Company Number 00196730
www.600group.com
The 600 Group PLC
Annual Report & Accounts 2022
Who We Are
The 600 Group PLC is focused on the global industrial
laser technology industry. Our market leading businesses
design and supply industrial laser systems for applications
in end-markets ranging from industrial and aerospace to
medical and pharmaceuticals.
Mission
An enduring commitment to quality, innovation, and service to drive value for
our customers and shareholders.
Position Statement
The 600 Group supports industries through the manufacture and
distribution of world-class industrial systems and solutions.
Vision
Proactively address future industrial challenges through a continually
expanding portfolio of solutions.
www.600group.com
VISIT US ONLINE
www.permanentmarking.com
www.cmslaser.com
We Stand For
Service
Our success relies not only on our world-class reputation
for providing solutions, but on the relationships we have
with our customers. No matter the industry, we personalize
our service and solutions to meet our customers’ unique
business requirements.
SECRETARY
Neil Carrick
REGISTERED OFFICE
42 Berkeley Square
London
W1J 5AW
REGISTERED NUMBER
00196730
REGISTRAR
Link Group
10th Floor
Central Square
29 Wellington Street
Leeds
LS1 4DL
AUDITOR
BDO LLP
BANKERS
Bank of America
HSBC Bank plc
BROKER & NOMINATED ADVISOR
Cenkos Securities plc
Innovation
To exceed industry expectations, we operate ahead of
the curve by expanding our portfolio of companies and
solutions.
Quality
We put the same maticulous attention to detail into every
product and service in our group, from a standard product
to the most complex, custom engineered systems. This
commitment to quality is the baseline that quarantees
world-class outcomes for customers.
600 Group Board of Directors
The 600 Group PLC
Annual Report and Accounts 2022
1
Company Number 00196730
Chairman’s statement
2
Strategic report
CFO Statement
3
8
Corporate governance
9
Audit committee report
11
Directors report
12
Statement of directors’ responsibilities
15
Independent auditor’s report to the members of The 600 Group PLC
16
Consolidated income statement
23
Consolidated statement of comprehensive income
24
Consolidated statement of financial position
25
Consolidated statement of changes in equity
26
Consolidated cash flow statement
27
Group accounting policies
28
Notes relating to the consolidated financial statements
37
Company statement of financial position
69
Company statement of changes in equity
70
Company accounting policies
71
Notes relating to the company financial statements
73
Company information
77
Chairman’s statement
2
Fiscal 2022 was a truly transformative year for The 600 Group PLC. After more than 100 years of owning and operating various,
often unrelated, businesses in a number of industries in various countries around the world, the group has simplified itself and is now
engaged in only one line of business with current manufacturing and executive facilities in only one country, the United States. The
group has transitioned from being a leveraged manufacturer of legacy products in mature industries to a business that was debt free
at the date of the machine tool disposal and is now focused, flexible and embracing 21st century technology with inherent attractive
growth rates and ample opportunities, both internal and external, to expand its existing capabilities.
The sale of our machine tool business, concluded in April, allowed us to redeem all long-term debt while we remain with significant
credit facilities. This enables us to support the increased level of activity in our remaining division, Industrial Lasers, where revenues
increased by 50% and year-end order book has grown by 24%.
During the pandemic, our divisional management has done an excellent job of balancing the challenges faced including adjusting to
supply chain issues, managing personnel absentees and shortages, and taking advantage of government programs including PPP
in the US and the furlough and loan schemes in the UK. This could not have been accomplished without the hard work and dedication
of our superb work force whom the Board congratulate on a job well done under very trying circumstances.
Having fundamentally changed the business, we must now leverage our strengths including our enviable position in laser systems
manufacturing, our strong distribution network, our proprietary intellectual property, our diversified, blue chip customer base, our
strong financial position, our buoyant order book and our committed and talented employees. We must also take advantage of the
large addressable market available to us and look for synergies within our technology base.
The last few years-- simplification of the business, the pandemic, the supply chain disruptions, the relocation of the head office--have
created an opportunity for The 600 Group to thrive and prosper. It is now up to the board, the management and our employees to
take advantage of that opportunity.
Paul Dupee
Chairman
30 September 2022
Strategic report
3
Our business
The 600 Group PLC ("the Group") is a leading engineering group focused on the global industrial laser technology industry. Our
market leading businesses have a diversified, blue-chip customer base to whom we design and supply industrial laser systems for
applications in end-markets ranging from industrial and aerospace to medical and pharmaceuticals. The Group operates from
locations in North America and sells 21% of its products and services worldwide. The Group has important relationships directly with
customers and also with a number of distributors Worldwide.
Given the large number of customers and established distributors in many countries there are no major sales concentrations of
customers or products. Sales are split evenly between direct customers and distributors and in the year ended 31 March 2022, the
top 20 customers, of which 9 (2021: 10) were distributors, contributed 43% (2021: 23%) of revenues.
Revenues (Continuing activities)
Revenues are generated across many diverse geographical territories:
Percentage of worldwide revenues
(by destination)
2022
%
2021
%
United States of America
79.0
84.3
United Kingdom
0.4
0.6
Far East
12.5
1.8
Europe (excluding UK)
5.2
6.9
Rest of the World
2.9
6.4
Total
100
100
Macroeconomic and industry trends
Industrial laser systems
The use of industrial lasers for material processing continues to expand worldwide with laser systems now becoming a mainstream
manufacturing process. Applications include laser machining, including cutting and drilling, marking, ablation and a host of other
niche processes. 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 $5.6bn but given this number relates just to 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 was estimated to be in the region of 12% and largely driven by Chinese decline in cutting
systems which mirrored the decline in machine tools, both of which are heavily influenced by Chinese demand. The effects of the
COVID-19 pandemic led to significant reductions in volumes in the early part of 2020 but as China, in particular, opened up, volumes
recovered and the overall market was estimated to be similar to that of 2019 as a result. The European and American markets
however were slower to recover and took until Q1 of 2021 to show significant signs of a return to more normal levels of activity. Whilst
there continues to be post pandemic global issues with increased inflation and the Ukraine war leading to energy price increases the
laser processing markets have shown resilience in recent years to Global market changes.
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 of products and components. 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 thus whilst unit volumes have
continued to increase, revenue has been held back. It is for this reason the Group took the decision to focus 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 in June 2019 significantly enhanced these capabilities.
Industry predictions for the laser industry expect the volumes to continue to increase at high single digit percentage levels going
forward.
Our main markets
The main market we operate in is the USA. As with all Global markets demand reduced as a result of the COVID-19 global pandemic
but saw a rapid increase as lockdowns ended. Supply chain issues have created delays in deliveries and inflationary pressures have
resulted in cost increases. The Group has bought forward inventory and passed on cost increases where possible to mitigate these
factors.
The possibility of disruption remains due to the ongoing effects of COVID-19 and possible new outbreaks and variants. Increased
inflationary pressures from fuel costs and the risk of recession have more recently arisen and may create further demand issues in
the Global markets.
Strategic report
4
(continued)
Activity in the year
Industrial laser systems
Following a fall in activity of 10% during the pandemic both CMS and TYKMA Electrox experienced significant increased order activity
leading to record levels of order book.
The existing TYKMA Electrox business continued to move more into the custom higher specification market as increased competition
and price deflation continued in the lower end standard products sector and the higher end large projects undertaken by the CMS
business returned. Both businesses continued to take advantage of the USA Paycheck Protection Program (PPP) scheme at the
start of the year to keep teams and key skills together which allowed them to respond quickly to the significant increase in activity.
This was the second round of benefits coming from this program. Both businesses have continued to recruit additional personnel
throughout the year as activity continued to increase.
The completion of the upgraded proprietary software for TYKMA Electrox will provide upgrade opportunities to customers going
forward as well as adding new functionality and compatibility with other systems and operations.
Results for Continuing activities of the Laser Division for the financial year were as follows:
2022
$ 000
2021
$ 000
Revenues
31,960
21,331
Underlying operating profit
4,109
1,836
Underlying operating margin
12.9%
8.6%
Underlying operating profit is before adjusting items, which are explained in note 29 Alternative Performance Measures and set out
in note 3.
Discontinued Activity - Machine tools division
Following the agreed sale of the Division in March 2022, this activity is treated as discontinued with the assets and liabilities shown
as held for sale in current assets and current liabilities in the Consolidated Statement of Financial Position.
The revenue generated by this in the year ended 31 March 2022 was $37.0m and a profit of $0.8m after tax and adjusting items. The
total of assets and liabilities held for sale, detailed in note 30, are $32m and $13.8m.
Group Results
Revenue from continuing operations represents the Laser Division and as a result of record order books increased by 50% to $32.0m
(2021: $21.3m). Group profit before tax and adjusting items including the continuing central costs was $0.8m (2021: loss $1.3m). The
profit before tax after adjusting items was $0.2m (2021: loss $2.8m).
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 29 alternative performance measures and set out in note 3. All adjusting items are
taken into account in the GAAP figures in the Income Statement.
Costs incurred on the disposal of the Machine Tool Division up to 31 March 2022 were $0.4m.
Amortisation of the intangible assets acquired through the CMS deal of $0.3m (2021: $0.3m) are also included in adjusting items.
As a result of the extension of the repayment date of the loan notes in August 2021 the amortisation of the loan note discount and
costs were required to be recalculated to take account of the additional period which resulted in a net credit of $0.03m (2021: $0.6m
charge) and this is also included in adjusting items. The loan notes were repaid from the proceeds of the Machine Tool division sale
in April 2022.
Strategic report
5
(continued)
Taxation
The current year tax recorded in the P&L was a credit of $0.3m (2021: charge of $1.4m). The majority of this amount relates to
deferred taxation movements with only $0.08m actually paid in State taxes. There was no Federal tax expense in the USA. There is
no USA deferred tax recognised as management has made the determination that it is more likely than not that the net deferred tax
assets will not be realized in the short to medium term and therefore have placed a valuation allowance against those deferred tax
assets. There were no significant penalties or interest recognized during the year or accrued at year-end.
The UK holding company continues to benefit from previous tax losses with $1.6m of deferred tax asset not recorded on the balance
sheet. No taxation is payable in the UK. There are substantial deferred tax assets in the USA of $2.5m that are not recorded on the
balance sheet. 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 $0.5m (2021: loss
of $4.2m) with pre-adjusting items profit of $1.1m (2021: loss $3.0m).
Underlying basic earnings from continuing operations before adjusting items were 0.93 cents (equivalent to 0.68p) per share (2021:
loss 2.53 cents, equivalent to 1.93p loss) and basic earnings per share from continuing operations were 0.41 cents (equivalent to
0.30p) (2021: 3.58 cents loss, equivalent to 2.73p loss) - see note 9 for details.
Financial position and utilisation of resources
Cash flow
Cash generated from operations before working capital movements was $3.4m (2021: $1.6m).
Working capital increased during the year in response to the increased revenues and supply chain constraints in particular inventories
increasing by $3.8m. Receivables also increased $3.9m due to the sales growth in the year.
Interest paid on borrowings was in line with the previous year at $1.1m with the largest component of this being the fixed interest on
the £8.5m ($10.7m) 8% loan notes which were repaid in April 2022.
Capital expenditure was $0.8m, higher than prior year (2021: $0.5m) to support the strong sales growth across the organization.
Net borrowings
Group net debt at 31 March 2022 excluding lease liabilities was $17.0m (of which $0.7m was in discontinued entities held for sale)
against $12.7m in the prior year.
In order to provide headroom through the COVID-19 pandemic, on 21 August 2020, the 600 UK Limited machine tools subsidiary
drew down a £1.2m ($1.7m) 3-year term loan with a bullet repayment on 15 September 2023 and interest at 1.92% under the
Government backed Coronavirus Large Business Interruption Loan Scheme (CLBILS). There are no covenants on the loan. The loan
was repaid on completion of the Machine Tools Division sale in April 2022.
Net bank indebtedness of $6.3m at 31 March 2022 (2021: $4.8m) was all cleared in April 2022 following the receipt of the proceeds
on the Machine Tool Division sale. The USA working capital credit line was increased to $10m to facilitate additional requirements to
support the substantial order increases during the year and was reduced in April 2022 to $7.5m following the sale of Machine tools.
The extension of the repayment date of the loan notes to 14 August 2023 was agreed in August 2021 but the notes were repaid in
April 2022 following completion of the Machine Tool Division sale. The associated warrants to subscribe for new ordinary shares at
20p were similarly extended to the same date and remain outstanding. The loan notes are shown net of unamortised discounting and
costs and also amounts disclosed in equity reserve which amount to $0.2m in the current financial year (2021: $0.2m).
Working capital facilities totaling $13.9m were renewed with HSBC UK, Bank of America and Westpac Australia during the year and
would have been due to be reviewed in the normal course in early 2023 however all but the $7.5m working capital line from Bank of
America were repaid and extinguished in April 2022. All financial covenants in place were met during the year.
Retirement benefits
The US retiree health scheme and pension fund deficits decreased to $0.8m (2021: $1.0m) during the current year. These liabilities
are included in liabilities held for sale as part of the Machine Tool Division disposal which was completed in April 2022 and the
liabilities transferred as part of that process.
Strategic report
6
(Continued)
Key performance indicators (KPIs)
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, KPIs also include working capital control, and customer related performance measures such as on-
time delivery and minimisation of warranty concerns.
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. Given the
Global effects of the COVID-19 pandemic, comparison against prior periods has been difficult and relatively meaningless, and market
estimates have been very volatile and unpredictable. Revenue targets are to outperform the market forecasts by 1% (5% is
considered a normal ongoing level of growth) and to achieve over a 10% underlying operating margin target.
The Group’s recent performance on these financial KPIs on continuing operations is set out as follows:
KPI
2022
2021
Revenue (annual growth rate)
50%
(10%)
Underlying operating margin
(% of revenue)
5.8%
(0.8%)
All figures are pre adjusting items on continuing operations.
These KPIs 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 expects 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 stakeholder group in relation to the
subject matter is also considered. The key decisions in the year related to the Group’s decision to dispose of the Machine Tool
Division. These considerations involved all staff as well as customers and suppliers of the Group along with bank and loan note
funders.
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, consider what is most likely to promote the success of the Group for its shareholders in the long term.
Further information in relation to each specific consideration of the Directors is set out below:
Consideration Further information
the likely consequence of any decision in the long term;
Pages 9 to 10 set out the corporate governance and
management framework and the strategy update is included in
the Outlook section of the Chairman’s statement on page 2, the
CFO statement on page 8 and point 1 of the QCA code on page
10.
the interests of the group’s employees;
Page 10 sets out the consideration of the interests of the
employees.
the need to foster the group’s business relationships with
suppliers, customers and others;
The operating review on pages 3 to 6 discusses the need to
foster the business’s external relationships.
the impact of the group’s operations on the community and the
environment;
The Corporate Governance report on pages 9 and 10 discusses
these issues along with the environmental reporting within the
Director’s report on page 13.
the desirability of the group maintaining a reputation for high
standards of business conduct; and
The corporate governance report on pages 9 and 10 sets out
how the Directors promote this.
Strategic report
7
the need to act fairly between members of the group.
The corporate governance report on pages 9 and 10 considers
relations with members and the Group’s values.
(Continued)
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. The Directors seek
to ensure that overall risk is mitigated by avoiding excessive concentration of exposure to any given 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 can affect lead times and
create some disruption.
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 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 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 with different vendors and in different geographic regions have
also been put in place.
Other risks and uncertainties
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 and Global recessionary risk.
The Directors have taken steps to ensure that all of the Group’s 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.
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.
Paul Dupee
Chairman
30 September 2022
CFO Statement
8
Chief Financial Officer Statement
The year ended 31 March 2022 was pivotal on the positioning of The 600 Group. The sale of the Machine Tool Division, signed in
early March 2022 and closed on 11 April 2022, repositioned the Group as a pure laser machine manufacturer. It moreover allowed
the Group considerably strengthening the Group’s balance sheet. 2022 also marked a year of recovery from the impact of the
COVID-19 restrictions which is reflected in the revenue growth (+29%) and order intake increase (+29%), including discontinued
operations.
Current year review
The Laser Division delivered the strongest performance. Revenue increased 49.8% driven by strong organic order intake growth of
35.9%. While both companies (Tykma and CMS) grew its order intake, CMS led the group with an increase of 68.3% which was
highly impacted by the order received from Goe Goe for four pill driller machines that totalled $4.3m. Profit in the Laser Division
grew 123.1% which was the result of a strong customer demand, including the large contract mentioned before and its operational
agility in spite of supply chain disruptions. However, there was a reduction in gross margin (-2.5%) as a result of product mix and
increased costs of supplies.
The discontinued Machine Tool Division also saw some growth, with revenue increase of 14.9%. Growth was observed in the
European affiliates (+25.5%) and Clausing (+8.3%) but not in Australia (-3.7%). Order intake was the main reason for this revenue
increase with a total growth of 23.3%. Similarly, to the revenue, the order intake pattens were substantially increased in Europe
(+48.1%) and Clausing (+14.7%), however the Australian affiliate saw its orders reduced by -11.1%. Despite the growth in revenue,
profitability in the division declined -47.1% to $1.9m (2021: $2.8m). This profit decline was influenced by the decrease in margins
(-1.1%), which reflects the general increase in raw materials, and increase overheads as a consequence of the ease on the
pandemic.
The operating profit margin for the overall Group was 5.4% (2021: 4.9%). The Laser Division generated an operating profit of
12.9% that represents an increase of 4.2% vs previous year while the Machine Tool Division delivered an operating profit of 5.2%
which is a decline of -2.2% vs prior year.
Statement of financial position
With the considerable growth of the Group’s top line and the increased challenges with supply chain across the world, our working
capital was increased $3.8m on inventories plus $3.9m on trade receivables. This increase was partially funded by the increase in
trade creditors of $2.9m. The remaining part of it was financed by the increase in the short-term loans.
The sale of the Machine Tool Division, $21.0m price on a cash and debt free basis, closed on 11 April 2022 with the collection of
funds. This amount (minus the escrow accounts of $0.4m, brokerage and legal fees) was used to pay the loan notes (£8.5m),
HSBC CLBILS Covid loan in the UK (£1.2m), the Bank of America CMS remaining acquisition loan of $1.6m and the revolving line
of credit with Bank of America of $4.2m.
Because the Machine Tool Division sale closed immediately after year end, the balance sheet included in the annual report does
not reflect the above movements.
Next year outlook
Entering the new year with all long term debt paid off and the business focused 100% on the Laser Division, the Group is now in
the unique position of being able to look for options to expand its portfolio within this line of business. The 2023 financial year has
started strongly, with a record order book in place and the Group currently reviewing several potential business propositions
Conclusion
The 600 Group delivered a solid financial performance, despite global challenges and international economic and political uncertainty
including the COVID pandemic and, more recently, the conflict in Ukraine. Despite this, trading has remained encouraging thus far
in the FY23 year.
Rui Lopes
Chief Financial Officer
30 September 2022
Corporate governance
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 has formulated
corporate governance policies 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 the Annual Report how it addresses the ten principles of the 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 Directors are Rui Lopes, CFO and Don Haselton, president of the Laser Division.
The senior non-executive Director, Derek Zissman assisted by the two other non-executive Directors, Stephen Fiamma and Todd
Riggs provide adequate counterbalances and challenges to ensure no one view dominates decisions.
Mr Zissman has now been on the Board over 9 years but continues to bring independent views and contemporary working practices
to the Board as a result of his roles as a non-executive director with a number of other listed companies.
The Directors meet regularly during the year and utilise video conference as well as site visits to operating businesses. Local
management teams presented to the Board on current and future business projects during the year.
The Board is served by an Audit Committee headed by Derek Zissman and including Stephen Fiamma and Todd Riggs. The Audit
Committee meets at least twice during the year to review both the interim and year end results before publication. 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 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.
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.
Relations with shareholders
Regular contact is maintained with major shareholders particularly following the announcement of results and any significant events.
In normal circumstances individual shareholders attending the AGM engage directly with the Board in an open question and answer
session before voting on the various resolutions. The 2021 AGM was open to members but as a result of COVID-19 restrictions
attendance was not encouraged but questions in advance were requested with any replies posted on the Group website along with
the results of proxy votes 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 meetings and conference calls between the Board and the divisional
management teams. 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 has overall responsibility for the monitoring of internal controls, approving accounting policies and agreeing the
treatment of significant accounting issues.
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:
Corporate governance
10
1. Establish a strategy and business model which promote long-term value for shareholders
The Group strategy is to build on the Group’s leading position in the Global industrial laser technology sector through organic growth
and value-accretive acquisitions.
2. Seek to understand and meet shareholder needs and expectations
Regular contact is maintained with major shareholders particularly following the announcement of results and any significant events.
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 meetings
and conference calls between the Board and the divisional management teams. 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.
The Board is served by an Audit Committee headed by Derek Zissman and including Stephen Fiamma and Todd Riggs. The Audit
Committee meets at least twice during the year to review both the interim and year end results before publication. 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 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.
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.
Rui Lopes has held several executive finance positions over the past 15 years, most recently as Director of Halma PLC Safety Sector.
Mr Lopes was previously Chief Financial Officer of Ocean Insight, Inc. (Halma company) between 2018 and 2021, Vice President at
Accudynamics LLC (Halma company) between 2017 and 2018 and held senior finance roles at Smiths Medical (Smiths Group PLC)
between 2006 and 2017.
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 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, acquisitions, divestitures and financings particularly involving the USA.
Don Haselton has 45 years of industrial distribution experience with prior management roles with General Electric and Fadal
Engineering. Don joined the Group as President of 600 Group Inc in 2006. In this role, Don has been part of the success of the 600
Group in North America and has also had responsibility for the Machine Tools and Laser Technology Businesses worldwide. He was
appointed to the Board on 2 September 2021.
Todd Riggs is currently the Chief Operating and Financial Officer of Sellars Company, a profitably growing, privately held mid-sized
manufacturer and marketer of proprietary nonwoven materials. He has substantial experience with private equity portfolio companies
and has deep operational, financial, and strategic expertise. He was appointed to the Board on 2 September 2021.
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. 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.
Audit Committee report
11
During the year, the Audit Committee met by video conference twice and there were also meetings between the Audit Committee
Chair and the external auditor.
The Committee met the external auditor independent of executive management to ensure that a full and frank discussion of all
relevant matters took place.
The Audit Committee discussed the scope and key audit matters before the commencement of the current audit.
Financial Reporting
The Committee has reviewed with both management and the external auditor the more significant areas of judgement and the
appropriateness and application of the Group’s accounting policies.
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 and this has now become part of
the routine controls of the senior management.
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 meetings and conference calls between the Board 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, taxation and accounting assistance 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
year’s audit.
The Audit Committee Report has been approved by the Board and signed on its behalf by:
D Zissman
Chairman of the Audit Committee
30 September 2022
Directors report
12
The Directors present their report to the members, together with the audited financial statements for the period ended 31 March 2022,
which should be read in conjunction with the Chairman’s Statement on the affairs of the Group (page 2), and Strategic Report (pages
3 to 7). The Annual Report incorporates the consolidated financial statements, prepared to 31 March of The 600 Group Plc (the
Company) and all subsidiary undertakings (collectively, the Group). The results for 2021 are for the period ended 31 March 2021.
Activities of the Group
Following the sale of 600 Group’s legacy Machine Tools Division post year end, in April 2022, the Group’s operations are focused on
the design and supply of industrial laser systems for applications in end-markets ranging from industrial and aerospace to medical
and pharmaceuticals.
Result
The result for the period is shown in the Consolidated Income Statement on page 23.
Business review
A balanced and comprehensive analysis of development and performance of the Group is contained in the Chairman’s Statement,
the Strategic Report and CFO statement on pages 2 to 8. This analysis includes comments on the position of the Group at the end
of the financial period, consideration of the principal risks and uncertainties facing the business and the key performance indicators
which are monitored in relation to the achievement of the strategy of the business.
Post balance sheet events
The sale of the Group’s Machine Tool Division for $21m was completed on 11 April 2022. The activities of this division are shown as
discontinued in the Consolidated Income Statement with the assets and liabilities shown as held for sale in the consolidated statement
of financial position at 31 March 2022.
Dividend
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 25 to the financial statements.
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 23 September 2022, the Directors had been informed of the following interests in shares of 3% or more of the issued ordinary
share capital of the Company:
Percentage
of issued
ordinary
Number
share capital
Haddeo Partners LLP
23,492,535 19.92
Mr A Perloff and the Maland Pension Fund Trustees
10,600,000
8.99
Pruta Securities (Jersey) Ltd
5,000,000
4.24
Phillip J Milton & Co PLC
4,598,964
3.90
Mr T Miller
4,500,000
3.81
Miton UK MicroCap Trust plc
3,846,154
3.26
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 11,747,334 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 28 September 2021. This authority remains valid
until the conclusion of the next Annual General Meeting.
Directors
Details of the current Directors of the Company are shown on page 9.
Mr R Lopes was appointed a Director on 28 February 2022.
Directors report
13
Service contracts
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.
Mr Lopes has a service contract dated 28 February 2022 which has a notice period of one year.
Mr Haselton has a one year contract dated 15 July 2022.
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 31 March 2022 in the ordinary shares of the Company were as follows:
At 31 March
At 31 March
2022
2021
Number
Number
P R Dupee
23,492,535
23,492,535
D Zissman
400,000
400,000
S Fiamma
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 which can be used to either convert their loan notes into shares or to
purchase shares for a cash consideration.
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.
Laser processing machines generally use less energy and have no consumable products required compared to more traditional
processes for which they are replacing. The Group’s disposal of its Machine Tool Division will significantly reduce the Group’s energy
consumption used in production.
Streamlined Energy & Carbon Reporting (SECR)
The data for the annual quantity of emissions has been collated for all subsidiaries from metered purchases of electricity and fuel
consumed and measured as tonnes of CO2 equivalent. Additionally, a measure of CO2 emitted from company operated vehicles has
been included.
MWH
CO2
(Tonnes)
CO2
Intensity
(Tonnes Per
Employee *)
Purchased electricity
1,165
269
2.19
Combustion of fuels
1,035
190
1.54
Use of Group operated vehicles
69
42
0.34
Total
2,269
501
4.07
*Calculated using the average number of employees in the year of 123
The Group has undertaken multiple actions in the year to improve efficiency and promote recycling of waste products. The ongoing
design of new products and processes incorporates wherever possible opportunities to lower operating costs and waste for both the
customer and in the production process for the Group. New developments and refurbishments include the use of energy efficient
methods of building and lighting and heating.
Directors report
14
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.
Reappointment of auditor
A resolution reappointing BDO LLP as the statutory auditor will be proposed at the Annual General Meeting in September 2022.
On behalf of the Board
Paul Dupee
Chairman
30 September 2022
Statement of directors’ responsibilities
15
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 UK adopted international accounting 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 for that period.
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 UK adopted international accounting 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.
Paul Dupee
Chairman
30 September 2022
Independent auditor’s report to the members of The 600 Group PLC
Opinion on the financial statements
In our opinion:
•
the financial statements give a true and fair view of the state of the Group’s and of the Parent Company’s affairs
as at 31 March 2022 and of the Group’s profit for the year then ended;
•
the Group financial statements have been properly prepared in accordance with UK adopted international
accounting standards;
•
the Parent Company financial statements have been properly prepared in accordance with United Kingdom
Generally Accepted Accounting Practice) and as applied in accordance with the provisions of the Companies Act
2006; and
•
the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
We have audited the financial statements of The 600 Group Plc (the ‘Parent Company’) and its subsidiaries (the ‘Group’)
for the year ended 31 March 2022 which comprise the consolidated income statement, the consolidated statement of
comprehensive income, the consolidated statement of financial position, the consolidated statement of changes in equity,
the consolidated cash flow statement, the Group accounting policies, the notes relating to the consolidated financial
statements, the Company statement of financial position, the Company statement of changes in equity, the Company
accounting policies and the notes relating to the Company 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 UK adopted international accounting standards.
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).
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs
(UK)) and applicable law. Our responsibilities under those standards are further described in the
Auditor’s responsibilities for the audit of the financial statements section of our report. We believe that the audit evidence
we have obtained is sufficient and appropriate to provide a basis for our opinion.
Independence
We remain 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.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the Directors’ use of the going concern basis of accounting in
the preparation of the financial statements is appropriate. Our evaluation of the Directors’ assessment of the Group and
the Parent Company’s ability to continue to adopt the going concern basis of accounting included:
•
Review of the Audit Committee paper supporting the Group and the Parent Company assessment of going
concern, ensuring this is consistent with underlying supporting documentation regarding liquidity, headroom and
covenant analysis throughout the forecasted period;
•
Consideration of the forecast income statement and cash flows of the Group’s continuing activities for the next
two financial years, to evaluate whether the forecasts are calculated on a reasonable basis with reference to
historical performance and forecast accuracy, current business trends and pipeline/contract analysis;
•
Confirmation and agreement of the post balance sheet cash receipt following the sale of the machine tooling
division. This was to ensure that management’s assertions regarding repayment of existing Group liabilities and
facilities had been actioned post year end in line with management’s assumptions in their going concern
assessment;
•
Confirmation of the available cash and financing facilities within the Group, and evaluation of management’s
downside sensitivities on cash flow headroom, incorporating a review of financial covenants and headroom
analysis throughout the forecast period; and
•
Review of correspondence with the Group’s primary banking provider regarding the borrowing facilities,
expectation of renewal in the ordinary course of business and of the wider lender relationship.
Independent auditor’s report to the members of The 600 Group PLC (continued)
17
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions
that, individually or collectively, may cast significant doubt on the Group and the Parent Company’s ability to continue as
a going concern for a period of at least twelve months from when the financial statements are authorised for issue.
Our responsibilities and the responsibilities of the Directors with respect to going concern are described in the relevant
sections of this report.
Overview
Coverage1
95% (2021: 98%) of Group profit before tax
96% (2021: 95%) of Group revenue
94% (2021: 99%) of Group total assets
Key audit matters
2022
2021
Carrying value of inventory
-
☒
Impairment
of
goodwill
and
other
intangibles
-
☒
Discontinued operations
☒
-
Carrying value of inventory was a key audit matter in the prior year
due to the judgemental nature of provisioning against aged
inventory. This type of stock was primarily within the machine
tooling division, which was held for sale at year end and
subsequently sold post balance sheet. Therefore, the risk of
estimation uncertainty around valuation of this inventory was
diminished.
Impairment of goodwill and other intangibles was a key audit matter
in the prior year due to the Group’s poor performance and ongoing
losses due to Covid 19. The Group has since returned to profits,
reducing this judgement and inherent risk.
Materiality
Group financial statements as a whole
$190,000 (2021: $159,000) based on 0.3% of Group revenues
(including discontinued operations) (2021: 0.3% of revenue).
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. We also addressed
the risk of management override of internal controls, including assessing whether there was evidence of bias by the
Directors that may have represented a risk of material misstatement.
The Group engagement team maintained that whilst the machine tooling division would be discontinued and held for sale
at 31 March 2022, the nature of the operations and the relative size of the components within the division are still
considered to be significant components regardless of their presentation in the financial statements. This is due to the fact
that the discontinued operations would still be representing 12 months of results in the consolidated statement of
comprehensive income and those entities were ultimately fully operational members of the Group throughout the year
ended 31 March 2022. Those entities that were previously considered significant, would remain significant in our scoping
and be subject to full scope audits, with only the valuation assertion of the balance sheet having reduced risk profile
compared with previous years. For comparability, the division’s revenues are also still within the Group’s materiality
assessment due to their significance of operations. In light of the above assessment, the Group audit consisted of five
significant components (2021: Five) requiring full scope audits. Three out of five significant components operate in the
USA and therefore involved BDO member firms as component auditors, the remaining two significant components operate
in the UK and were fully audited by the Group engagement team. There were four non-significant components (2021:
three), which were not subjected to full scope audits, but were subject to specific audit procedures on material and/or risk
1 These are areas which have been subject to a full scope audit by the Group engagement team
Independent auditor’s report to the members of The 600 Group PLC (continued)
18
driven balances. Three out of four non-significant components requiring specific audit procedures were performed by the
group engagement team, with the final component being audited by a BDO member firm through agreed upon procedures
due to its location of operations in Australia.
Our involvement with component auditors
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 determining the 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. The Group audit team visited both the US Component team and
US management during the completion of component audits. Such visits had previously been restricted by Covid-19
imposed restrictions. The Group audit team reviewed the component auditors working papers and obtained the necessary
assurances to support the Group audit opinion. The Group audit team also visited the trading premises of a significant
component where we performed walkthroughs of key cycles and observed the trading warehouse and manufacturing
functions accompanied by management.
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, supported by desktop review procedures performed by the Group
audit team.
For remaining non-significant components, desktop review procedures were performed in order to consider if any financial
statement areas required specific audit procedures due to their size or risk profile to ensure the Group obtained sufficient
assurances by applying the Group materiality level.
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. This matter was 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 this matter.
Key audit matter
How the scope of our audit addressed the key
audit matter
Discontinued
operations and
division held for
sale – Machine
Tooling Division
Sale
Notes 30 and 31 and
the summary of
accounting policies.
The Group announced on 7 March 2022
that the Group had conditionally signed an
agreement to sell its Machine tooling
division. This division consists of four legal
entities, of which two are significant
components in the Group audit.
On 11 April 2022, the Group announced
that all conditions of the sale had been
met, and therefore the division had been
sold.
Due to the proximity to year end, this
increased the complexity in disclosures
and cut off considerations with regards to
the timing of assets and liabilities being
held for sale, and the timing of the control
passing to the new buyer.
The division represents circa 50% of the
Group (both in revenues and assets),
which therefore had significant Group audit
We reviewed legal documentation to identify the
substance of the transaction and whether the
Group had passed the risks and rewards of the
entities over to the proposed buyer as at 31
March 2022.
We considered IFRS10 - Consolidated financial
statements, criteria in this complex assessment
of control and power. The conclusions drawn
regarding control could not have passed under
IFRS10, until the agreement became
unconditional. This milestone was met on 11
April 2022.
We reviewed completion documentation and
agreed to post year end cash receipt of the
consideration of $21m, and challenged
management on the possibility of claw backs
from the buyer by reviewing post year end
correspondences and likelihood of changes to
consideration due. This challenge directly
impacted the valuation of those assets held for
Independent auditor’s report to the members of The 600 Group PLC (continued)
19
team focus in considering the scoping of
the respective audits of these components
and the complexity of the relevant
disclosures and cut off considerations and
is therefore a key audit matter.
IFRS5 - Non-current Assets Held for Sale
and Discontinued operations, requires the
valuation of assets held for sale to be held
at the lower of their carrying amount or fair
values less cost to sell. As such, the
disclosures and values of assets held for
sale at year end require impairment
assessments at the balance sheet date
which adds complexity and judgment to
this key audit matter.
sale regarding the potential impairment
assessment of assets and liabilities held for
sale at year end for which we compared the net
consideration calculated as outlined in note 31
to the net assets held for sale, noting no
indicators of impairment. This also aided our
audit work on the valuation assertion of financial
statement areas that are inherently susceptible
to management bias, such as stock valuation
and expected credit losses, as the Group had
recovered these via alternative means.
We reviewed management’s paper on IFRS10
control considerations and conclusions drawn in
light of the above complexities.
We considered IFRS5 – Non-current Assets
Held for Sale and Discontinued operations,
criteria for the timing of the division being
disclosed as held for sale and challenged
management on the timing of this to determine
if any other cut off considerations may cause
material impact to the financial statements.
We reviewed the disclosures for both held for
sale and discontinued operations and the
respective primary statement presentation to
check that it was in line with IFRS5 - Non-
current Assets Held for Sale and Discontinued
operations
Key observations:
Based on the work performed we considered
management’s disclosures and papers
regarding this complex matter to be reasonable
and appropriate to support the transaction.
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, including omissions, could influence the economic
decisions of reasonable users that are taken on the basis of the financial statements.
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. Importantly, misstatements below
these levels will not necessarily be evaluated as immaterial as we also take account of the nature of identified
misstatements, and the particular circumstances of their occurrence, when evaluating their effect on the financial
statements as a whole.
Based on our professional judgement, we determined materiality for the financial statements as a whole and performance
materiality as follows:
Group financial statements
Parent company financial statements
2022
$
2021
$
2022
$
2021
$
Materiality
190,000
159,000
25,000
25,000
Basis
for
determining
materiality
0.3% of revenue
(Including
discontinued
operations)
0.3% of revenue
5% of net assets,
but capped at
13% of Group
materiality for
Group audit
purposes.
5% of net assets, but capped
at 16% of Group materiality
for Group audit purposes.
Independent auditor’s report to the members of The 600 Group PLC (continued)
20
Rationale for the
benchmark
applied
Revenue considered to be a stable
metric for this Group in what has been a
volatile period in the Group’s
performance history
Holding company therefore net asset basis of
materiality applied.
Performance
materiality
133,000
111,300
17,500
17,500
Basis
for
determining
performance
materiality
70% of materiality
70% of materiality
70% of
materiality
70% of materiality
On the basis of our risk assessment, together with our assessment of the Group’s control
environment, our judgement is that performance materiality for the financial statements should
be 70%.
Component materiality
We set materiality for each component of the Group based on a percentage of between 13% and 68% of Group materiality
dependent on the size and our assessment of the risk of material misstatement of that component. Component materiality
ranged from $25,000 to $130,000. In the audit of each component, we further applied performance materiality levels of
70% of the component materiality to our testing to ensure that the risk of errors exceeding component materiality was
appropriately mitigated.
Reporting threshold
We agreed with the Audit Committee that we would report to them all individual audit differences in excess of $5,700
(2021: $4,000). We also agreed to report differences below this threshold that, in our view, warranted reporting on
qualitative grounds.
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. 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 course of 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 this gives rise to a material
misstatement in the financial statements themselves. 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.
Other Companies Act 2006 reporting
Based on the responsibilities described below and our work performed during the course of the audit, we are required by
the Companies Act 2006 and ISAs (UK) to report on certain opinions and matters as described below.
Strategic report
and
Directors’
report
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.
In the light of the knowledge and understanding of the Group and 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.
Matters
on
which we are
required
to
report
by
exception
We have nothing to report in respect of the following matters in relation to which the
Companies Act 2006 requires us to report to you if, in our opinion:
•
adequate accounting records have not been kept by the Parent Company, or
returns adequate for our audit have not been received from branches not
visited by us; or
Independent auditor’s report to the members of The 600 Group PLC (continued)
21
•
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, the Directors are responsible for the preparation of
the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the
Directors determine is necessary to enable the preparation of financial statements that are free from material misstatement,
whether due to fraud or error.
In preparing the financial statements, the Directors are responsible for assessing the Group’s and the Parent Company’s
ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going
concern basis of accounting unless the Directors either intend to liquidate the Group or the Parent Company or to cease
operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable
assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will
always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered
material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of
users taken on the basis of these financial statements.
Extent to which the audit was capable of detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line
with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The
extent to which our procedures are capable of detecting irregularities, including fraud is detailed below:
The audit team was structured with the appropriate experience and competence, including component audit teams, and
specialists were used where further specific knowledge was required including in areas relating to laws and regulations,
for example an independent tax review.
As part of the audit, we gained an understanding of the legal and regulatory framework applicable to the Group, the
industries and geographies in which it operates, and considered the risk of acts by the Group that were contrary to
applicable laws and regulations, including fraud. We considered the Group’s compliance with laws and regulations that
have a direct impact on the financial statements including, but not limited to, company law and tax legislation in the
jurisdictions within which the Group operates, and we considered the extent to which non-compliance might have a material
effect on the financial statements.
Based on our understanding we designed our audit procedures to identify instances of non-compliance with such laws and
regulations. Our procedures included reviewing the financial statement disclosures and agreeing to underlying supporting
documentation where necessary.
We evaluated management’s incentives and opportunities for fraudulent manipulation of the financial statements (including
the risk of override of controls) and determined that the principal risks were related to posting inappropriate journal entries
to improve performances and management bias in accounting estimates. Our audit procedures included, but were not
limited to:
•
Agreement of the financial statement disclosures to underlying supporting documentation;
•
Challenging assumptions and judgements made in significant accounting estimates, in particular in relation to
the Group’s judgements on contract assets and liabilities and stock provisioning;
•
Specific reviews over journal entries to revenue to ensure postings to revenue were reasonable, required and
not arbitrarily improving performance;
•
Identifying and testing journal entries, in particular any journal entries posted with unusual account
combinations or including specific keywords;
•
Holding discussions with management and those charged with governance, including consideration of known or
suspected instances of non-compliance with laws and regulation and fraud; and
•
Review of minutes of Board meetings throughout the period, to identify any inconsistencies with our audit work
or matters of which we needed to be aware.
Independent auditor’s report to the members of The 600 Group PLC (continued)
22
We made enquiries of management, the Directors and of component audit teams as to the risks of non-compliance and
any instances thereof, as well as the risk of fraud and irregularity, which was updated regularly throughout the audit. We
also addressed the risk of management override of internal controls, including in particular areas of accounting estimates
for evidence of bias, and the testing of journal entries processed during and subsequent to the year end and thereby further
evaluating whether there was evidence of bias by the Directors that represented a risk of material misstatement due to
fraud. We also applied a detailed risk assessment approach to our audit of revenue, by considering what could go wrong
within each of the Group and Company’s revenue streams and tailored our testing to responded to risks that we identified.
Our audit procedures were designed to respond to risks of material misstatement in the financial statements, recognising
that the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from
error, as fraud may involve deliberate concealment by, for example, forgery, misrepresentations or through collusion. There
are inherent limitations in the audit procedures performed and the further removed non-compliance with laws and
regulations is from the events and transactions reflected in the financial statements, the less likely we are to become aware
of it.
A further description of our responsibilities is available 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, UK
30 September 2022
BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).
Consolidated income statement
For the Year ended 31 March 2022
23
RESTATED
Before
After
Before
After
Adjusting
Adjusting
Adjusting
Adjusting
Adjusting
Adjusting
Items
Items
Items
Items
Items
Items
year
year
year
year
year
year
ended
ended
ended
ended
ended
ended
31 March
31 March
31 March
31 March
31 March
31 March
2022
2022
2022
2021
2021
2021
Notes
$000
$000
$000
$000
$000
$000
Continuing
Revenue
1
31,960
-
31,960
21,331
- 21,331
Cost of sales
(18,490)
76
(18,414)
(12,117)
(79)
(12,196)
Gross profit
13,470
76
13,546
9,214
(79)
9,135
Net operating expenses
2
(11,622)
(707)
(12,329)
(9,395)
(765)
(10,160)
Operating profit/(loss)
1,848
(631)
1,217
(181)
(844)
(1,025)
Financial expense
6
(1,081)
26
(1,055)
(1,153)
(642)
(1,795)
Profit/(loss) before tax
767
(605)
162
(1,334)
(1,486)
(2,820)
Income tax credit/(charge)
7
322
-
322
(1,639)
257
(1,382)
Profit/(loss) for the period on continuing
activities
1,089
(605)
484
(2,973)
(1,229)
(4,202)
Profit on discontinued operations
30
1,027
(242)
785
1,177 452
1,629
Profit/(loss) for the period attributable to the
equity holders of the parent
2,116
(847)
1,269
(1,796)
(777)
(2,573)
Basic earnings per share - continuing activities
9
0.93c
0.41c
(2.53c)
(3.58c)
Diluted earnings per share - continuing activities
9
0.91c
0.40c
(2.53c)
(3.58c)
Basic earnings per share
9
1.80c
1.08c
(1.53c)
(2.19c)
Diluted earnings per share
9
1.76c
1.06c
(1.53c)
(2.19c)
Company Number 00196730
The accompanying accounting policies and notes on pages 28 to 68 form part of these Financial Statements.
As explained in note 3, the directors have highlighted adjusting items which are material or 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 prior year figures have been restated for the effects of the discontinued operations- see note 30.
Consolidated statement of comprehensive income
For the period ended 31 March 2022
24
year
year
ended
ended
31 March
31 March
2022
2021
$000
$000
Profit/(loss) for the period
1,269
(2,573)
Other comprehensive income/(expense)
Items that will not be reclassified to the Income Statement:
Re-measurement of defined benefit asset/(liability)
(349)
210
Deferred taxation credit/(charge)
106
(51)
Total items that will not be reclassified to the Income Statement:
(243)
159
Items that are or may in the future be reclassified to the Income Statement:
Foreign exchange translation differences
903
514
Total items that are or may in the future be reclassified to the Income
Statement:
903
514
Other comprehensive income for the period, net of income tax
660
673
Total comprehensive income/(expense) for the period
1,929
(1,900)
Attributable to:
Equity holders of the Parent Company
1,929
(1,900)
Attributable to continuing activities 2,416 (5,433)
Attributable to discontinued activities (487)
3,533
Equity holders of the Parent Company
1,929
(1,900)
The accompanying accounting policies and notes on pages 28 to 68 form part of these Financial Statements.
Consolidated statement of financial position
Company Number 00196730
As at 31 March 2022
25
As at 31 March 2022
As at 31 March 2021
Notes
$000
$000
Non-current assets
Property, plant and equipment
11
1,842
2,808
Goodwill
12
13,174
13,174
Other intangible assets
12
3,189
3,726
Right of use assets
21
1,473
8,988
Deferred tax assets
14
236
2,765
19,914
31,461
Current assets
Inventories
15
8,041
17,941
Trade and other receivables
16
6,587
8,570
Deferred tax assets
14
99
809
Taxation
16
291
-
Cash and cash equivalents
17
207
4,997
Assets held for sale
30
31,954
-
47,179
32,317
Total assets
67,093
63,778
Non-current liabilities
Employee benefits
-
(968)
Loans and other borrowings
18
(11,639)
(1,590)
Government loans
18
-
(1,656)
Lease liabilities
21
(1,081)
(7,801)
Provisions
20
(174)
(248)
(12,894)
(12,263)
Current liabilities
Trade and other payables
19
(6,227)
(8,162)
Lease liabilities
21
(486)
(1,505)
Taxation
19
-
(546)
Provisions
20
(178)
(188)
Government loans
18
-
(2,234)
Loans and other borrowings
18
(4,871)
(12,202)
Liabilities held for sale
30
(13,777)
-
(25,539)
(24,837)
Total liabilities
(38,433)
(37,100)
Net assets
28,660
26,678
Shareholders’ equity
Called-up share capital
22
1,803
1,803
Share premium account
3,828
3,828
Equity reserve
201
201
Translation reserve
(5,713)
(6,616)
Retained earnings
28,541
27,462
Total equity
28,660
26,678
The financial statements on pages 23 to 68 were approved by the Board of Directors on 30 September 2022 and were signed on its behalf by:
Rui Lopes – Chief Financial Officer
30 September 2022
Consolidated statement of changes in equity
Company Number 00196730
As at 31 March 2022
26
Ordinary
Share
share
premium
Revaluation
Translation
Equity
Retained
capital
account
reserve
reserve
reserve
Earnings
Total
$000
$000
$000
$000
$000
$000
$000
At 28 March 2020
1,803
3,828
1,348
(7,130)
201
28,508
28,558
Loss for the period
-
-
-
-
-
(2,573)
(2,573)
Foreign currency translation
-
-
-
514
-
-
514
Property disposal
-
-
(1,348)
-
-
1,348
-
Net defined benefit pension movement
-
-
-
-
-
210
210
Deferred tax
-
-
-
-
-
(51)
(51)
Total comprehensive Income/(expense)
-
-
(1,348)
514
-
(1,066)
(1,900)
Credit for share-based payments
-
-
-
-
-
20
20
Total transactions with owners
-
-
-
-
-
20
20
At 31 March 2021
1,803
3,828
-
(6,616)
201
27,462
26,678
Profit for the period
-
-
-
-
-
1,269
1,269
Foreign currency translation
-
-
-
903
-
-
903
Net defined benefit pension movement
-
-
-
-
-
(349)
(349)
Deferred tax
-
-
-
-
-
106
106
Total comprehensive income
-
-
-
903
-
1,026
1,929
Transactions with owners:
Credit for share-based payments
-
-
-
-
-
53
53
At 31 March 2022
1,803
3,828 -
(5,713)
201
28,541
28,660
The accompanying accounting policies and notes on pages 28 to 68 form part of these Financial Statements.
Consolidated cash flow statement
For the Year ended 31 March 2022
27
period ended
period ended
31 March 2022
31 March 2021
$000
$000
Cash flows from operating activities
Profit/(loss) for the period
1,269
(2,573)
Adjustments for:
Amortisation
251
417
Depreciation
783
760
Depreciation of right of use assets
1,312
1,217
Net financial expense
1,371
2,138
PPP funding forgiven
(2,297)
(2,234)
Non-cash adjusting items
406
(357)
(Profit) on disposal of property, plant and equipment
-
(489)
Equity share option expense
53
20
Income tax charge
243
2,663
Operating cash flow before changes in working capital and provisions
3,391
1,562
Increase in trade and other receivables
(3,944)
(56)
(Increase)/decrease in inventories
(3,801)
1,887
Increase/(decrease) in trade and other payables
2,915
(631)
Employee benefit contributions
(60)
(118)
Cash (used in)/generated from operations
(1,499)
2,644
Interest paid
(1,069)
(1,126)
Lease interest
(311)
(373)
Net cash flows (used in)/generated from operating activities
(2,879)
1,145
Cash flows (used in)/ generated from investing activities
Interest received
24
3
Proceeds from sale of property, plant and equipment
225
1,745
Purchase of property, plant and equipment
(780)
(494)
Development and IT software expenditure capitalised
(54)
(228)
Net cash flows (used in)/ generated from investing activities
(585)
1,026
Cash flows used in financing activities
PPP funding
-
4,468
Proceeds from/(repayment of) external borrowing
1,037
(5,063)
UK Government loan
-
1,656
Lease payments
(1,460)
(1,383)
Net cash flows used in financing activities
(423)
(322)
Net (decrease)/increase in cash and cash equivalents
(3,887)
1,849
Cash and cash equivalents at the beginning of the period
4,997
2,878
Effect of exchange rate fluctuations on cash held
181
270
Cash and cash equivalents at the end of the period
1,291
4,997
Consolidated cash flow statement includes all activity relating to continuing and discontinuing activity.
Cash in discontinued entities (Assets held for sale) 1,084
Cash in continuing entities 207
Cash and cash equivalents at the end of the period
1,291
Group accounting policies
28
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 Group’s accounting reference date of 31 March, of
the Company and its subsidiary undertakings (together referred to as the Group). The results for 2022 are for the year ended 31 March
2022. The results for 2021 are for the period ended 31 March 2021.
Given more than 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 UK adopted international
accounting standards in conformity with the requirements of the Companies Act 2006. The Company has elected to prepare its parent
company financial statements in accordance with FRS 101; these are presented on pages 69 to 76.
The preparation of financial statements in conformity with 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 27.
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:
New standards:
•
IFRS 17 - insurance contracts including amendments to IFRS 17 (issued 25 June 2020) (effective from 1 January 2023).
Amendments:
•
IAS 1 - Classification of liabilities as current and non-current (effective from 1 January 2023).
•
IAS 1 - Disclosure of accounting policies (effective from 1 January 2023).
•
IFRS 3 - Business combinations (effective from 1 January 2022).
•
IAS 16 - Property, plant and equipment (effective from 1 January 2022).
•
IAS 37 - Provisions, contingent liabilities and contingent assets (effective from 1 January 2022).
•
IAS 12 - Income Tax – Deferred tax related to assets and liabilities from a single transaction (effective from 1 January 2023).
•
IAS 8 – Accounting Policies, Changes in Accounting Estimates and Errors – Definition of accounting estimates (effective from 1
January 2023).
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.
Group accounting policies (continued)
29
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 2 and the Strategic Report on pages 3 to 7.
The financial position of the Group, liquidity, cash flows and borrowing facilities are described in the Strategic Report. Note 25 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
25. Further details on the Group’s cash and bank borrowings are included in notes 17,18 and 24.
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 Coronavirus Large Business Interruption Loan scheme (CLBILS) taken
out in August 2020. All borrowings with HSBC plus the loan notes, that were due in August 2023, were repaid in April 2022 on completion
of the Machine Tool Division sale. The borrowings with Bank of America were similarly all repaid on completion of the Machine Tool
Division sale but the $7.5m short term trade and credit facilities were maintained. These facilities are subject to adjusted EBITDA to a
fixed charge and to senior debt and an overall asset cover test. The $7.5m of short-term trade and credit facilities are due to be reviewed
again at the end of August 2023 and are expected to continue in the ordinary course of business on the same terms. Given the USA
working capital facilities are largely undrawn this creates headroom in bank facilities and as a result reasonable downside modelling does
not create liquidity issues.
The Directors believe that the Group is well placed to manage its business risks and, after making enquiries of divisional management
including a review of forecasts and assumptions, which take account of reasonably possible changes in trading activity and considering
the existing banking facilities and stress tests on covenants which continue to show headroom, 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. 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. The sale of the Machine Tool Division was agreed on 5 March 2022
through a sale and purchase agreement (SPA). This contract included articles (VI and VII) that govern the conditions precedent to closing
and closing deliveries. Under Article VI there were several conditions that needed to occur before either party was required to close the
transaction contemplated by the SPA. Although the Sellers satisfied many of their conditions precedent prior to March 31st (the biggest
being the UK Shareholder Approval of The 600 Group PLC), the Buyer was not able to satisfy them all. For example, the Buyer was
unable to satisfy its financing condition (Section 6.2(g)) or the issuance of the representation and warranty insurance policy (Section
6.2(i)) before 31 March but was able to satisfy these conditions prior to the 11 April outside date permitted in the SPA (Section 7.4(a)).
Article VII of the SPA sets forth the many Closing deliveries that must be made by the parties for the transaction to be considered closed.
While the Sellers were able to deliver most if not all the deliveries required pursuant to Section 7.2 prior to March 31st, the Buyer was
not able to deliver its requirements under Section 7.3. The most important delivery of the Buyer was the payment of the purchase price
(Section 7.3(b)) which did not occur until 11 April 2022.
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 revenue as
performance obligations are satisfied. It 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 to customers,
either at a point in time or over-time depending on the characteristics of the contract, as the performance obligations to the customer are
satisfied.
Revenue represents the invoiced value of sales to customers less returns allowance and VAT.
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.
In Control Micro Systems Inc (CMS) and increasingly in the TYKMA Electrox business sales are of higher specification jobs. These
custom machines are produced to customers’ specific requirements which can take several months to complete and consequently these
machine sales are recognised over time.
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 are treated differently for revenue recognition purposes from the standard products. These machines are produced over an extended
Group accounting policies (continued)
30
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 accounts for the revenue on these custom jobs over a period of time, as the performance obligation is satisfied. 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.
Smaller machines and spares 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.
Service revenue is normally billed after a service visit has taken place and recognised at this point in time.
Customer deposits (contract assets and contract liabilities)
On machine sales (in both lasers and machine tools) it is usual when the sale is to an individual customer, rather than distributor or dealer,
for a deposit to be taken with the order 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 statement of
financial position and separately identified in note 19.
If the revenue recognised to date on custom machines exceeds the invoiced value a contract asset will be recorded to recognise 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 of 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, being the board, to allocate resources to the segments and to
assess their performance.
The Board consider there to be one operating segment, being Industrial Laser Systems, with the Machine Tools and Precision Engineered
Components Division being discontinued following the sale agreed in March 2022.
The Board assesses the performance of the operating segments based on a measure of underlying operating profit. This measurement
basis excludes the effects of adjusting items from the operating segments. Head Office and unallocated represent central functions and
costs.
ADJUSTING ITEMS
The directors have highlighted transactions which are material or 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 29 alternative performance measures and set out in note 3. All adjusting items are
taken into account in the GAAP figures in the Income Statement.
PENSIONS AND POST-RETIREMENT HEALTH BENEFITS
The Group operates both defined benefit and defined contribution pension schemes. It also operates a retirement healthcare benefit
scheme for certain of its employees in the US. The Group’s net obligation in respect of the defined benefit scheme 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
immediately through the statement of comprehensive income. The extent to which the schemes’ liabilities exceed the assets is shown as
a deficit in the statement of financial position. Both these schemes were disposed of as part of the Machine Tool Division disposal
completed in April 2022 and the deficit is shown within the liabilities held for disposal in the 31 March 2022 statement of financial position.
Items recognised in the income statement and statement of comprehensive income are as follows:
WITHIN PROFIT FROM DISCONTINUED 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
Group accounting policies (continued)
31
PENSIONS AND POST-RETIREMENT HEALTH BENEFITS (CONTINUED)
WITHIN PROFIT FROM DISCONTINUED OPERATIONS (CONTINUED)
period. To the extent that the changes to benefits vest immediately, past service costs are recognised immediately, in
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;
•
obligations for contributions to defined contribution pension schemes are recognised as an expense in the income
statement as incurred: and,
•
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.
Goodwill is deemed to have an indefinite useful economic life and is therefore not amortised but instead subject to an annual impairment
review, with any impairment losses being recognised immediately in the income statement.
RESEARCH AND DEVELOPMENT
Research expenditure undertaken with the prospect of gaining new scientific or technical knowledge and understanding is recognised in
the income statement as an expense as incurred.
Expenditure on development activities, whereby research findings are applied to a plan or design for the production of new or substantially
improved products and processes, is capitalised if the product or process is technically and commercially feasible and the Group has
sufficient resources to complete development. The expenditure capitalised includes direct labour and an appropriate proportion of
overheads. Amortisation is charged to the income statement on a straight-line basis over the useful economic life of the activity. Currently
the annual rate used is 20%.
PLANT AND EQUIPMENT
Plant and equipment are held at cost less depreciation. Profits or losses on disposals are calculated using the carrying value in the
balance sheet.
Depreciation is calculated to write off the cost of 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:
•
Leasehold improvements
– over residual terms of the lease
•
Plant and machinery
– 10 to 20%
•
Fixtures, fittings, tools and equipment – 10 to 33.3%
INVENTORIES
Inventories are valued at the lower of cost and net realisable value after making due allowance for obsolete and slow-moving items.
Costs incurred in bringing each product to its present location and condition are accounted for as follows:
•
Raw materials - purchase cost on a first in, first out basis
•
Finished goods and work in progress – cost of direct materials on a first in, first out basis and labour and a proportion
of manufacturing overheads based on normal operating capacity
Net realisable value is the estimated selling price in the ordinary course of business, less estimated cost of completion and the estimated
costs necessary to make the sale.
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.
Group accounting policies (continued)
32
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.
Notes to the Income Statement have been restated for the prior year to reflect only continuing activities.
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, which 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 trade facilities 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 using the
effective interest method. The equity component of a compound financial instrument is not remeasured subsequent to initial recognition.
Interest and gains and losses related to the financial liability are recognised in profit or loss. On conversion, the financial liability is
reclassified to equity; no gain or loss is recognised on conversion.
Where the terms and conditions of compound financial instruments are modified the Group 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.
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.
Group accounting policies (continued)
33
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 through profit or loss) are
capitalised to the initial carrying amount of the financial asset/liability, as appropriate on initial recognition. Transaction costs directly
attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognised immediately in profit
or loss.
On initial recognition, it is presumed that the transaction price is the fair value unless there is observable information available in an active
market to the contrary. The best evidence of an instrument's fair value on initial recognition is typically the transaction price. However, if fair
value can be evidenced by comparison with other observable current market transactions in the same instrument or is based on a valuation
technique whose inputs include only data from observable markets then the instrument should be recognised at the fair value derived from
such observable market data.
For valuations that have made use of significant unobservable inputs, the difference between the model valuation and the initial transaction
price is recognised in profit or loss either on a straight line basis over the term of the transaction, or over the reporting period until all model
inputs will become observable where appropriate, or released in full when previously unobservable inputs become observable. Financial
liabilities are subsequently measured at amortised cost.
Classification
Non-derivative financial instruments comprise trade and other receivables, cash and cash equivalents, trade and other payables and contract
assets and liabilities.
Financial assets
On initial recognition, the Group classifies its financial assets into the following measurement categories:
•
amortised cost; or
•
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 give 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
Group accounting policies (continued)
34
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
On adoption of IFRS 16, the Group 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 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 Group’s leasing activities and how these are accounted for
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.
Group accounting policies (continued)
35
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.
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.
PROVISIONS
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that
an outflow of resources embodying economic benefit will be required to settle the obligation, although there remains uncertainty over
timing or the amount of the obligation, and a reliable estimate can be made of the amount of the obligation.
IMPAIRMENT
The carrying amount of the Group’s assets, other than inventories and deferred tax assets (see accounting policies above), are reviewed
at each balance sheet date to determine whether there is any indication of impairment. If any such indication exists, the asset’s recoverable
amount is estimated.
For goodwill, the recoverable amount is estimated at each balance sheet date.
An impairment loss is recognised whenever the carrying amount of an asset or cash generating unit exceeds its recoverable amount.
Impairment losses are recognised in the consolidated income statement. Those relating to revalued property are treated in accordance
with IAS 16.
Impairment losses recognised in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill
allocated to cash-generating units (group of units) and then to reduce the carrying amount of the other assets of the unit (group of units)
on a pro rata basis.
GOVERNMENT ASSISTANCE AND LOANS
Paycheck Protection Program assistance in the USA is recognised initially under IAS 20 as a government grant and included in
outstanding debt within one year, given forgiveness is expected within 12 months. On forgiveness, the amount forgiven is recognised in
net operating expenses in the Consolidated Income Statement over the period during which the expenditure was incurred in qualifying
for the forgiveness. Amounts received in the UK and Australia for assistance during the COVID-19 pandemic, most notably income under
the UK furlough scheme, have been recognised in net operating expenses as received against the qualifying expenditure. The UK CLBILS
loan is recognised in debt with respect to the bullet repayment date of 15 September 2023, although this loan was repaid in April 2022
on completion of the Machine Tool Division sale.
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 flows of expected
income.
When the excess is negative, a bargain purchase gain is recognised immediately in consolidated income.
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.
Group accounting policies (continued)
36
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.
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.
Notes relating to the consolidated financial statements
37
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 Board of Directors. The Board review the Group’s internal
reporting in order to assess performance and allocate resources.
The Board consider there to be one operating segment, being Industrial Laser Systems, with the Machine Tools and Precision Engineered
Components Division being discontinued following the sale agreed in March 2022.
The Board assesses the performance of the operating segments based on a measure of underlying operating profit. 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, results and net assets by reportable segment:
Continuing
Discontinued
Year ended 31 March 2022
Industrial
laser
systems
Head Office
&
unallocated
Total
Machine
tools
& precision
engineered
components
Group
Total
Segmental analysis of revenue
$000
$000
$000
$000
$000
Total revenue
31,960
-
31,960
37,024
68,984
Segmental analysis of operating
profit/(loss) before Adjusting Items
4,109
(2,261)
1,848
1.908
3,756
Adjusting Items
76
(707)
(631)
(242)
(873)
Group operating profit/(loss)
4,185
(2,968)
1,217
1,666
2,883
Other segmental information:
Reportable segment assets
20,466
14,673
35,139
31,954
67,093
Reportable segment liabilities
(9,040)
(15,616)
(24,656)
(13,777)
(38,433)
Fixed asset additions
577
33
610
170
780
Depreciation and amortisation
924
446
1,370
976
2,346
Notes relating to the consolidated financial statements
38
1.
SEGMENT INFORMATION (CONTINUED)
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 for continuing operations
2022
2021
$000
%
$000
%
North America
31,960
100.0
21,331
100.0
Disaggregation of revenue by origin for discontinued operations
2022
2021
$000
%
$000
%
UK
12,913
34.8
10,131
31.4
Other European
504
1.4
-
-
North America
21,069
56.9
19,453
60.4
Australasia
2,538
6.9
2,635
8.2
Total
37,024
100.0
32,219
100.0
Continuing Discontinued
Year ended 31 March 2021
Industrial
laser
systems
Head Office
&
unallocated
Total
Machine
tools
& precision
engineered
components
Group
Total
Segmental analysis of revenue
$000
$000
$000
$000
$000
Total revenue
21,331
-
21,331
32,219
53,550
Segmental analysis of operating profit/(loss)
before Adjusting Items
1,836
(2,017)
(181)
2,801
2,620
Adjusting Items
(79)
(765)
(844)
452
(392)
Group operating profit/(loss)
1,757
(2,782)
(1,025)
3,253
2,228
Other segmental information:
Reportable segment assets
13,424
16,998
30,422
33,469
63,891
Reportable segment liabilities
(5,586)
(20,187)
(25,773)
(10,781)
(36,554)
Fixed asset additions
432
114
546
176
722
Depreciation and amortisation
1,016
371
1,387
1,007
2,394
Notes relating to the consolidated financial statements
39
1. SEGMENT INFORMATION (CONTINUED)
Disaggregation of revenue by destination for continuing operations:
2022
2021 (RESTATED)
$000
%
$000
%
Revenue:
UK
126
0.4
127
0.6
Other European
1,666
5.2
1,466
6.9
North America (USA)
25,257
79.0
17,982
84.3
Africa
5
0.0
10
0.0
Australasia
7
0.0
39
0.2
Central America
264
0.8
1,044
4.9
Middle East
657
2.1
280
1.3
Far East
3,978
12.5
383
1.8
31,960
100.0
21,331
100.0
Disaggregation of revenue by origin for discontinued operations
2022
2021 (RESTATED)
$000
%
$000
%
Revenue:
UK
8,005
21.6
7,315
22.7
Other European
4,848
13.1
2,372
7.4
North America (USA)
21,078
56.9
19,488
60.5
Africa
245
0.7
230
0.7
Australasia
2,546
6.9
2,390
7.4
Central America
10
0.0
74
0.2
Middle East
58
0.2
18
0.1
Far East
234
0.6
333
1.0
37,024
100.0
32,220
100.0
Disaggregation of revenue by product group for continuing operations:
2022
2021 (RESTATED)
$000
%
$000
%
Sector
Lasers
29,462
92.2
19,544
91.6
Laser spares and service
2,498
7.8
1,787
8.4
Total
31,960
100.0
21,331
100.0
Timing of revenue recognition
Products and services transferred at a point in time
16,679
52.2
11,936
56.0
Products and services transferred over time
15,281
47.8
9,395
44.0
Total
31,960
100.0
21,331
100.0
There are no customers that represent 10% or more of the Group’s revenues.
Assets and liabilities related to contracts with customers:
Notes relating to the consolidated financial statements
40
The group has recognised the following assets and liabilities related to contracts with customers on continuing operations.
2022
2021
$000
$000
Current contract liabilities relating to deposits from customers
2,668
624
2022
2021
$000
$000
Current contract assets relating to amounts due from customers
2,104
344
Notes relating to the consolidated financial statements
41
1. SEGMENT INFORMATION (CONTINUED)
Remaining performance obligations
The vast majority of the group’s 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 brought forward contract liabilities:
2022
2021
$’000
$’000
Revenue recognised that was included in the contract liability balance at the beginning of the year
444
385
2. NET OPERATING EXPENSES
.
Restated
2022
2021
Notes
$000
$000
– government assistance forgiven
1,451
1,456
Total other operating income
1,451
1,456
2022
2021
$000
$000
– administration expenses
13,073
10,851
– adjusting Items 3
707
765
Total operating expenses
13,780
11,616
Total net operating expenses
12,329
10,160
Notes relating to the consolidated financial statements
42
3. ADJUSTING ITEMS
RESTATED
2022
2021
$000
$000
Items included in cost of sales:
US Tariffs & Duty charges relating to prior years (d)
76
(79)
76
(79)
Items included in operating expenses:
Restructuring cost
-
(928)
Unavoidable lease cost
-
350
Right of use asset impairment
-
227
Acquisitions cost
-
(71)
Cost related to sale of the Machine Tool Division (a)
(364)
-
Amortisation of intangible assets acquired (b)
(343)
(343)
(707)
(765)
(631)
(844)
Items included in financial (income)/expense:
Amortisation of Loan notes and costs (c)
(530)
(642)
Loan Note credit on extension of repayment date (c)
556
-
26
(642)
Total adjusting items before tax
(605)
(1,486)
Income tax on adjusting items
-
257
Total adjusting items after tax
(605)
(1,229)
The directors have highlighted transactions which are material or 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 29 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)
Cost related to the sale of the Machine Tool Division incurred before 31 March 2022.
b)
A charge of $0.3m (2021: $0.3m) arose as a result of amortisation of intangible assets acquired through the CMS Inc deal.
c)
A credit of $0.03m resulted from the recalculation of the amortization of the loan notes and associated costs on the extension of the
repayment date to 14 August 2023 in July 2021. Costs of amortization of $0.6m were incurred in the prior year
d)
A credit resulted on the settlement of the prior year duty of $0.07m in the year.
Notes relating to the consolidated financial statements
43
4. OPERATING PROFIT
Restated
Operating Profit/(loss) is stated after charging/(crediting):
2022
2021
$000
$000
– depreciation of plant and equipment
882
524
– amortisation of development expenditure and trademarks
(23)
65
– amortisation of acquisition intangible
343
343
– depreciation of right of use assets
114
455
– Research and development cost expensed
981
-
– short term and low value lease expense
-
91
– (profit)/loss on sale of property, plant and equipment
-
15
– government assistance USA
(1,451)
(1,456)
Auditor’s remuneration:
– audit of these financial statements
140
72
– 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)
290
209
– tax advisory on the sale of the Machine Tool division
50
-
– other services relating to tax compliance
71
55
– other services relating to tax advisory
40
26
Amounts paid to the Company’s auditor in respect of services to the Company, other than the audit of the Company’s financial statements
have not been disclosed as the information is required instead to be disclosed on a consolidated basis.
5. PERSONNEL EXPENSES
RESTATED
2022
2021
$000
$000
Staff costs:
– wages and salaries
9,359
7,610
– social security costs
470
383
– pension charges relating to defined contribution schemes
25
130
– equity share options expense
55
20
9,909
8,143
The average number of employees of the Group (including Executive Directors) during the period was as follows:
RESTATED
2022
2021
Number
Number
Management and administration
44
44
Production
67
48
Sales
12
10
Total
123
102
Notes relating to the consolidated financial statements
44
5. PERSONNEL EXPENSES (CONTINUED)
Directors’ emoluments
Total
Total
Salary
Fees
Pension
Signing on bonus
Benefits in
kind
2022
2021
$
$
$
$
$
$
$
P R Dupee
420,000
-
-
-
12,648
432,648
425,767
D Zissman
-
44,979
-
-
-
44,979
43,624
S E Fiamma
-
46,200
-
-
-
46,200
46,585
D Haselton (appointed 2 September 2021)
177,277
-
40,783
-
5,600
223,660
-
T Riggs (appointed 2 September 2021)
-
26,950
-
-
-
26,950
-
R Lopes (appointed 28 February 2022)
22,917
-
-
50,000
-
72,917
-
S J Rutherford (retired 28 September 2021)
-
22,490
-
-
-
22,490
43,624
G M Krasny (appointed 22.12.20, resigned 10.02.21)
-
-
-
-
-
-
160,995
N R Carrick (resigned 22.12 20)
-
-
-
-
-
-
264,057
Total
620,194
140,619
40,783
50,000
18,248
869,844
984,652
The aggregate employer’s NIC relating to directors was $36,782 (2021: $33,252) and the aggregate US employer’s taxes were $23,165
(2021: $14,028).
Directors’ share options
Details of share options at 31 March 2022 and 31 March 2021 for each Director who held office during the year are as follows:
Number of
Number of
options at
options at
31 March
Lapsed/
31 March
2021 Issued prior to
appointment
Exercised
forfeited
2022
P Dupee
1,000,000
-
-
-
1,000,000
S Rutherford
500,000
-
-
-
500,000
D Zissman
500,000
-
-
-
500,000
S Fiamma
500,000
-
-
-
500,000
D Haselton
-
1,000,000
-
-
1,000,000
Options were all granted under the 600 Group PLC Deferred Share Plan and are exercisable between 3 and 10 years from date of grant.
•
2,000,000 options with an exercise price of 17p were granted on 7 April 2014;
•
1,000,000 options with an exercise price of 18p were granted on 6 August 2015; and
•
500,000 nil cost options were granted 15 September 2016.
No options were granted during the year to Directors. Don Haselton was elected Director on 2 September 2021 and owned 1m options before
the election.
The charge to the Income Statement in respect of share-based payments was $53,000 (2021: $20,000).
The share price at 31 March 2022 was 14.75p (20.10cents) and the highest and lowest prices during the period were 16.50p (22.49cents)
and 8.75p (11.93cents) respectively.
6. FINANCIAL EXPENSE
RESTATED
2022
2021
$000
$000
Bank overdraft and loan interest
(77)
(147)
Loan note interest
(914)
(897)
Finance charges
(1)
(11)
Lease interest
(89)
(98)
Financial expense before adjusting items
(1,081)
(1,153)
Amortisation of Loan notes and costs
(530)
(642)
Loan Note credit on extension of repayment date
556
-
Financial expense
(1,055)
(1,795)
Notes relating to the consolidated financial statements
45
7. TAXATION
2022
$000
RESTATED
2021
$000
UK Corporation tax at 19% (2021: 19%):
- Prior Year:
283
-
Overseas taxation:
– current period
8
(419)
Total tax credit/ (charge)
291
(419)
Deferred taxation:
– current period
31
(1,054)
– prior period
-
91
Total deferred taxation credit/ (charge) (Note 14)
31
(963)
Taxation credited/(charged) to the income statement
322
(1,382)
The rate for Federal tax in the USA is 21% and in addition businesses suffer State taxes estimated at 4%.
TAX RECONCILIATION
The tax credit/charge assessed for the period is higher than (2021: higher than) the standard rate of corporation tax in the UK of 19%
(2021: 19%). The differences are explained below:
RESTATED
2022
2021
$000
$000
Profit/(loss) before tax
162
(2,820)
Profit/(loss) before tax multiplied by the standard rate of corporation tax
in the UK of 19% (2021: 19%)
31
(536)
Effects of:
– income not taxable and/or expenses not deductible
-
75
– overseas tax rates
-
97
– US state taxes
8
10
– amount in respect of prior periods
(283)
-
– tax losses utilised not previously recognised
(78)
-
– deferred tax de-recognised on losses in the period
-
1,736
Taxation credited/(charged) to the income statement
(322)
1,382
Deferred taxation balances are analysed in note 14.
Notes relating to the consolidated financial statements
46
8. DIVIDENDS
No dividends have been proposed this year or last year.
9. EARNINGS PER SHARE
The calculation of the basic earnings per share for continuing operations of 0.41c (2021: loss 3.58c) is based on the earnings for the
financial period attributable to the Parent Company’s shareholders of a profit of $484,000 (2021: loss $4,202,000) and on the weighted
average number of shares in issue during the period of 117,473,341 (2021: 117,473,341). At 31 March 2022, there were 3,790,000 (2021:
2,040,000) potentially dilutive shares (share options or warrants with an exercise price below the average share price for the year) with
a weighted average effect of 2,496,578 (2021: 2,040,000) shares giving diluted earnings per share for continuing operations of 0.40c
(2021: loss 3.58c). In accordance with IAS 33 – Earnings per Share, the Group shows no dilutive impact in respect of its share options
and Deferred Share Plan for the year ended 31 March 2021 as their conversion to ordinary shares would decrease the loss per share
from continuing operations.
RESTATED
2022
2021
Weighted average number of shares
Issued shares at start of period
117,473,341
117,473,341
Effect of shares issued in the year
-
-
Weighted average number of shares at end of period
117,473,341
117,473,341
Weighted average number of the 3,790,000 (2021: 2,040,000) potentially dilutive shares
2,496,578
2,040,000
Total weighted average diluted shares
119,969,919
119,513,341
$000
$000
Total post tax profit/(loss) - continuing operations
484
(4,202)
Total post tax profit/ (loss) including discontinued operations
1,269
(2,573)
Basic EPS – continuing operations
0.41c
(3.58c)
Diluted EPS – continuing operations
0.40c
(3.58c)
Total including discontinued operations
Basic EPS
1.08c
(2.19c)
Diluted EPS
1.06c
(2.19c)
Underlying earnings
$000
$000
Total post tax profit/( loss) - continuing operations
484
(4,202)
Adjusting items – per note 3
605
1,229
Underlying earnings after tax and adjusting items-continuing operations
1,089
(2,973)
Underlying basic EPS
0.93c
(2.53c)
Underlying diluted EPS
0.91c
(2.53c)
Notes relating to the consolidated financial statements
47
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.
SHARE-BASED PAYMENTS EXPENSE
The Group recognised a total charge of $53,000 (2021: $20,000) in relation to equity-settled share-based payment transactions.
2022
2021
DSP
DSP
The number and weighted average exercise price of share options
Number of options outstanding at beginning of period
8,190,000
8,400,000
Number of options granted in period
-
500,000
Number of options forfeited/lapsed in period
-
(710,000)
Number of options exercised in period
-
-
Number of options outstanding at end of period
8,190,000
8,190,000
Number of options exercisable at end of period
6,650,000
6,650,000
On 31 March 2021, 500,000 nil cost options were granted, and 710,000 nil cost options lapsed as a result of employees leaving the
group.
All options are exercisable in 3 years from the date of grant.
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:
2021
2019
2018
2016
2015
2014
2012
Grant
Grant
Grant
Grant
Grant
Grant
Grant
Fair value
8.75p
14p
14p
10p
4p
4p
4p
Share price at grant
8.75p
18p
17p
10p
18p
17p
10p
Exercise price
0p
0p
0p
0p
18p
17p
10p
Dividend yield
0%
5%
5%
0%
0%
0%
0%
Expected volatility
7%
6%
5%
50%
50%
25%
50%
Expected life
3.0 years
3.0 years
3.0 years
3.0 years
3.0 years
3.0 years
3.0 years
Risk-free interest rate
0.70%
1.36%
1.36%
1.36%
1.36%
4.08%
4.08%
Number of shares under option
500,000
900,000
850,000
500,000
1,000,000
3,400,000
1,750,000
Notes relating to the consolidated financial statements
48
11. PROPERTY, PLANT AND EQUIPMENT
Fixtures,
fittings,
Leasehold
Plant and
tools and
Improvements
machinery
equipment
Total
$000
$000
$000
$000
Cost or valuation
At 31 March 2021
847
4,141
4,920
9,908
Exchange differences
(4)
(27)
(12)
(43)
Additions during period
29
445
569
1,043
Disposals during period
-
(58)
-
(58)
Held for Sale
(388)
(1,710)
(2,382)
(4,480)
At 31 March 2022
484
2,791
3,095
6,370
Depreciation
At 31 March 2021
189
3,095
3,816
7,100
Charge for period
48
269
467
784
Disposals during period
-
(26) -
(26)
Held for Sale
(130)
(1,130)
(2,070)
(3,330)
At 31 March 2022
107
2,208
2,213
4,528
Net book value
At 31 March 2022
377
583
882
1,842
At 31 March 2021
658
1,046
1,104
2,808
Land
Fixtures,
fittings,
and buildings
Leasehold
Plant and
tools and
Freehold
Improvements
machinery
equipment
Total
$000
$000
$000
$000
$000
Cost or valuation
At 28 March 2020
981
847
3,912
4,511
10,251
Exchange differences
238
11
258
48
555
Transfers between classes
-
(44)
(196)
240
-
Additions during period
-
33
192
269
494
Disposals during period
(1,219)
-
(25)
(148)
(1,392)
At 31 March 2021
-
847
4,141
4,920
9,908
Depreciation
At 28 March 2020
18
159
2,674
3,340
6,191
Exchange differences
4
3
209
24
240
Transfers between classes
-
(14)
(78)
92
-
Charge for period
4
41
295
420
760
Disposals during period
(26)
-
(5)
(60)
(91)
At 31 March 2021
-
189
3,095
3,816
7,100
Net book value
At 31 March 2021
-
658
1,046
1,104
2,808
At 31 March 2020
963
688
1,238
1,171
4,060
Notes relating to the consolidated financial statements
49
12. GOODWILL AND OTHER INTANGIBLE ASSETS
Total
Customer
Development
IT
Total
Tykma
CMS
Goodwill
relationships
Trademarks
Expenditure
Software
Other intangible
Total
$000
$000
$000
$000
$000
$000
$000
$000
$000
Cost
At 31 March 2021
10,329
2,845
13,174
2,743
312
1,138
661
4,854
18,028
Additions
-
-
-
-
-
1
53
54
54
Disposal
-
-
-
-
-
(282)
-
(282)
(282)
Foreign exchange
-
-
-
-
-
(3)
(31)
(34)
(34)
Held for Sale
(85)
(85)
(85)
At 31 March 2022
10,329
2,845
13,174
2,743
312
769
683
4,507
17,681
Amortisation and
impairment
At 31 March 2021
-
-
-
631
312
185
-
1,128
1,128
Amortisation
-
-
-
343
-
-
-
343
343
Disposal
-
-
-
-
-
(92)
-
(92)
(92)
Foreign exchange
-
-
-
-
-
(3)
-
(3)
(3)
(Held for Sale
(58)
(58)
(58)
At 31 March 2022
-
-
-
974
312
32
-
1,318
1,318
Net book value
At 31 March 2022
10,329
2,845
13,174
1,769
-
737
683
3,189
16,363
At 31 March 2021
10,329
2,845
13,174
2,112
-
953
661
3,726
16,900
Total
Customer
Development
IT
Total
Tykma
CMS
Goodwill
relationships
Trademarks
Expenditure
Software
Other intangible
Total
$000
$000
$000
$000
$000
$000
$000
$000
$000
Cost
At 31 March 2020
10,329
2,845
13,174
2,743
312
1,030
489
4,574
17,748
Additions
-
-
-
-
-
114
114
228
228
Disposal
-
-
-
-
-
(12)
-
(12)
(12)
Foreign exchange
-
-
-
-
-
6
58
64
64
At 31 March 2021
10,329
2,845
13,174
2,743
312
1,138
661
4,854
18,028
Amortisation and
impairment
At 28 March 2020
-
-
-
288
312
106
-
706
706
Amortisation
-
-
-
343
-
74
-
417
417
Foreign exchange
-
-
-
-
-
5
-
5
5
At 31 March 2021
-
-
-
631
312
185
-
1,128
1,128
Net book value
At 31 March 2021
10,329
2,845
13,174
2,112
-
953
661
3,726
16,900
At 31 March 2020
10,329
2,845
13,174
2,455
-
924
489
3,868
17,042
IT software relates to a new ERP system which was not implemented due to Machine Tool Division sale and written off in the following
year.
Amortisation and impairment charges are recorded in the following line item in the income statement:
2022
2021
$000
$000
Operating expenses
251
417
Notes relating to the consolidated financial statements
50
12. GOODWILL AND OTHER INTANGIBLE ASSETS (CONTINUED)
IMPAIRMENT TESTING OF GOODWILL
The Group has undertaken its annual impairment testing of Goodwill as at 31 March 2022 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 Electrox and CMS are identified as separate CGUs. Budgets
and revised forecasts, which take into account the recovery of the markets from the effects of the Covid-19 pandemic and the expected
uplift in order activity in the Group’s businesses from March 2022 have been prepared by all business units covering the two years to
March 2024. 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 increased revenue and profitability in the year to March 2023 with further growth in 2024 and
thereafter a return to more normal terminal growth rates of 5% 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 post-tax weighted average cost of capital,
which is adjusted for CGU risk factors, resulting in a rate of 13.26%.
The forecasts do not result in any impairment.
Sensitivity to changes in assumptions
Whilst future uncertainty as a result of the Covid-19 pandemic and geopolitical instability 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.
With the sale of the Machine Tool Division, in April 2022, the remaining UK entities in the Group (The 600 Group Plc, Electrox Laser
Limited, Electrox Limited, The 600 Group (Overseas) Limited) moved their UK address to 42 Berkeley Square, London. Coborn Insurance
Company Limited continues to be registered in Guernsey.
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. This
entity was sold as part of the Machine Tool Division exit with the completion of the deal in April 2022.
TYKMA Inc’s 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 has a registered office at 3963 Emerald Drive, Kalamazoo, Michigan 49001, US.
600 Group Inc has a registered office at 200 S. Orange Avenue, Suite 2170, Orlando Florida 32801 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.
REST OF THE WORLD:
600 Machine Tools (Pty) Ltd – (Australia)
600 Machine Tools (Pty) Ltd’s principal activity is the design and distribution of machine tools and precision engineered components. The
registered office address is 27 Foundry Road, 7 Hills, New South Wales, Australia. This entity was sold as part of the Machine Tool
Division exit with the completion of the deal on 11 April 2022.
Notes relating to the consolidated financial statements
51
Colchester GmbH* – (Germany)
A corporation established in Germany for the distribution of machine tools and precision engineered components with its registered office
at AM Herdicksbach 29, 45731 Waltrop, Germany. This entity was sold as part of the Machine Tool Division exit with the completion of
the deal on 11 April 2022.
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.
Notes relating to the consolidated financial statements
52
14. DEFERRED TAX ASSETS AND LIABILITIES
RECOGNISED DEFERRED TAX ASSETS AND LIABILITIES
Deferred tax assets and liabilities are attributable to the following:
Assets
2022
2021
$000
$000
Decelerated capital allowances
41
956
Short-term timing differences
-
6
Tax losses
294
2,612
Net deferred tax assets
335
3,574
Assets
2022
2021
$000
$000
Due within one year
99
809
Due after one year
236
2,765
Total
335
3,574
MOVEMENT IN DEFERRED TAX DURING THE PERIOD
As at
As at
31 March 2021
Transfer to assets
held for sale
Income statement
Exchange
Fluctuations
31 March 2022
$000
$000
$000
$000
$000
Decelerated capital allowances
956
(915)
-
-
41
Short-term timing differences
6
(6)
-
-
-
Tax losses
2,612
(2,336)
31
(13)
294
3,574
(3,257)
31
(13)
335
The rate of UK corporation is 19% but an increase to 25% by April 2023 had been substantively enacted at the balance sheet date. UK
deferred tax has therefore been measured at a blended rate of 23%. US deferred tax is provided at 25% (2021: 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:
2022
2021
$000
$000
Tax losses
4,142
6,230
There is no expiry date for the recoverability of the tax losses.
Notes relating to the consolidated financial statements
53
15. INVENTORIES
2022
2021
$000
$000
Work in progress
2,890
1,320
Finished goods and goods for resale
5,151
16,621
Total
8,041
17,941
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 considerations, including customer demand.
Inventories included within Cost of Sales for the continuing operations only amounted to $14.7m (2021: $9.1m).
During the period inventory provisions have decreased by $95,889 (2021: decreased by $59,747). Following the impairment provisions,
inventories are valued at lower of cost and net realisable value.
16. TRADE AND OTHER RECEIVABLES
2022
2021
$000
$000
Trade receivables
3,424
5,149
Other debtors
411
1,361
Other prepayments
648
1,716
Contract assets
2,104
344
Total
6,587
8,570
2022
2021
$000
$000
Taxation
291
-
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:
2022
2021
$000
$000
Current (not overdue)
2,347
4,312
Overdue:
– 0–3 months overdue
981
761
– 3–6 months overdue
143
159
– 6–12 months overdue
(4)
(4)
– more than 12 months overdue
9
24
Continuing Operations
3,476
5,252
Notes relating to the consolidated financial statements
54
16. TRADE AND OTHER RECEIVABLES (CONTINUED)
At 31 March 2022 the lifetime expected loss provision for trade receivables for continuing operations only:
31 March 2022
current
0-3 months
3-6 months
6-12 months
over 12
months
Expected loss ratio
0%
0%
33%
100%
100%
Total
$'000
$'000
$'000
$'000
$'000
$'000
Gross carrying amount
2,347
981
143
(4)
9
3,476
Loss provision
-
-
47
(4)
9
52
31 March 2021
current
0-3 months
3-6 months
6-12 months
over 12
months
Expected loss ratio
0%
0%
52%
100%
100%
Total
$'000
$'000
$'000
$'000
$'000
$'000
Gross carrying amount
4,312
761
159
(4)
24
5,252
Loss provision
-
-
83
(4)
24
103
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 group’s 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 for continuing operations only:
2022
2021
$000
$000
Opening provision for impairment
103
91
Exchange difference on opening balance
(3)
7
(Released)/Charged in the period
29
23
Utilised in the period
(22)
(18)
Held for Sale
(55)
-
Closing provision
52
103
17. CASH AND CASH EQUIVALENTS
2022
2021
$000
$000
Cash at bank and in hand
75
4,287
Short-term deposits – restricted cash
132
710
Cash position for continuing operations
207
4,997
Discontinued operations cash and cash equivalents
1,084
-
Cash and cash equivalents per cash flow statement
1,291
4,997
Included within cash and cash equivalents at 31 March 2022 is an amount totaling $132,000 (2021: $710,000) 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.
Notes relating to the consolidated financial statements
55
18. LOANS AND OTHER BORROWINGS
CURRENT:
2022
2021
$000
$000
Bank loans and trade facilities
4,871
977
8% Loan notes
-
11,225
4,871
12,202
NON-CURRENT:
2022
2021
$000
$000
Bank loans
921
1,590
8% Loan notes
10,718
-
11,639
1,590
Government loans
2022
2021
$000
$000
Current
-
2,234
Non-current
-
1,656
-
3,890
The $10.7m (£8.1m) accounting 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 were extended in July
2021 to 14 August 2023. 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. Subsequent to
the year end the loan notes were repaid from the proceeds of the Machine Tool Division disposal. The warrants remain outstanding until
14 August 2023.
Facilities from the Bank of America include a revolving credit facility of $10m which was reduced to $7.5m following the sale of the
Machine Tool Division in April 2022. A term loan for $3.25m was taken to part fund the acquisition of CMS Inc in 2020 and is being repaid
on a monthly basis through to June 2024 in equal instalments, with an interest rate of 2.25% above base. A total of $5.8m was outstanding
at 31 March 2022 (2021: $2.3m) all of which was paid back to Bank of America with the proceeds from the sale of the Machine Tool
Division in April 2022.
On 21 August 2020 a loan of $1.6m (£1.2m) was taken out under the Government Coronavirus Large Business Interruption Loan Scheme
by the UK machine tool business with interest at 1.92% and a bullet repayment of 1 September 2023. This loan was repaid in April 2022
from the proceeds of the Machine Tool Division sale.
The above loans and borrowings are secured by way of fixed and floating charges over the assets of the Group.
Notes relating to the consolidated financial statements
56
19. TRADE AND OTHER PAYABLES
2022
2021
$000
$000
Current liabilities:
Trade payables
2,962
3,792
Social security and other taxes
16
344
Other creditors
35
1,254
Accruals
546
2,148
Contract liabilities
2,668
624
Total
6,227
8,162
2022
2021
$000
$000
Taxation
-
546
20. PROVISIONS
Unavoidable
lease costs
Warranties
Dilapidations
Total
$000
$000
$000
$000
Total provisions at 31 March 2021
146
140
150
436
Exchange differences
(6)
1
-
(5)
Utilised in the period
(58)
-
-
(58)
Asset Held for Sale
-
(21)
-
(21)
Provisions due within one year
58
120
-
178
Provisions due after one year
24
-
150
174
Total provisions at 31 March 2022
82
120
150
352
The timing of warranty payments is uncertain in nature. The warranty provisions are calculated based on historical experience of claims
received, taking into account recent sales of items which are covered by warranty. The provision relates mainly to products sold in the
last twelve months. The typical warranty period is now twelve months.
The dilapidations provision relates to leasehold premises.
Notes relating to the consolidated financial statements
57
21. LEASES
The right of use assets relate to the following asset types:
The lease liabilities at the year-end were as follows:
Lease liabilities
31 March 2022
31 March 2021
$000
$000
Current
486
1,505
Non-Current
1,081
7,801
Total
1,567
9,306
During the year lease payments amounted to $1.588m (2021: $1.569m).
The undiscounted payments under the leases fall due as follows for continuing operations only:
31 March 2022
31 March 2021
$000
$000
Up to one year
486
1,505
One to five years
1,186
5,157
Over five years
-
4,427
Total undiscounted payments due under continuing leases
1,672
11,089
Plant and
Property
Vehicles
machinery
Total
$000
$000
$000
$000
Cost or valuation
At 31 March 2021
11,088
188
71
11,347
Exchange differences
(229)
(9)
(1)
(239)
Additions during period
721
-
-
721
Disposals in period
(33)
-
-
(33)
Held for sale
(8,723)
(179)
(67)
(8,969)
At 31 March 2022
2,824
-
3
2,827
Depreciation
At 31 March 2021
2,211
113
35
2,359
Exchange difference
(31)
(5)
(1)
(37)
Disposals in the period
(33)
-
-
(33)
Charge for period
1,293
5
13
1,311
Held for sale
(2,086)
(113)
(47)
(2,246)
At 31 March 2022
1,354
-
-
1,354
Net book value
At 31 March 2022
1,470
-
3
1,473
At 31 March 2021
8,876
75
37
8,988
Notes relating to the consolidated financial statements
58
22. SHARE CAPITAL
2022
2021
$000
$000
Allotted, called-up and fully paid:
Ordinary shares of 1p each
117,473,341 ordinary shares of 1p each on issue at start of the period (2021: 117,473,341 ordinary shares)
1,803
1,803
117,473,341 ordinary shares of 1p each on issue at end of period (2021: 117,473,341 ordinary shares of 1p)
1,803
1,803
Total Allotted, called-up and fully paid at the end of the period
1,803
1,803
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.
The Company has raised £8.5m ($11.2m at year end rate) through the issue of loan notes. The loan notes' maturity was extended to 14
August 2023 in July 2021 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 to 14 August 2023 to subscribe for 43.95m ordinary shares of 1p each in the Company at
a price of 20p per Ordinary Share. 43.95m warrants remained outstanding at the year-end. The loan notes were repaid on 11 April 2022
following the receipt of the proceeds for the Machine Tool Division sale.
23. RECONCILIATION OF NET CASH FLOW TO NET DEBT
2022
2021
$000
$000
(Decrease)/increase in cash and cash equivalents
(3,887)
1,849
Decrease in debt and lease liabilities
734
6,820
(Increase)/decrease in net debt from cash flows
(3,153)
8,669
Net debt at beginning of period
(21,991)
(24,142)
Government assistance loans USA
-
(2,234)
Government assistance loans UK
-
(1,656)
Loan note amortisation
(530)
(675)
Lease liabilities increase
(118)
(502)
Shareholder loan adjustment
511
-
Exchange effects on net funds
419
(1,451)
Net debt at end of period
(24,862)
(21,991)
Notes relating to the consolidated financial statements
59
24. ANALYSIS OF NET DEBT
Group
Total
Transfer to
held for sale
Continuing
activities
At
31 March 2021
Exchange
movement
Transfer
Other
Cash flows
At
31 March 2022
At
31 March 2022
$000
$000
$000
$000
$000
$000
$000
$000
Cash at bank and in hand
4,287
175
-
-
(3,302)
1,160
(1,084)
76
Term Deposits
710
6
-
-
(585)
131
-
131
4,997
181
-
-
(3,887)
1,291
(1,084)
207
Debt due within one year
(977)
-
-
-
(4,089)
(5,066)
196
(4,870)
Debt due after one year
(1,590)
(1)
-
-
664
(927)
6
(921)
Loan notes due within one year
(11,225)
526
10,718
(19)
-
-
-
-
Loan notes due after one year
-
-
(10,718)
-
-
(10,718)
-
(10,718)
Government Assistance loans
(3,890)
(78)
-
2,388
-
(1,580)
1,580
-
Lease liabilities
(9,306)
(209)
-
(118)
1,771
(7,862)
6,294
(1,568)
Total
(21,991)
419
-
2,251
(5,541)
(24,862)
6,992
(17,870)
25. FINANCIAL INSTRUMENTS
Overview
The Group has exposure to the following risks from its use of financial instruments:
•
credit risk;
•
liquidity risk; and
•
market risk.
This note presents information about the Group’s exposure to each of the above risks, the Group’s objectives, policies and processes
for measuring and managing exposure to these.
The Board of Directors has overall responsibility for the establishment and oversight of the Group’s risk management framework. The
Board is responsible for developing and monitoring the Group’s risk management policies.
The Group’s risk management policies are established to identify and analyse the risks faced by the Group, to set appropriate risk limits
and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect
changes in market conditions and the Group’s activities. The Group, through its training and management standards and procedures,
aims to develop a disciplined and constructive control environment in which all employees understand their roles and obligations.
The Group has identified the gross domestic product (GDP), purchasing managers index and inflation rate as the key macroeconomic
factors in the countries where the Group operates.
The Directors determine the appropriate capital structure of the Group between funds raised from equity shareholders (equity), through
the issue of shares and retention of profits generated, and funds borrowed from financial institutions, other businesses, individuals and
preference shareholders (debt) in order to finance the Group’s activities both now and in the future. The Board’s objectives when
managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide returns to Shareholders and
benefits to other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. In order to maintain or adjust the
capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares
or sell assets to reduce debt.
The Audit Committee oversees how management monitors compliance with the Group’s risk management policies and procedures and
reviews the adequacy of the risk management framework in relation to the risks faced by the Group. The Audit Committee is assisted in
its oversight role by head office staff undertaking both regular and ad hoc reviews of risk management controls and procedures, the
results of which are reported to the Audit Committee.
Notes relating to the consolidated financial statements
60
25. 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 is 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:
2022
2021
$000
$000
UK
8
1,241
North America
3,416
3,748
Australasia
-
160
3,424
5,149
Notes relating to the consolidated financial statements
61
25. FINANCIAL INSTRUMENTS (CONTINUED)
LIQUIDITY RISK
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group’s approach to managing
liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and
stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation.
Due to banking facilities being held with different banks in USA and Australia certain restrictions on the repatriation of funds to the UK
may be imposed by the local bank.
Typically, the Group ensures that it has sufficient cash or 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:
2022
Carrying
Contractual
Less than
Amount
cash flows
1 year
1–2 years
2–5 years
$000
$000
$000
$000
$000
Bank Loan
1,594
1,594
673
921
-
Bank Trade facilities
4,198
4,198
4,198
-
-
8% loan notes
10,718
11,180
-
11,180
-
Lease Liabilities
1,567
1,672
486
486
700
Interest bearing financials liabilities
18,077
18,644
5,357
12,587
700
Trade and other payables
6,227
6,227
6,227
-
-
Financial liabilities
24,304
24,871
11,584
12,587
700
2021
Carrying
Contractual
Less than
Amount
cash flows
1 year
1–2 years
2–5 years
$000
$000
$000
$000
$000
Bank loan
2,381
2,381
164
2,217
-
Bank trade facilities
186
186
186
-
-
8% loan notes
11,225
11,729
11,729
-
-
Government assistance loans
3,890
3,890
2,234
-
1,656
Lease Liabilities
9,306
11,089
1,505
1,462
8,122
Interest bearing financial liabilities
26,988
29,275
15,818
3,679
9,778
Trade and other payables
7,819
7,819
7,819
-
-
Financial liabilities
34,807
37,094
23,637
3,679
9,778
MARKET RISK
Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect the Group’s
income. The objective of market risk management is to manage and control market risk exposures within acceptable parameters,
while optimising the return on risk.
Notes relating to the consolidated financial statements
62
25. FINANCIAL INSTRUMENTS (CONTINUED)
CURRENCY RISK
The Group is exposed to currency risk on sales, purchases and borrowings that are denominated in a currency other than the functional
currency of the operating entity, primarily Sterling, the Euro (€) and US Dollars ($).
The Group’s exposure to foreign currency risk may be summarised as follows:
2022
2021
Sterling
US Dollars
Euro
Sterling
US Dollars
Euro
£000
$000
€000
£000
$000
€000
Trade receivables
-
-
-
-
40
116
Trade payables
-
-
-
(20)
(27)
(149)
Balance sheet exposure
-
-
-
(20)
13
(33)
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 (2021: none). Exposures arising from the translation of intra-group lending are managed through the use of
borrowings in the relevant foreign currency.
In considering the impact on the retranslation of non-functional currency monetary assets and liabilities in the Group's operations arising
from a, reasonably possible, 10% movement in the Group’s principal foreign currency exchange rates at the year-end date, the directors
have assessed the effect on the profit before tax to be insignificant to the group. As a result, no further disclosure of the sensitivity to
potential exchange rate variances of the above monetary assets and liabilities is given.
INTEREST RATE RISK
The Group holds a mixture of both fixed and floating interest borrowings to control its exposure to interest rate risk although it has no
formal target for a ratio of fixed to floating funding. The level of debt is continually reviewed by the Board. The sensitivity analysis is set
out below:
Change if
Net cash/
interest rates
borrowings
in foreign
in foreign
Currency
currency
change by 1%
$’000
$’000
US Dollar
(5,762)
57.6
GB Pound
(10,540)
105.4
AUS Dollar
-
-
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 31 March 2022, 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 $0.022m (2021: charge of $0.02m). A reduction of 100 basis points would have the equal and opposite
effect. There is no further impact on shareholders' equity.
Notes relating to the consolidated financial statements
63
25. FINANCIAL INSTRUMENTS (CONTINUED)
HEDGING OF FLUCTUATIONS IN FOREIGN CURRENCY
The Group is exposed to foreign currency risk on sales, purchases and borrowings of balances held and transactions in non-functional
currency of the operating entity.
Forward exchange contracts are occasionally used to hedge commercial foreign currency risk and generally have maturities of less than
one year. There were no contracts outstanding at the period end (2021 – none).
In respect of other monetary assets and liabilities held in currencies other than functional currency of the entity, the Group ensures that
the net exposure is kept to an acceptable level by buying or selling foreign currencies at spot rates where necessary to address short-
term imbalances.
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 foreign
exchange. These instruments are recognised at fair value. Any gain or loss is immediately recognised in the income statement.
The fair value of forward exchange contracts used at 31 March 2022 was a liability of $nil (2021: 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 31 March 2022 and 31 March 2021 was:
2022
2021
Financial
Financial
assets
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
Total
assets
assets
is earned
Total
Currency
$000
$000
$000
$000
$000
$000
$000
$000
Sterling
46
132
194
372
3,481
138
1,114
4,733
US Dollars
30
-
5,744
5,774
17
-
5,463
5,480
Australian Dollars
-
-
-
-
789
572
211
1,572
Euros
-
-
-
-
-
-
170
170
76
132
5,938
6,146
4,287
710
6,958
11,955
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.
Notes relating to the consolidated financial statements
64
25. 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 31 March 2022 and 31 March 2021 was:
2022
2021
Financial
Financial
liabilities
liabilities
Floating rate
Fixed rate
on which
Floating rate
Fixed rate
on which
financial
Financial
no interest
financial
financial
no interest
liabilities
Liabilities
is paid
Total
liabilities
liabilities
is paid
Total
Currency
$000
$000
$000
$000
$000
$000
$000
$000
Sterling
-
10,718
522
11,240
-
17,317
2,681
19,998
US Dollars
4,198
3,161
5,705
13,064
186
9,382
4,804
14,372
Australian Dollars
-
-
-
-
-
103
159
262
Euro
-
-
-
-
-
-
175
175
4,198
13,879
6,227
24,304
186
26,802
7,819
34,807
The floating rate financial liabilities comprise bank borrowings, trade finance and overdrafts that bear interest rates based on local
currency base interest rates. The fixed rate financial liabilities comprise of loan notes at 8%, lease liabilities and government assistance
loans that bear interest rates based on local currency base rates.
BORROWING FACILITIES
At 31 March 2022 and 31 March 2021, the Group had undrawn committed borrowing facilities as follows:
2022
2021
‘000
‘000
UK
£2,848
£2,848
US
$5,802
$7,314
Australia
-
AUD$500
FAIR VALUES OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES
2022
2021
$000
$000
Trade and other receivables
5,939
8,570
Cash and cash equivalents
207
4,997
Bank loan
(5,792)
(2,567)
Government assistance loans
-
(3,890)
Loans notes
(11,180)
(11,729)
Lease obligations
(1,672)
(11,089)
Trade and other payables
(6,227)
(8,162)
(18,725)
(23,870)
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 $1.6m for
continuing operations (2021: $11.543m) and the Loan Notes which are shown at their gross value of $11.180m (2021: $11.729m). Their
carrying value in the accounts is shown net of discounting and issue costs.
Notes relating to the consolidated financial statements
65
26. CONTINGENT LIABILITIES
2022
2021
$000
$000
Third-party guarantees
197
183
These guarantees and letters of credit are entered into in the normal course of business. A liability would only arise in the event of the
Group failing to fulfil its contractual obligations.
27. 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 28 to 36.
The key judgements and sources of estimation uncertainty are:
FINANCIAL INSTRUMENTS
Note 25 contains information about the assumptions and estimates and the risk factors relating to interest rate and foreign currency
exposures.
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 given recent trading during COVID-19 and the fact that the PPP assistance in the US is not taxable all assets were de-
recognised in the USA last year and the position remains the same in the current year.
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 13.26% 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.
DISCONTINUED OPERATIONS
The Machine Tool Division was determined to be discontinued operations on the signing of the sale agreement on 5 March 2022, with
Timesavers Acquisitions LLC. The contract included a number of conditions which were not fulfilled until the completion date and
collection of funds on 8 and 11 April 2022. The sale of the Division is therefore to be recognized in the year ended 31 March 2023 with
the assets and liabilities of these entities held for sale at 31 March 2022.
Judgements were made, in the current year, in respect of Leases and Discontinued operations.
28. RELATED PARTY TRANSACTIONS
Detailed disclosure of the individual remuneration of Board members is included in note 5. The 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 $88,322 in interest payments during the financial year
(2021: $84,953) in respect of their respective holding of the loan notes. At the year-end Haddeo Partners LLP held £810,000 ($1,104,030)
of loan notes. Further details on the loan notes can be found in note 18.
There have been no other transactions between Key Management Personnel and the Company. None of the directors were due any
monies at the end of the current period or the prior period.
Notes relating to the consolidated financial statements
66
29. 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.
The directors have highlighted transactions which are material or unrelated to the normal trading activity of the Group.
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/(loss)
2022
$000
RESTATED
2021
$000
Operating profit/(loss)
1,217
(1,025)
Adjusting items included in net operating expenses (see note 3)
631
844
Underlying operating profit
1,848
(181)
Underlying profit/(loss) for the period from continuing activities
Profit/(Loss) for the period
1,269
(2,573)
Adjusting items included in cost of sales and net operating expenses (see note 3)
631
844
Discontinued activities
(785) (1,629)
Adjusting items included in Financial expense
(26)
642
Tax on adjusting items
-
(257)
Underlying profit/(loss) for the period on continuing activities
1,089
(2,973)
Underlying EPS
A reconciliation of underlying EPS is included in note 9.
Net debt excluding IFRS 16 leases liabilities
Net debt (see note 24)
(24,862)
(21,991)
Lease Liabilities
7,862
9,306
Net Debt excluding leases
(17,000)
(12,685)
Discontinued activities net debt
698
-
Net debt excluding IFRS 16 lease liabilities- continuing
activities
(16,302)
(12,685)
Notes relating to the consolidated financial statements
67
30. DISCONTINUED OPERATIONS
The Consolidated Income statement reflects the profit after taxation of the Machine Tool Division as “discontinued operations”. The
consolidated Statement of Financial Position reflects the entities to be sold as “Assets held for sale” and “liabilities held for sale”.
Assets and liabilities held for sale detail:
Held for sale as at 31
March 2022
$000
Non-current assets
Property, plant and equipment
1,150
Other intangible assets
27
Right of use assets
6,722
7,899
Current assets
Inventories
13,929
Trade and other receivables
6,025
Deferred tax assets
3,017
Cash and cash equivalents
1,084
24,055
Total assets
31,954
Non-current liabilities
Employee benefits
(837)
Loans and other borrowings
(1,585)
Lease liabilities
(6,294)
(8,716)
Current liabilities
Trade and other payables
(4,845)
Taxation
1
Provisions
(21)
Loans and other borrowings
(196)
(5,061)
Total liabilities
(13,777)
Net assets
18,177
Notes relating to the consolidated financial statements
68
30. DISCONTINUED OPERATIONS (CONTINUED)
Discontinued Operations Income Statement
Before
After
Before
After
Adjusting
Adjusting
Adjusting
Adjusting
Adjusting
Adjusting
Items
Items
Items
Items
Items
Items
year
year
year
year
year
year
ended
ended
Ended
ended
ended
ended
31 March
31 March
31 March
31 March
31 March
31 March
2022
2022
2022
2021
2021
2021
$000
$000
$000
$000
$000
$000
Discontinued operations
Revenue
37,024
-
37,024
32,219
- 32,219
Cost of sales
(26,677)
-
(26,677)
(22,436)
-
(22,436)
Gross profit
10,347
-
10,347
9,783
-
9,783
Net operating expenses
(8,439)
(242)
(8,681)
(6,982)
452
(6,530)
Operating profit/(loss)
1,908
(242)
1,666
2,801
452
3,253
Financial expense
(316)
-
(316)
(344)
-
(344)
Profit before tax
1,592
(242)
1,350
2,457
452
2,909
Income tax (charge)
(565)
-
(565)
(1,280)
-
(1,280)
Profit/(loss) for the period on discontinued
activities
1,027
(242)
785
1,177
452
1,629
Basic earnings per share - discontinued activities
0.87c
0.67c
1.00c
1.39c
Diluted earnings per share - discontinued activities
0.86c
0.65c
0.98c
1.36c
Total comprehensive (expense)/ income for the period
Attributable to discontinued activities (487)
3,533
Cashflows of discontinued operations
Net cashflows from operations 116
Cashflows from investing activities (610)
Cashflows from financing activities (2,411)
31. POST BALANCE SHEET EVENTS
On 5 March 2022, the 600 Group signed a contract with Timesavers Acquisitions LLC to sell its Machine Tool Division. This sale included
the following legal entities: (a) Colchester GmbH, a private company with limited liability organized under the Legal Requirements of
Federal Republic of Germany, (b) 600 UK Limited (registered number 144979), a private limited company organized under the Legal
Requirements of England and Wales, (c) 600 Machine Tools Pty Ltd. (ACN 000161106), a proprietary company organized under the Legal
Requirements of Australia, and (d) Clausing Industrial, Inc., a Delaware corporation. The price agreed for the transaction was $21m. While
the contract was signed in early March 2022, the completion date and collection of funds happened on 8 and 11 April 2022. The agreement
included two escrow accounts: a Net Working Capital (NWC) escrow with the amount of $0.25m and a Retention escrow with the amount
of $0.15m. We are currently in negotiations to finalize the final working capital.
With the contract signed before 31 March 2022 and the deal closing after this date, the accounts reflect the profitability of the Machine Tool
Division as “discontinued operations”. The 600 Group consolidated balance sheet reflects the entities to be sold as “Assets held for sale”
and “liabilities held for sale”. The sale of this division will be recognized in FY23 accounts for the price agreed plus the cash collected, plus
NWC amount, once agreed, minus all the expenses and write offs related with the sold entities.
There was no adjustment for impairment to the value of the assets transferred to held for sale in the year ended 31 March 2022.
As mentioned previously in this report, with the proceeds of the sale, all debt of the 600 Group was repaid on 11 April 2022. After paying
the loan notes, the HSBC loans in the UK and all remaining loans with Bank of America in the US, we are now left with a revolving credit
line of $7.5m with Bank of America.
Company statement of financial position
As at 31 March 2022
69
As at
As at
31 March
31 March
2022
2021
Notes
$000
$000
Non-current assets
Fixed assets
-
1
Intangible assets
3
683
661
Investments
4
13,963
11,895
14,646
12,557
Current assets
Trade and other receivables
5
25,346
48,570
Cash and cash equivalents
35
78
25,381
48,648
Total assets
40,027
61,205
Current liabilities
Trade and other payables
6
(376)
(15,861)
Provisions
(58)
(434)
(15,861)
Non-current liabilities
Trade and other payables
6
(14,799)
(98)
Provisions
(24)
(14,823)
(98)
Total liabilities
(15,257)
(15,959)
Net assets
24,770
45,246
Shareholders’ equity
Called-up share capital
7
1,803
1,803
Share premium account
3,828
3,828
Equity reserve
201
201
Profit and loss account
18,938
39,414
24,770
45,246
Included in the profit and loss account is a loss for the year of $20.2m (prior year loss $1.0m). The accompanying accounting policies
and notes on pages 71 to 76 form part of these Financial Statements.
The financial statements on pages 71 to 76 were approved by the Board of Directors on 30 September 2022 and were signed on its
behalf by:
RUI LOPES
Chief Financial Officer
30 SEPTEMBER 2022
REGISTERED OFFICE
42 Berkeley Square, London
W1J 5AW, United Kingdom
Company statement of changes in equity
Company Number 00196730
As at 31 March 2022
70
Ordinary
Share
share
premium
Equity
Retained
capital
account
reserve
Earnings
Total
$000
$000
$000
$000
$000
At 28 March 2020
1,803
3,828
201
37,553
43,385
Loss for the period
-
-
-
(971)
(971)
Foreign currency translation
-
-
-
2,812
2,812
Total comprehensive income
-
-
-
1,841
1,841
Credit for share-based payments
-
-
-
20
20
Total transactions with owners
-
-
-
20
20
At 31 March 2021
1,803
3,828
201
39,414
45,246
Loss for the period
(20,180)
(20,180)
Foreign currency translation
-
-
-
(349)
(349)
Total comprehensive income
-
-
-
(20,529)
(20,529)
Credit for share-based payments
-
-
-
53
53
Total transactions with owners
-
-
-
53
53
At 31 March 2022
1,803
3,828
201
18,938
24,770
The accompanying accounting policies and notes on pages 71 to 76 form part of these Financial Statements.
Company accounting policies
71
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 Company’s accounting reference date of 31 March. The results for 2022 are for the period ended 31 March 2022 and the results
for 2021 are for the period ended 31 March 2021, 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;
•
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%
TAXATION
Tax on the profit or loss for the year comprises current and deferred tax. Tax is recognised in the profit and loss account except to the extent
that it relates to items recognised directly in equity or other comprehensive income, in which case it is recognised directly in equity or other
comprehensive income.
Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively
enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years.
Deferred tax is provided on temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and
the amounts used for taxation purposes. The following temporary differences are not provided for: the initial recognition of goodwill; the initial
recognition of assets or liabilities that affect neither accounting nor taxable profit other than in a business combination, and differences relating
to investments in subsidiaries to the extent that they will probably not reverse in the foreseeable future. The amount of deferred tax provided
is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or
substantively enacted at the balance sheet date.
A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the temporary
difference can be utilised.
CURRENCY TRANSLATION
Transactions are translated into US Dollars at the rates of exchange ruling on the date of the transaction. Monetary assets and liabilities
are translated into US Dollars at the year-end rates.
Company accounting policies (continued)
72
INVESTMENTS
Investments in respect of subsidiaries are stated at cost less provisions for impairment in value.
DIVIDENDS
Equity dividends are recognised as a liability in the period in which they are declared (appropriately authorised and no longer at the
discretion of the Company).
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 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 31 March 2022 no provision for expected credit loss was recognised having made this assessment.
Notes relating to the company financial statements
73
1. PERSONNEL EXPENSES
2022
2021
$000
$000
Staff costs:
– wages and salaries
509
394
– social security costs
40
45
– pension charges
12
20
– equity share options expense
-
20
561
479
The average number of employees of the Company (including Executive Directors) during the period was as follows:
2022
2021
Number
Number
Head office function
5
6
These staff costs related entirely to the Directors and head office staff who are all classified as administration and management.
Details of Directors’ emoluments, share option schemes and pension entitlements are given in the Personnel expenses note 5 on page
43.
2. DIVIDENDS
No dividends have been proposed this year or last year.
3. INTANGIBLE ASSETS
IT
Software
Total
$000
$000
Cost
At 31 March 2021
661
661
Additions
53
53
Foreign exchange
(31)
(31)
At 31 March 2022
683
683
Net book value
At 31 March 2022
683
683
At 31 March 2021
661
661
Intangible assets relates to a new ERP system which was not implemented due to Machine Tool Division sale and written off in the
following year.
Notes relating to the company financial statements (continued)
74
4. INVESTMENTS
Shares
In Group
Undertakings
$000
Cost:
At 31 March 2021
52,761
Additions in the period
3,224
Exchange variance
(3,233)
At 31 March 2022
52,752
Provisions
At 31 March 2021
40,866
Exchange variance
(2,077)
At 31 March 2021
38,789
Net book values
At 31 March 2022
13,963
At 31 March 2021
11,895
In the current year there was a transfer of Electrox shares from 600 UK to PLC at book cost.
Shares
In Group
Undertakings
$000
Cost:
At 28 March 2020
47,169
Additions in the period
33
Exchange variance
5,559
At 31 March 2021
52,761
Provisions
At 28 March 2020
36,558
Exchange variance
4,308
At 31 March 2021
40,866
Net book values
At 31 March 2021
11,895
At 28 March 2020
10,611
The subsidiaries undertakings of The 600 Group PLC and their countries of incorporation are listed on Group note 13 Investments.
Notes relating to the company financial statements (continued)
75
5. TRADE AND OTHER RECEIVABLES
2022
2021
$000
$000
Amounts owed by subsidiary undertakings1
24,999
48,243
Deferred tax
294
277
Other debtors
54
50
25,347
48,570
1 All inter-company loans are repayable on demand and as such are recorded at their face value.
6. TRADE AND OTHER PAYABLES
2022
2021
$000
$000
Current liabilities:
Trade payables
(349)
(122)
Amounts owed to subsidiary undertakings1
(27)
(4,150)
8% loan notes
-
(11,225)
Accruals and deferred income
-
(315)
Unavoidable lease costs
(58)
(49)
(434)
(15,861)
2022
2021
$000
$000
Non-current liabilities:
8% loan notes
(10,717)
-
Amounts owed to subsidiary undertakings
(4,082)
-
Unavoidable lease costs
(24)
(14,823)
(98)
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 $10.7m (£8.1m) accounting 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 current borrowings. Costs are
amortised to the income statement over the term of the loan. The loan notes and the warrants’ expiration date were extended in July
2021 to 14 August 2023. 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. The loan notes
were repaid in full on 11 April 2022 following receipt of the proceeds from the sale of the Machine Tool Division.
Unavoidable lease costs
The old Heckmondwike premises lease was reassigned to a third party, therefore releasing the group of the lease liability. In the prior
year provisions had been created to cover the unavoidable costs associated with the lease, however as a result of the reassignment of
the lease these provisions were reduced. The remaining provision shown in the unavoidable lease costs relates to compensating
payments due to the landlord in excess of the reassigned lease that is set to expire at the end of September 2023.
Notes relating to the company financial statements (continued)
76
7. SHARE CAPITAL
2022
2021
$000
$000
Allotted, called-up and fully paid:
Ordinary shares of 1p each
117,473,341 ordinary shares of 1p each on issue at start of the period (2021: 117,473,341 ordinary shares)
1,803
1,803
117,473,341 ordinary shares of 1p each on issue at end of period (2021: 117,473,341 ordinary shares of 1p)
1,803
1,803
Total Allotted, called-up and fully paid at the end of period
1,803
1,803
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.
The Company has raised £8.5m ($10.7m at year end rate) through the issue of loan notes. The loan notes' maturity was extended to14
August 2023 in July 2021 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 to 14 August 2023 to subscribe for 43.95m ordinary shares of 1p each in the Company at
a price of 20p per Ordinary Share. 43.95m warrants remained outstanding at the year-end. The loan notes were repaid on 11 April 2022
following the receipt of the proceeds for the Machine Tool Division sale.
8. CONTINGENT LIABILITIES
2022
2021
$000
$000
Bank guarantees in respect of Group undertakings
197
204
9. PENSION
The Company makes contributions to defined contribution schemes for certain employees. The pension contribution charge for the
Company amounted to $12k (2021: $20k).
10. RELATED PARTY TRANSACTIONS
Detailed disclosure of the individual remuneration of Board members is included in the Remuneration report. The Executive Board
members are regarded as the Key Management Personnel of both the Company and the Group.
Mr P Dupee is the managing partner of Haddeo Partners LLP which has received $84,953 in interest payments during the financial year
(2021: $82,361) in respect of holding of the loan notes. At the year-end Haddeo Partners LLP held £810,000 ($1,117,664) of loan notes.
Further details on the loan notes can be found in note 18.
There have been no other transactions between Key Management Personnel and the Company. None of the directors were due any
monies at the end of the current period or the prior period.
Company Information
77
SECRETARY
Neil Carrick
REGISTERED OFFICE
42 Berkeley Square
London
W1J 5AW
REGISTERED NUMBER
00196730
REGISTRAR
Link Group
10th Floor
Central Square
29 Wellington Street
Leeds
LS1 4DL
AUDITOR
BDO LLP
BANKERS
Bank of America
HSBC Bank plc
Broker and Nominated Advisor
Cenkos Securities plc
UK Headquarters
600 Group PLC
42 Berkeley Square
London, W1J 5AW
US Headquarters
200 S. Orange Ave, #2170
Orlando, Florida 32081
USA
Contact Information
w / www.600group.com
p / +1 407.818.1123
e / info@600groupinc.com
Company Number 00196730