book value against the
recoverable amount from the continued use or sale of the related business.
The recoverable amount of each cash generating unit (CGU) is assessed on a value in use basis by calculating the net present value of
cash flows derived from individual financial plans of the business. Tykma and CMS are identified as separate CGU’s. Budgets and revised
forecasts, which take into account the possible effects of the Covid-19 pandemic have been prepared by all business units covering the
two years to March 2022. Cashflow projections are part of this process and the forecasts are consistent with those used in the evaluation
of Going Concern. The revised forecast assumes reduced revenue and profitability in the year to March 2021 and March 2022 before a
return to budgeted levels of activity thereafter with annual growth rates of 3% in line with local industry forecasts. A terminal value
calculation is used to estimate the cashflow after year five. 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 13%.
The Covid-19 pandemic has created unprecedented economic and social effects and the impact on the Group’s operations during this
time cannot be forecast with reasonable certainty and accordingly the impairment of non-financial assets is considered a key source of
estimation and uncertainty. The revised forecasts reflect a severe downside scenario but do not result in any impairment.
Sensitivity to changes in assumptions
Whilst an even worse scenario as a result of the Covid-19 pandemic cannot be ruled out, 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 600 Limited; 600
Bearings Limited; T S Harrison & Sons Limited; The Richmond Machine Tool Company Limited; 600 Lathes Limited and Coborn
Insurance Company 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
Control Micro Systems Inc
Clausing Industrial, Inc’s principal activity is the design and distribution of machine tools and precision engineered components.
TYKMA Inc’s and Control Micro Systems Inc principal activities are 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.
Control Micro Systems Inc has a registered office of 4420-A Metric Drive Winter Park, Florida 32792, US.
199
-
11,439
10,736
REST OF THE WORLD:
600 Machine Tools (Pty) Ltd – (Australia)
2020
$000
325
2019
$000
73
49
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.
50
50
Notes relating to the consolidated financial statements
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)
Due within one year
Due after one year
Total
Assets
Liabilities
Net
2020
2019
2020
2019
2020
2019
$000
735
322
2,195
2,154
157
-
5,563
$000
950
344
2,585
699
-
-
4,578
$000
$000
-
-
-
-
-
(236)
(567)
-
-
-
-
(2,292)
(249)
(2,541)
$000
735
322
2,195
2,154
157
(236)
5,327
$000
950
344
2,585
699
(2,292)
(249)
2,037
Assets
2020
$000
1,148
4,415
5,563
2019
$000
-
4,578
4,578
Liabilities
2020
$000
(236)
-
(236)
2019
$000
(2,541)
-
(2,541)
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
As at
30 March
On acquisition
Income
Pension scheme
Exchange
28 March
2019
$000
950
344
2,585
699
(2,292)
(249)
2,037
statement
sale
Fluctuations
$000
(197)
-
-
-
-
-
$000
42
(21)
(246)
1,455
(153)
-
(197)
1,077
$000
-
-
-
-
2,464
-
2,464
$000
(60)
(1)
(144)
-
138
13
(54)
2020
$000
735
322
2,195
2,154
157
(236)
5,327
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 further reductions are not now expected. The deferred tax
assets and liabilities at the balance sheet date have been calculated based on this rate.
US deferred tax is provided at 25% (2019: 25%) 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.
51
2020
$000
2,588
2,422
2019
$000
2,588
1,986
51
15. INVENTORIES
Raw materials and consumables
Work in progress
Finished goods and goods for resale
2020
$000
382
851
17,821
19,054
2019
$000
63
1,264
17,703
19,030
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 $38.8m (2019: $38.4m)
During the period inventory provisions have decreased by $1,164,000 largely as a result of sale of the Gamet business (2019: increased
by $643,000). 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
Contract assets
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
2020
$000
6,153
772
913
246
8,084
2020
$000
222
2019
$000
7,599
540
1,024
-
9,163
2019
$000
294
2020
$000
2019
$000
4,999
5,823
1,133
1,771
58
17
37
11
90
40
6,244
7,735
52
52
Notes relating to the consolidated financial statements
Notes relating to the consolidated financial statements
16. TRADE AND OTHER RECEIVABLES (CONTINUED)
At 28 March 2020 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%
63%
100%
Gross carrying amount
$'000
4,999
$'000
1,133
$'000
58
$'000
17
over 12
months
100%
$'000
37
Total
$'000
6,244
Loss provision
-
-
37
17
37
91
17. ASSETS CLASSIFIED AS HELD FOR SALE AND DISCONTINUED OPERATIONS
The Gamet Bearings business was 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 and trading assets were
sold in October 2019 to another bearing manufacturer in the UK with the Colchester site closed and the freehold sold separately in
February 2020. 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 assets for sale were classified as held for sale in the consolidated statement of financial position at 30 March 2019 and consisted of
inventory, freehold property and plant equipment to the value of $1.1m. An impairment loss of $0.96m on the measurement of the disposal
group to fair value less cost to sell was recognised in the prior year and additional provision was required in the current y ear of $0.5m.
These amounts are included in adjusting items in loss attributable to discontinued activity in the consolidated income statement. The fair
value of net asset were 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. The operating cash out flows in the
year were $0.96m (2019: outflow $1.1m) and nil (2019: nil) for investing and financing activities.
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. As the groups historical credit loss experience over the past five years does not
show significantly different loss patterns for different customer segments, the provision for loss allowance based on past due status is
not further analysed.
There has been no change in the estimation technique or significant assumptions made during the current reporting period. The movement
in the loss provision has been as follows:
Opening provision for impairment
Exchange difference on opening balance
On acquisition
Utilised in the period/unused provision released
Closing provision
2020
$000
136
(2)
82
2019
$000
317
(12)
-
(125)
(169)
91
136
Revenue
Cost of sales
Gross profit
Net operating expenses
Loss before tax
Income tax
Loss for the period
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
28 March
28 March
28 March
30 March
30 March
30 March
2020
$000
830
(422)
408
(825)
(417)
-
2020
$000
2020
$000
2019
$000
2019
$000
2019
$000
-
-
-
(543)
(543)
-
830
(422)
408
(1,368)
(960)
-
1,572
(1,382)
190
(336)
(146)
-
-
-
-
(961)
(961)
-
1,572
(1,382)
190
(1,297)
(1,107)
-
(417)
(543)
(960)
(146)
(961)
(1,107)
The loss on disposal of assets held for sale at the prior year end amounted to $127K and is included within the $543K adjusting items
above.
Asset Held for resale 30 March 2019
Exchange variance
Proceeds received
Loss on disposal
Assets Held for resale 28 March 2020
18. CASH AND CASH EQUIVALENTS
Cash at bank and in hand
Short-term deposits – restricted cash
Cash and cash equivalents per statement of financial position and per cash flow statement
$000
1,108
(55)
(926)
(127)
-
2019
$000
818
130
948
2020
$000
2,755
123
2,878
Included within cash and cash equivalents at 28 March 2020 is an amount totalling $123,000 (2019: $130,000) held in a secured account at
Barclays Bank plc in favour of Commercial Union Assurance Company plc, which can only be used to pay claims and related expenses within
a subsidiary of the group.
53
53
54
54
Notes relating to the consolidated financial statements
Notes relating to the consolidated financial statements
19. LOANS AND OTHER BORROWINGS
CURRENT:
Bank loans and overdrafts
Obligations under finance leases
NON-CURRENT:
Bank loans
8% Loan notes
Obligations under finance leases
2020
$000
5,414
-
5,414
2020
$000
2,217
9,437
-
2019
$000
5,189
127
5,316
2019
$000
572
9,517
84
11,654
10,173
19. LOANS AND OTHER BORROWINGS (CONTINUED)
The $10.5m (£8.5m) nominal value 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 an equity
reserve and the balance after deduction of associated costs and amortisation of $0.8m, 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, during the
prior year, 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 nothing was utilised at the year-end (2019 $0.7m). The
mortgage for the Colchester property had been repaid on 6 February 2020 in full from the proceeds of the sale of the Gamet business
(2019: $0.3m). Subsequent to the year end on 21 August 2020 a loan of $1.6m was taken out under the Coronavirus Large Business
Interruption Loan Scheme by the UK machine tool business with interest at 1.92% and a bullet repayment in three years.
Facilities from the Bank of America include a US Dollar denominated term loan of $0.25m repaid on a monthly basis through to April 2021
in equal instalments with an interest rate of 2.25% above base and a revolving credit facility of an additional $7.5m. During the current
period a further loan for $3.25m was taken to part fund the acquisition of Control Micro Systems Inc and is being repaid on a monthly
basis through to June 2024 in equal instalments with an interest rate of 2.25% above base with $2.8m outstanding at 28 March 2020.
Subsequent to the year end each of the three USA businesses received loans under the Paycheck Protection Program in May 2020
totalling $2.2m. Amounts under the loan agreement may be forgiven dependent on expenditure and payroll numbers, with any balance
repaid over a 2 year period at a 1% interest rate.
The above loans and borrowings are secured by way of fixed and floating charges over the assets of the Company and its subsidiaries.
21. PROVISIONS
Provision carried forward at 30 March 2019
Exchange differences
Charged to income statement
Transferred on adoption of IFRS 16
On acquisition of subsidiary
Utilised in the period
Provision carried forward at 28 March 2020
Unavoidable
Onerous lease
Warranties
Dilapidations
Total
lease costs
$000
-
-
378
-
-
(74)
304
$000
429
(23)
-
(406)
-
-
-
$000
$000
18
(2)
-
-
120
-
136
-
-
-
-
150
-
150
$000
447
(25)
378
(406)
270
(74)
590
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 the old premises were in the process of being sub-let when they were
flooded and consequently the right of use asset has been fully impaired, the provisions at the year end includes expected unavoidable
costs for the remainder of the lease.
22. LEASES
The Group has initially adopted IFRS 16 Leases from 31 March 2019. The effect of initially applying this standard is to increase both the
assets and liabilities of the Group through the recognition on the balance sheet of the operating leases in respect of rented properties, plant
and machinery and vehicles.
The group has adopted IFRS 16 using the modified retrospective approach from 31 March 2019 and therefore has not restated comparatives
for the 2019 reporting period, as permitted under the specific transitional provisions in the standard. The reclassifications and the adjustments
arising from the new leasing rules are therefore recognised in the opening balance sheet on 31 March 2019.
Adjustments recognised on adoption of IFRS 16
On adoption of IFRS 16, the group recognised lease liabilities in relation to leases which had previously been classified as ‘operating leases’
under the principles of IAS 17 Leases. These liabilities were measured at the present value of the remaining lease payments, discounted
using the lessee’s incremental borrowing rate as of 31 March 2019. The weighted average lessee’s incremental borrowing rate applied to
the lease liabilities on 31 March 2019 was 3.69%.
20. TRADE AND OTHER PAYABLES
Current liabilities:
Trade payables
Social security and other taxes
Other creditors
Accruals
Contract liabilities
55
2020
$000
2019
$000
Operating lease commitments disclosed as at 30 March 2019
Discounted using the lessee’s incremental borrowing rate at the date of initial application
Other short term operating leases
Lease liability recognised as at 31 March 2019
Of which are:
Current lease liabilities
Non-current lease liabilities
Lease liability recognised as at 31 March 2019
$000
13,093
(3,328)
(87)
9,678
1,199
8,479
9,678
At the date of acquisition CMS held $1.477m of right of use assets, all of which related to building leases.
The associated right-of-use assets were measured at the amount equal to the lease liability, adjusted by the amount of any prepaid or
accrued lease payments relating to that lease recognised in the balance sheet as at 30 March 2019.
56
56
3,424
576
1,468
2,445
385
8,298
4,292
199
1,323
1,743
538
8,095
55
Notes relating to the consolidated financial statements
Notes relating to the consolidated financial statements
22. LEASES (CONTINUED)
The right of use assets relate to the following asset types:
Cost or valuation
At 30 March 2019
Effect on transition to IFRS 16
Exchange differences
Additions during period
Addition on acquisition
At 28 March 2020
Depreciation
At 30 March 2019
Effect on transition to IFRS 16
Exchange difference
Impairment charged in the period
Charge for period
At 28 March 2020
Net book value
At 28 March 2020
At 30 March 2019
Property
Vehicles
$000
$000
Plant and
machinery
$000
-
9,584
(315)
-
1,477
10,746
-
429
(59)
230
1,177
1,777
8,969
-
-
27
(1)
76
-
102
-
-
-
-
56
56
46
-
-
67
(1)
-
-
66
-
-
-
-
21
21
45
-
Total
$000
-
9,678
(317)
76
1,477
10,914
-
429
(59)
230
1,254
1,854
9,060
-
22. LEASES (CONTINUED)
Impact on segment disclosures and earnings per share
Adjusted EBITDA, segment assets and segment liabilities for March 2020 all increased as a result of the change in accounting policy. Lease
liabilities are now included in segment liabilities. The impact on the segments affected by the change in policy are:
Machine Tools & Precision Engineered Components
Industrial Laser Systems
Head Office & unallocated
Total
Adjusted EBITDA
$000
Segment assets
$000
Segment liabilities
$000
904
430
191
1,525
7,174
1,886
-
9,060
(7,290)
(1,925)
(601)
(9,816)
EBITDA for the period was increased by $1.52m and Basic Earnings per share was reduced by 0.01c for the twelve months to 28 March
2020 as a result of the adoption of IFRS 16. At year end the right of use asset in the Head Office segment had been fully impaired as per
note 3.
Practical expedients applied
In applying IFRS 16 for the first time, the Group has used the following practical expedients permitted by the standard:
•
•
•
•
•
the use of a single discount rate to a portfolio of leases with reasonably similar characteristics;
reliance on previous assessments on whether leases are onerous;
the accounting for operating leases with a remaining lease term of less than 12 months as at 31 March 2019 as
short-term leases;
the exclusion of initial direct costs for the measurement of the right-of-use asset at the date of initial application:
and
the use of hindsight in determining the lease term where the contract contains options to extend or terminate the
lease.
The group has also elected not to reassess whether a contract is, or contains, a lease at the date of initial application. Instead, for contracts
entered into before the transition date the group relied on its assessment made applying IAS 17 and IFRIC 4 Determining whether an
Arrangement contains a Lease.
The lease liabilities at the year-end were as follows:
The Group’s leasing activities and how these are accounted for.
Lease liabilities
Lease liabilities
Current
$000
1,608
1,608
Non-current
$000
8,344
8,344
28 March 2020
Total
$000
9,952
9,952
During the year lease payments amounted to $1.525m, of which $375K was in respect of interest charges. The undiscounted payments
under the leases fall due as follows:
Up to one year
One to five years
Over five years
Total undiscounted payments due under leases
The change in accounting policy affected the following items in the balance sheet on 31 March 2019:
Right of use assets
Lease liabilities
Net impact upon retained earnings
The introduction of IFRS16 did not have an impact upon the Group’s recognised deferred tax balances.
57
28 March 2020
$000
1,608
5,562
4,426
11,596
31 March 2019
$000
9,678
(9,678)
-
57
The Group leases various factories, equipment and cars. Rental contracts are typically made for fixed periods of 3 to 5 years for equipment
and 5-15 years for properties. These may have extension options. Lease terms are negotiated on an individual basis and contain a wide
range of different terms and conditions. The lease agreements do not impose any covenants, but leased assets may not be used as
security for borrowing purposes.
Until the 2019 financial year, leases of property, plant and equipment were classified as either finance or operating leases. Payments made
under operating leases (net of any incentives received from the lessor) were charged to profit or loss on a straight-line basis over the
period of the lease. From 31 March 2019, leases are recognised as a right-of-use asset and a corresponding liability at the date at which the
leased asset is available for use by the group. Each lease payment is allocated between the liability and finance cost. The finance cost is
charged to profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability
for each period. The right-of-use asset is depreciated over the shorter of the asset's useful life and the lease term on a straight-line basis.
Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of
the following lease payments (where they exist within a lease):
•
•
•
•
•
fixed payments (including in-substance fixed payments), less any lease incentives receivable;
variable lease payments that are based on an index or a rate;
amounts expected to be payable by the lessee under residual value guarantees;
the exercise price of a purchase option if the lessee is reasonably certain to exercise that option; and
payments of penalties for terminating the lease, if the lease term reflects the lessee exercising that option.
The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be determined, the lessee’s incremental
borrowing rate is used, being the rate that the lessee would have to pay to borrow the funds necessary to obtain an asset of similar value in a
similar economic environment with similar terms and conditions.
Right-of-use assets are measured at cost comprising the following:
the amount of the initial measurement of lease liability;
any lease payments made at or before the commencement date less any lease incentives received;
any initial direct costs; and
restoration costs.
•
•
•
•
58
58
Notes relating to the consolidated financial statements
Notes relating to the consolidated financial statements
22. LEASES (CONTINUED)
Payments associated with short-term leases and leases of low-value assets are recognised on a straight-line basis as an expense in profit
or loss. Short-term leases are leases with a lease term of 12 months or less. Low-value assets comprise small items of workshop
equipment, office furniture and machines.
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 (2019: 112,973,341 ordinary shares)
June 2019 – 4,500,000 ordinary shares of 1p each issued as part of the acquisition of CMS Inc
117,473,341 ordinary shares of 1p each on issue at end of period (2019: 112,973,341 ordinary shares of 1p)
Total Allotted, called-up and fully paid at the end of the period
2020
$000
2019
$000
1,746
57
1,803
1,803
1,746
-
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.
4,500,000 shares were issued on 21 June 2019 for 17.5p (22.2c) of which $57,132 was allocated to share capital and $942,868 to share
premium.
The Company has raised £8.5m ($9.7m) 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
Effect of transition to IFRS 16
Cash and debt through acquisition
Loan note credit/(amortisation)
Lease liabilities increase
Exchange effects on net funds
Net debt at end of period
2020
$000
(952)
(341)
(1,293)
2019
$000
(641)
(61)
(702)
(14,541)
(15,600)
(9,755)
1,451
(421)
(74)
491
-
-
982
-
779
(24,142)
(14,541)
25. ANALYSIS OF NET DEBT
At
30 March
Exchange
Effect on
transition
Cash
and debt
on
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
Lease liabilities
Total
2019
$000
818
130
948
(5,189)
(572)
(9,517)
(211)
-
(14,541)
$000
(39)
(7)
(46)
41
17
501
-
(22)
491
movement
to IFRS 16
acquisition
Other
Cash flows
$000
$000
$000
$000
At
30 March
2020
$000
2,755
123
2,878
(5,414)
(2,217)
(9,437)
-
-
-
-
-
-
-
211
(9,966)
(9,755)
2,928
2,928
-
-
-
-
(1,477)
1,451
-
-
-
-
-
(421)
-
(74)
(495)
(952)
-
(952)
(266)
(1,662)
-
-
1,587
(9,952)
(1,293)
(24,142)
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 re flect
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 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, ind ividuals and
preference shareholders (debt) in order to finance the Group’s activities both now and in the future. The Board’s objectives when
managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide returns to Sharehold ers and
benefits to other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. In order to maintain or adjust the
capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares
or sell assets to reduce debt.
The Audit Committee oversees how management monitors compliance with the Group’s risk management policies and procedures and
reviews the adequacy of the risk management framework in relation to the risks faced by the Group. The Audit Committee is ass isted 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.
59
59
60
60
Notes relating to the consolidated financial statements
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 and contract assets.
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
2020
$000
2,249
3,672
232
6,153
Contract assets of $246K (2019: nil) relating to North America were recognised at the year end but were not impaired.
61
2019
$000
2,292
4,673
634
7,599
61
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
Bank overdraft
8% loan notes
Lease Liabilities
Interest bearing financial liabilities
Trade and other payables
Financial liabilities
Bank loan
Trade finance
8% loan notes
Finance lease obligations
Interest bearing financial liabilities
Trade and other payables
Financial liabilities
2020
Carrying
Amount
$000
3,067
4,564
9,437
9,952
27,020
7,722
34,742
2019
Carrying
Amount
$000
Contractual
Less than
cash flows
$000
3,067
4,564
10,492
11,596
29,719
7,722
37,441
1 year
$000
850
4,564
1–2 years
$000
2,217
-
-
10,492
1,669
7,083
7,722
1,514
14,223
-
2–5 years
$000
-
-
-
8,413
8,413
-
18,805
14,223
8,413
Contractual
Less than
cash flows
$000
1 year
$000
1–2 years
$000
2–5 years
$000
5,035
5,035
4,713
322
726
726
9,517
9,517
211
211
15,489
7,896
23,385
15,489
7,896
23,385
726
-
127
5,566
7,896
13,462
-
-
84
406
-
406
-
-
9,517
-
9,517
-
9,517
MARKET RISK
Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect the Group’s
income. The objective of market risk management is to manage and control market risk exposures within acceptable parameters,
while optimising the return on risk.
62
62
Notes relating to the consolidated financial statements
Notes relating to the consolidated financial statements
26. FINANCIAL INSTRUMENTS (CONTINUED)
CURRENCY RISK
The Group is exposed to currency risk on sales, purchases and borrowings that are denominated in a currency other than the functional
currency of the operating entity, primarily Sterling, the Euro (€) and US Dollars ($).
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.
The Group’s exposure to foreign currency risk may be summarised as follows:
Trade receivables
Trade payables
Balance sheet exposure
2020
Sterling
US Dollars
£000
-
(17)
(17)
$000
154
(364)
(210)
Euro
€000
471
(499)
(28)
2019
Sterling
US Dollars
£000
67
(10)
57
$000
361
(64)
297
Euro
€000
675
(432)
243
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 (2019: 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 althou gh 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
(6,909)
130
(70)
-
Currency
Sterling
US Dollars
Australian Dollars
Euros
Forward exchange contracts are occasionally used to hedge commercial foreign currency risk and generally have maturities of less than
one year. There were no contracts outstanding at the period end (2019 – none).
In respect of other monetary assets and liabilities held in currencies other than functional currency of the entity, the Grou p 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.
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, trade and other debtors, trade finance, trade and other creditors,
contract assets and liabilities, overdrafts and cash. These financial instruments are used for the purpose of funding the Group’s
operations.
ASSETS AND LIABILITIES
The Group does not hedge account but occasionally uses derivative financial instruments to hedge its commercial exposure to f oreign
exchange. These instruments are recognised at fair value. Any gain or loss is immediately recognised in the income statement.
The fair value of forward exchange contracts used at 28 March 2020 was a liability of $nil (2019: liability of $nil).
FINANCIAL ASSETS
The Group’s financial assets measured at amortised cost comprise cash, trade receivables, other debtors and contract assets. The profile
of the financial assets at 28 March 2020 and 30 March 2019 was:
2020
Financial
assets
2019
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
1,896
729
130
-
$000
123
-
-
-
$000
2,090
4,410
241
521
Total
$000
4,109
5,139
371
521
assets
assets
is earned
$000
734
84
-
-
$000
130
-
-
-
$000
1,547
4,784
646
758
Total
$000
2,411
4,868
646
758
2,755
123
7,262
10,140
818
130
7,735
8,683
The impact of interest rate risk on the Group's result is due to changes in interest rates on net floating rate cash and cash equivalents
and borrowings. On 28 March 2020, 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 $0.07m (2019: charge of $0.04m). A reduction of 100 basis points would have the equal and opposite
effect. There is no further impact on shareholders' equity.
There is no interest received on floating rate financial assets.
The fixed 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 expected credit loss provisions.
63
63
64
64
Notes relating to the consolidated financial statements
Notes relating to the consolidated financial statements
26. FINANCIAL INSTRUMENTS (CONTINUED)
FINANCIAL LIABILITIES
Financial liabilities measured at amortised cost comprise short-term loans, overdrafts, trade and other payables, lease obligations, other
creditors more than one-year, contract liabilities and other provisions for liabilities and charges (excluding accrued post-retirement health
care accrual). The profile of the Group’s financial liabilities at 28 March 2020 and 30 March 2019 was:
27. CONTINGENT LIABILITIES
Third-party guarantees
2020
$000
183
2019
$000
193
2020
Financial
liabilities
2019
Financial
liabilities
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.
Floating rate
Fixed rate
on which
Floating rate
Fixed rate
on which
28. CAPITAL COMMITMENTS
Capital expenditure contracted for but not provided in the accounts
2020
$000
-
2019
$000
335
29. EMPLOYEE BENEFITS
The Group operates a USA defined benefit pension scheme. The assets of this scheme are held in separate trustee-administered funds.
The benefits from the scheme are based upon years of pensionable service and pensionable remuneration of the employee as defined
under the scheme provisions. The scheme is funded by contributions from the employee and from the employing company over the
period of the employees’ service. Contributions are determined by an independent qualified actuary based upon annual valuations in the
US.
UK
The buy-out of the scheme was completed in April 2019.The accounting and disclosure for the UK Scheme in the prior year and until buy
out are under IAS19 on the basis that the insurance policy securing the benefit is an asset of the scheme which matches the l iabilities.
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 liabil ities 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 disclosures for the US schemes that follow refer to the US defined benefit scheme and the retirement healthcare benefit scheme.
Currency
Sterling
US Dollars
Australian Dollars
Euro
financial
Financial
no interest
liabilities
Liabilities
$000
-
7,631
-
-
$000
14,278
4,959
152
-
is paid
$000
2,796
4,220
155
551
Total
$000
17,074
16,810
307
551
financial
liabilities
$000
1,093
4,298
370
-
financial
no interest
liabilities
$000
9,559
88
81
-
is paid
$000
3,015
3,845
278
758
Total
$000
13,667
8,231
729
758
7,631
19,389
7,722
34,742
5,761
9,728
7,896
23,385
The floating rate financial liabilities comprise bank borrowings, trade finance and overdrafts that bear interest rates based on local
currency base interest rates.
BORROWING FACILITIES
At 28 March 2020 and 30 March 2019, the Group had undrawn committed borrowing facilities as follows:
UK
US
Australia
FAIR VALUES OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES
Trade and other receivables
Cash and cash equivalents
Bank loan
Loans notes
Lease obligations
Trade and other payables
2020
‘000
£2,848
$3,657
2019
‘000
£3,736
$3,702
AUD$500
AUD$180
2020
$000
8,084
2,878
(7,631)
(10,492)
(11,596)
(8,298)
(27,055)
2019
$000
9,163
948
(5,761)
(11,079)
(211)
(7,896)
(14,836)
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 Lease obligations which are shown at the undiscounted value of $11.596m
and the Loan Notes which are shown at their gross value of $10.492m (2019: $11.079m). Their carrying value in the accounts is shown
net of issue costs.
65
65
66
66
Notes relating to the consolidated financial statements
Notes relating to the consolidated financial statements
29. EMPLOYEE BENEFITS (CONTINUED)
MORTALITY RATES
The mortality rates for the US scheme are based on the PRI-2012 (2019: RP-2014) Mortality Table for males and females adjusted to
total dataset with improvement factor scale MP-2019(2019: 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:
29. EMPLOYEE BENEFITS (CONTINUED)
Inflation under RPI – UK scheme
Inflation under CPI – UK scheme
Rate of increase to pensions in payment – RPI max 5% - UK scheme
Rate of increase to pensions in payment – RPI max 2.5% - UK scheme
Discount rate for scheme liabilities - UK scheme
Discount rate for scheme liabilities - US scheme
2020
% p.a.
n/a
n/a
n/a
n/a
n/a
2.83
2019
% p.a.
3.60
3.10
3.35
2.20
2.15
3.50
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 28 March 2020 and 30 March 2019 were:
Assets
Liabilities
(Deficit)/surplus
2020
2019
US
UK
US
UK
Schemes
Schemes
Schemes
Schemes
$000
834
(2,095)
(1,261)
$000
$000
$000
-
-
-
939
236,952
(2,178)
(229,493)
(1,239)
7,459
Movement in net defined benefit asset (UK Scheme)
Defined benefit obligation
Fair value of plan assets
Net defined benefit asset
28 March
30 March
28 March
30 March
28 March
30 March
2020
$000
2019
$000
2020
$000
2019
$000
2020
$000
2019
$000
Opening balance:
(229,493)
(271,816) 236,952
326,135
7,459
54,319
Liabilities extinguished / (assets distributed) on
settlements
220,416
16,367
(219,610)
(17,644) 806
(1,277)
Remeasurement (loss)/gain
Experience gain/(loss)
Change in assumptions – financial
Interest (cost)/income
Exchange differences
Contributions paid by employer
Payment to employer
Benefits paid
Closing balance:
-
(1,117)
2,543
(386)
5,635
-
-
2,402
-
(1,449)
8,091 -
(11,565)
(5,849)
-
408
(40,504)
(1,449)
- (1,117)
- 2,543
22
7,099
18,890
(5,819)
- -
-
(8,080)
(22,458)
713
-
16,389
(2,402)
(16,389)
(184)
-
(8,080)
-
(40,504)
8,091
(11,565)
1,250
(3,568)
713
-
-
-
(229,493)
-
236,952
-
7,459
Movement in net defined benefit liability (US Schemes)
Defined benefit obligation
Fair value of plan assets
Net defined benefit liability
28 March
30 March
28 March
30 March
28 March
30 March
Opening balance:
Current service cost
Experience gain/(loss)
Interest (cost)/income
Contributions paid by employer
Benefits paid
2020
$000
(2,178)
(55)
(3)
(29)
-
170
2019
$000
(2,232)
(58)
2020
$000
939
31
(24)
(30)
(55)
-
- 89
166
(170)
2019
$000
1,007
35
2020
$000
(1,239)
(24)
6
(58)
- (29)
57
(166)
89
-
2019
$000
(1,225)
(23)
(18)
(30)
57
-
Closing balance:
The US actuary has recommended minimum deficit reduction payments of $78,000 are required each calendar year. (2019: $82,000).
No payments were overdue at the period-end.
(2,178)
(1,261)
(2,095)
939
834
(1,239)
67
67
68
68
Notes relating to the consolidated financial statements
Notes relating to the consolidated financial statements
29. EMPLOYEE BENEFITS (CONTINUED)
The net surplus after tax was received by the Company in May 2019.
Expected return on assets UK scheme
Long-term
rate of return
Long-term
rate of return
Long-term
rate of return
expected at
Value at
expected at
Value at
expected at
Value at
28 March
28 March
30 March
30 March
31 March
31 March
2020
% p.a.
2020
$m
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
Equities
Property
LDI funds
Bonds
Absolute Return
Insurance policy
Other/cash
Combined
The LDI funds referred to related to Liability Driven Investment funds which had been increasingly utilised by the pension scheme. LDI funds
represented investments in a Liability Driven Investment fund via a Pooled Investment Vehicle. With the exception of cash, the remaining
scheme investments comprised of Pooled Investment Vehicles.
Investments were included at fair value as follows:
Pooled Investment Vehicles which were not traded on active markets, but where the investment manager had provided a monthly trading
price, were 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 was equal to the discount rate applied to liabilities.
29. EMPLOYEE BENEFITS (CONTINUED)
Profit on sale of UK pension scheme reconciliation
Net defined benefit asset 30 March 2019
Exchange variance
Payment to employer before tax
Profit on sales of UK pension scheme
Cash received reconciliation
Payment to employer before tax
Less tax (taken at source)
Cash received
Amounts recognised in the statement of comprehensive income are as follows:
2020
US
UK
schemes
scheme
$000
$000
Return on plan assets
Experience gain/(loss) on liabilities
Change in assumptions - financial
Amounts recognised during the period
Exchange adjustment
Eliminated on disposal of UK scheme
Balance brought forward
Balance carried forward
55
3
58
-
-
1,823
1,881
Total
$000
(1,393)
(1,114)
2,543
36
-
(1,448)
(1,117)
2,543
(22)
-
13,433
13,433
(13,411)
(11,588)
-
1,881
$000
7,459
(188)
(8,080)
809
$000
8,080
(2,867)
5,213
US
Schemes
$000
(6)
45
-
39
-
-
2019
UK
scheme
$000
Total
$000
(40,504)
(40,510)
8,947
8,992
(11,565)
(11,565)
(43,122)
(43,083)
(1,601)
(1,601)
-
-
1,784
1,823
31,312
33,096
(13,411)
(11,588)
The assets held within the US pension scheme amount to $0.834m (2019: $0.939m) and are held mainly in bonds.
The history of the schemes for the current and prior period before taxation is as follows:
Amounts recognised in the income statement in respect of the defined benefit schemes before taxation are as follows:
2020
2019
US
UK
US
UK
schemes
scheme
$000
$000
Total
$000
schemes
scheme
$000
$000
9
-
-
9
809
809
8
-
-
44
-
44
45
-
1,277
-
-
Total
$000
8
1,277
-
45
Included within operating profit:
– current service cost
– settlements (adjusting items)
- Profit on sale of UK pension scheme
Included within financial expense:
– interest on pension liabilities
Included within financial income:
Present value of defined benefit obligation
Fair value of scheme assets
(Deficit)/surplus in the scheme
Experience adjustments on the scheme liabilities
Experience adjustments on scheme assets
Exchange differences
2020
2019
US
UK
US
UK
Schemes
Scheme
schemes
scheme
$000
$000
$000
$000
(2,095)
834
(1,261)
55
3
-
-
-
-
-
-
-
(2,178)
(229,493)
939
236,952
(1,239)
45
(6)
-
7,459
8,947
-
(3,568)
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.
– interest on pension surplus (note 3)
-
(22)
(22)
-
(1,255)
(1,255)
Sensitivity Analysis:
The settlements figure of $1,277,000 in the prior year relates to liability reduction exercises 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.
69
69
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
2020
0.07%
-
-
-
2019
2.8%
-
1.8%
4.2%
70
70
Notes relating to the consolidated financial statements
Notes relating to the consolidated financial statements
30. ACCOUNTING ESTIMATES AND JUDGEMENTS
Management discussed with the Audit Committee the development, selection and disclosure of the Group’s accounting policies and
estimates and the application of these policies and estimates. The accounting policies are set out on pages 30 to 37.
The key sources of estimation uncertainty are:
FINANCIAL INSTRUMENTS
Note 26 contains information about the assumptions and estimates and the risk factors relating to interest rate and foreign c urrency
exposures.
PENSIONS
The Directors have employed the services of a qualified, independent actuary in assessing pension assets and liabilities. However they
note that final liabilities and asset returns may differ from actuarial estimates and therefore the pension liability may differ from that
included in the financial statements. Note 29 contains information about the principal actuarial assumptions used in the determination of
the net assets for defined benefit obligations.
DEFERRED TAXATION
Note 14 contains details of the Group’s deferred taxation. Liabilities recognised are determined by the likelihood of settlement and the
likelihood that assets are received 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.
Calculation 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 13% being the calculation of the Group’s weighted average cost of capital.
LEASES
Extension option clauses are included in some of the lease agreements, but the Directors have assumed that these will not be exercised.
31. 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 $82,361 in interest payments during the financial year
(2019: $84,888) in respect of their respective holding of the loan notes. At the year-end Haddeo Partners LLP held £810,000 ($999,840)
of loan notes. In addition, the wife of Mr N Carrick, the Group Finance Director, also held £50,000 ($61,719) 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.
32. 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 the
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.
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
Tax on adjusting items
Underlying profit for the period
Underlying EPS
A reconciliation of underlying EPS is included in note 9
2020
$000
1,540
1,187
2,727
595
1,187
(22)
536
2019
$000
3,471
1,786
5,257
4,233
1,786
(2,077)
-
48
2,296
3,990
33. ACQUISITION OF CONTROL MICRO SYSTEMS INC (CMS)
On 21 June 2019, with an effective acquisition date of 1 June 2019, 600 Group PLC acquired the entire issued share capital of Control Micro
Systems Inc (“CMS”), a provider of turnkey, custom-designed and fully-automated laser process machines and systems to a diverse base of
US and international blue-chip customers across a range of industries, including industry-leading positions in the high-growth precision
medical equipment, pharmaceutical and aerospace sectors, for a consideration of $10m, comprising of $9m in cash and $1m of 600 Group
plc shares
Details of the purchase consideration, the net assets acquired, and goodwill are as follows:
Purchase consideration
Cash paid
4,500,000 600 Group plc ordinary shares
Total purchase consideration
$000
9,000
1,000
10,000
71
71
72
72
Notes relating to the consolidated financial statements
33. ACQUISITION OF CONTROL MICRO SYSTEMS INC (CMS) (CONTINUED)
The assets and liabilities recognised as a result of the acquisition are as follows:
Company statement of financial position
As at 28 March 2020
Company Number 00196730
Cash and cash equivalents
Cash investment
Plant and equipment
Customer relationships
Inventories
Trade and other receivables
Contract assets
Right of use assets
Lease liabilities
Trade and other payables
Contract liabilities
Provisions
Deferred Taxation
Taxes payable
Net identifiable assets acquired
Add: goodwill
Fair value of consideration paid
Provisional
Fair value
$000
2,928
107
675
2,743
556
1,527
138
1,477
(1,477)
(524)
(457)
(270)
(197)
(71)
7,155
2,845
10,000
The goodwill is attributable to CMS’s assembled workforce and its strong position and profitability in the pharmaceutical, healthcare and
aerospace sectors. None of the goodwill is expected to be deductible for tax purposes.
Acquisition-related costs
Acquisition-related costs of $0.7m are included in adjusting items within net operating expenses in the income statement.
Revenue and profit contribution
The acquired business contributed revenues of $7.3m and net profit of $0.44m to the group for the period from 1 June 2019 to 28 March
2020. If the acquisition had occurred on 31 March 2019, it is estimated that consolidated revenue and consolidated profit after tax, on
continuing activities, for the year ended 28 March 2020 would have been $68.9m and $0.5m respectively.
34. POST BALANCE SHEET EVENTS
The freehold property in Brisbane, Australia was sold on 24 October 2020 for $1.6m.
Subsequent to the year end the Group has taken advantage of Government schemes and has received $2.2m of loans across the
three USA businesses under the Paycheck Protection Program. These loans may be forgiven dependent on expenditure on certain
items and employment numbers with any amount not forgiven repayable as a 2 year loan at 1% interest rate.
The UK machine tools business received a $1.5m loan under the Coronavirus Large Business Interruption Loan Scheme with a 3
year bullet repayment in September 2023 and 1.92% interest.
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
Lease liabilities
Non-current liabilities
Trade and other payables
Total liabilities
Net assets
Shareholders’ equity
Called-up share capital
Share premium account
Equity reserve
Profit and loss account
Notes
3
4
5
6
5
7
As at
28 March
As at
30 March
2020
$000
3
489
10,611
11,103
47,093
33
47,126
58,229
(4,501)
(602)
(5,103)
(9,741)
(9,741)
(14,844)
43,385
1,803
3,828
201
37,553
43,385
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
Included in the profit and loss account is a loss for the year of $1,259K (prior year profit $871K). The financial statements on pages 75 to
83 were approved by the Board of Directors on 19 November 2020 and were signed on its behalf by:
NEIL CARRICK
Finance Director
19 NOVEMBER 2020
REGISTERED OFFICE
Lowfields Way
Lowfields Business Park
Elland
West Yorkshire
HX5 9DA
73
73
74
74
Company statement of changes in equity
As at 28 March 2020
Company Number 00196730
Company accounting policies
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
At 30 March 2019
Loss 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
At 28 March 2020
Ordinary
Share
premium
Equity
Retained
account
reserve
Earnings
share
capital
$000
1,746
-
-
-
-
-
-
-
$000
2,885
$000
201
-
-
-
-
-
-
-
-
-
-
-
-
-
-
$000
Total
$000
44,464
49,296
871
871
(2,661)
(1,790)
(2,661)
(1,790)
-
-
(1,104)
(1,104)
45
(1,059)
-
-
-
-
-
-
-
-
(1,259)
-
(1,808)
(3,067)
-
(1,088)
93
(995)
45
(1,059)
46,447
(1,259)
-
(1,808)
(3,067)
1,000
(1,088)
93
5
201
37,553
43,385
-
-
-
-
57
-
-
57
1,803
-
-
-
-
943
-
-
943
3,828
1,746
2,885
201
41,615
The accompanying accounting policies and notes on pages 76 to 83 form part of these Financial Statements.
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 2019 are for the 52-week period ended
30 March 2019. The results for 2020 are for the 52-week period ended 28 March 2020, the functional currency of the company is GBP
but these accounts are presented in rounded 000’s in US $.
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
FIXED ASSETS
Property, plant and equipment are held at cost.
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 lease
fixtures, fittings, tools and equipment – 10 to 33.3%
LEASES
The Company has initially adopted IFRS 16 Leases from 31 March 2019. The effect of initially applying this standard is to increase both the
assets and liabilities of the Company through the recognition on the balance sheet of the leases in respect of rented properties.
The Company has adopted IFRS 16 using the modified retrospective approach from 31 March 2019 and therefore has not restated
comparatives for the 2019 reporting period, as permitted under the specific transitional provisions in the standard. The reclassifications and
the adjustments arising from the new leasing rules are therefore recognised in the opening balance sheet on 31 March 2019.
75
75
76
76
Company accounting policies
Notes relating to the company financial statements
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 rate s 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.
1. PERSONNEL EXPENSES
Staff costs:
– wages and salaries
– social security costs
– pension charges
– equity share options expense
2020
$000
2019
$000
1,396
1,053
80
25
93
73
25
45
1,594
1,196
The average number of employees of the Company (including Executive Directors) during the period was as follows:
2020
2019
Number
Number
8
6
INVESTMENTS
Investments in respect of subsidiaries are stated at cost less provisions for impairment in value.
Head office function
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).
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 17 to
19.
FINANCIAL INSTRUMENTS
The company 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 company recognises amounts payable to and receivable from other group companies which are repayable on demand and do not
incur interest. The recoverability of these balances is dependent upon the performance and value of the wider group, and at the year end
of 28 March 2020 no provision for expected credit loss was recognised having made this assessment.
2. DIVIDENDS
No dividends have been proposed this year. In the prior year a final dividend of 0.5p was paid on 30 September 2019 to holders on the
register at 30 August 2019.
Final Dividend paid September 2019 (0.5p/share)
Interim Dividend paid January 2020 (0.25p/share)
Final Dividend paid September 2018 (0.5p/share)
Interim Dividend paid December 2018 (0.25p/share)
Total
2020
$000
725
363
-
-
1,088
2019
$000
-
-
736
368
1,104
77
77
78
78
Notes relating to the company financial statements
Notes relating to the company financial statements
3. INVESTMENTS
Cost:
At 30 March 2019
Disposals in the period
Exchange variance
At 28 March 2020
Provisions
At 30 March 2019
Exchange variance
At 28 March 2020
Net book values
At 28 March 2020
At 30 March 2019
Shares
In Group
Undertakings
$000
52,673
(131)
(5,373)
47,169
41,331
(4,773)
36,558
10,611
11,342
Total
$000
52,673
(131)
(5,373)
47,169
41,331
(4,773)
36,558
10,611
11,342
In the year the investments of Gamet Bearings Limited and The 600 Group Pension Trustees Limited were written off.
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 600 Limited; 600
Bearings Limited; T S Harrison & Sons Limited; The Richmond Machine Tool Company Limited; 600 Lathes Limited; 600 SPV1 Limited*;
600 SPV2 Limited* and Coborn Insurance Company 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
Control Micro Systems Inc
Clausing Industrial, Inc’s principal activity is the design and distribution of machine tools and precision engineered components. TYKMA
Inc and Control Micro Systems Inc’s principal activities are 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.
Control Micro Systems Inc has a registered office of 4420-A Metric Drive Winter Park, Florida 32792, US.
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
Shares
In Group
Undertakings
$000
REST OF THE WORLD:
600 Machine Tools (Pty) Ltd – (Australia)
Total
$000
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.
56,624
56,624
-
(3,951)
52,673
44,431
(3,100)
41,331
11,342
12,193
-
(3,951)
52,673
44,431
(3,100)
41,331
11,342
12,193
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 28 March 2020, or the year ended 30 March 2019.
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.
2020
$000
2019
$000
46,669
46,408
107
317
101
168
47,093
46,677
79
79
80
80
Notes relating to the company financial statements
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
Onerous lease provisions
Unavoidable lease costs
2020
$000
87
3,944
470
4,501
2020
$000
9,437
-
304
9,741
2019
$000
467
1,281
393
2,141
2019
$000
9,517
429
-
9,946
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 $10.5m (£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 $0.8m, 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 in the prior year. The cost incurred will be amortised over the remaining term.
Onerous lease provisions and unavoidable lease costs
Following the move of the UK business to the new facility in Elland the old premises were in the process of being sub-let when they were
flooded and consequently the right of use asset in the company was fully impaired as the property sublet negotiations broke down. A
provision for unavoidable costs associated with the remainder of the lease has been provided in the year.
81
81
6. LEASES LIABILITIES
The company has initially adopted IFRS 16 Leases from 31 March 2019. The effect of initially applying this standard is to increase both the
assets and liabilities of the Group through the recognition on the balance sheet of the operating leases in respect of rented properties.
The company has adopted IFRS 16 using the modified retrospective approach from 31 March 2019 and therefore has not restated
comparatives for the 2019 reporting period, as permitted under the specific transitional provisions in the standard. The reclassifications and
the adjustments arising from the new leasing rules are therefore recognised in the opening balance sheet on 31 March 2019.
On adoption of IFRS 16, the company recognised lease liabilities in relation to leases which had previously been classified as ‘operating
leases’ under the principles of IAS 17 Leases. These liabilities were measured at the present value of the remaining lease payments,
discounted using the lessee’s incremental borrowing rate as of 31 March 2019. The weighted average lessee’s incremental borrowing rate
applied to the lease liabilities on 31 March 2019 was 3.35%, with the opening value being $0.8m
The associated right-of-use assets were measured at the amount equal to the lease liability of $0.8m, adjusted by the amount of any prepaid
or accrued lease payments relating to that lease recognised in the balance sheet as at 30 March 2019.
Right of use assets
Cost
At 30 March 2019
Effect on transition to IFRS 16
Cost at 28 March 2020
Depreciation
At 30 March 2019
Effect on transition to IFRS 16
Exchange difference
Depreciation
Impairment charged in the year
Total
Net book value
Lease liabilities
The annual charge for depreciation of lease liabilities was $145,115 and payments in the year were $190,650.
2020
$000
-
803
803
-
(431)
(20)
(145)
(207)
(803)
-
2019
$000
-
-
82
82
2020
$000
602
602
Notes relating to the company financial statements
7. 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 (2019: 112,973,341 ordinary shares)
June 2019 – 4,500,000 ordinary shares of 1p each issued as part of the acquisition of CMS Inc
117,473,341 ordinary shares of 1p each on issue at end of period (2019: 112,973,341 ordinary shares of 1p)
Total Allotted, called-up and fully paid at the end of period
2020
$000
2019
$000
1,746
57
1,803
1,803
1,746
-
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.
8. CONTINGENT LIABILITIES
Bank guarantees in respect of Group undertakings
9. CAPITAL COMMITMENTS
Capital expenditure contracted for but not provided in the accounts
2020
$000
183
2020
$000
-
2019
$000
193
2019
$000
335
10. PENSION
The Company makes contributions to defined contribution schemes for certain employees. The pension contribution charge for the
Company amounted to $24,785 (2019: $24,563).
11. 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 $82,361 in interest payments during the financial year
(2019: $84,888) in respect of their respective holding of the loan notes. At the year-end Haddeo Partners LLP held £810,000 ($999,840)
of loan notes. In addition, the wife of Mr N Carrick, the Group Finance Director, also held £50,000 ($61,719) 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.
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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
The number 600 Group PLC
Lowfields Business Park
Lowfields Way
Elland
HX5 9DA
mail@600grouphq.com
T: 01924 415000
Company Number: 00196730
The number