5
1
0
2
L
T
A
U
N
N
A
R
O
P
E
R
A N I N T R O D U C T I O N T O A V O N R U B B E R p . l . c .
The Group has transformed itself over recent years into an innovative design and engineering group specialising in two core markets,
Protection & Defence and Dairy. With a strong emphasis on research and development we design, test and manufacture specialist
products from a number of sites in the US and Europe, serving markets around the world. We achieve this through nurturing the talent
and aspirations of our employees to realise their highest potential.
Avon Protection Systems is the recognised global market leader in advanced Chemical, Biological, Radiological and Nuclear (CBRN)
respiratory protection systems for the world’s military, homeland security, first responder, fire and industrial markets.
With an unrivalled pedigree in mask design dating back to the 1920s, Avon Protection’s advanced products are the first choice for
Personal Protective Equipment (PPE) users worldwide and are placed at the heart of many international defence and tactical PPE
deployment strategies. Our expanding global customer base now includes military forces, civil and first line defence troops, emergency
service teams and industrial, marine, mineral and oil extraction site personnel. All put their trust in Avon’s advanced respiratory solutions
to shield them from every possible threat whether land, air or sea based.
Our world-leading Dairy supplies business and its Milkrite and InterPuls brands have a global market presence. With a long history of
manufacturing liners and tubing for the dairy industry, we have become the leading innovator and designer for products and services
right at the heart of milking. The acquisition of InterPuls in 2015, a milking components specialist in electro-mechanical components,
such as pulsators, milk meters, automatic cluster removers, milking clusters, washing systems, vacuum pumps, bucket milkers and
pipeline system components has added significantly to our product range, making us the complete milking point solution provider.
Working with leading scientists and health specialists in the global dairy industry we continue to invest in technology to further improve
the milking process and animal welfare. Our products provide exceptional results for both the animal and the milker, making the milk
extraction process more efficient. As our market share and milking experience continue to improve, so does our global presence.
O V E R V I E W O F
T H E Y E A R
H O W W E R U N
O U R B U S I N E S S
C O N T E N T S
IFC
01 - 07
08 - 10
Integrating technology
Who we are, where we are and what we do
Chairman's Statement
11 - 33
34 - 42
Strategic Report
Environmental and Corporate
Social Responsibility
43
44 - 47
48 - 52
Board of Directors
Directors' Report
Corporate Governance
53
54 - 55
56 - 77
Nominations Committee Report
Audit Committee Report
Remuneration Report
H O W W E
P E R F O R M E D
119 - 126
Independent Auditors' Reports
127 - 136 Parent Company Financial Statements
78 - 118
Financial results
137
Five year record
138 - 146 Notice of Annual General Meeting
IBC
Shareholder information
S H A R E H O L D E R
I N F O R M AT I O N
IFC
I N T E G R A T I N G T E C H N O L O G Y A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 5
G R O U P
Revenue
£134.3m £9.5m
Operating Profit*
£20.2m £3.2m
G R O U P
Diluted earnings per share (EPS)*
12.3p
54.6p
Operating Profit* (£m)
£20.2m
EPS (pence)*
£17.0m
£14.2m
£11.1m
£11.6m
£9.3m
£5.5m
54.6p
42.3p
34.0p
25.4p
23.3p
14.4p
09
10
11
12
13
14
15
8.0p
09
10
11
12
13
14
15
P R O T E C T I O N & D E F E N C E
D A I R Y
Revenue
£98.8m £6.0m
Operating Profit*
£15.9m £2.3m
Revenue
£35.5m £3.5m
Operating Profit*
£6.4m
£0.7m
Operating Profit* (£m)
Operating Profit* (£m)
£15.9m
£13.6m
£11.0m
£7.5m
£7.5m
£6.5m
£4.5m
£5.5m
£6.0m
£5.2m
£5.7m
£6.4m
£4.6m
£3.0m
09
10
11
12
13
14
15
09
10
11
12
13
14
15
* All profit and earnings per share figures above relate to adjusted
business performance as defined on page 19.
R
A
E
Y
E
H
T
F
O
W
E
I
V
R
E
V
O
S
S
E
N
I
S
U
B
R
U
O
N
U
R
E
W
W
O
H
D
E
M
R
O
F
R
E
P
E
W
W
O
H
N
O
I
T
A
M
R
O
F
N
I
R
E
D
L
O
H
E
R
A
H
S
A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 5 I N T E G R A T I N G T E C H N O L O G Y
1
A V O N
F I LT E R S R A N G E
P I O N E E R I N G C O N F O R M A L
F I L T E R T E C H N O L O G Y F O R F U L L
R A N G E O F T H R E A T S C E N A R I O S
C S P A P R
F I R S T S O L U T I O N T O A L L O W
S W I T C H I N G B E T W E E N
F I L T E R E D , P O W E R E D A N D
S U P P L I E D A I R
O R G A N I C P R O D U C T
D E V E L O P M E N T
The core technology underpinning our
product range is our world-leading military
and first responder 50 series respirator.
Over the last three years our internal
product development programme has
delivered a suite of modular interoperable
respiratory protection solutions
to meet the needs of all users
in all environments.
D E LTA I R
A W A R D - W I N N I N G
F I R E F I G H T E R
N F P A - A P P R O V E D S C B A
M 5 0 / C 5 0
N H 15 C O H O O D
C O M P A C T C B R N
E S C A P E H O O D W I T H
C O P R O T E C T I O N
N O W I N C O R P O R A T E D
02
C O N S U LTA N C Y
A N D T R A I N I N G
I N T E G R A T E D E N D - T O - E N D C B R N
P R O T E C T I O N C A P A B I L I T Y I N C L U D I N G
C O N S U L T A N C Y , T R A I N I N G A N D
T H R O U G H - L I F E S U P P O R T
INTEGRATING OUR RESPIRATORY
PROTECTION TECHNOLOGY
M C M 1 0 0
N E X T G E N E R A T I O N
M U L T I - C A P A B I L I T Y
U N D E R W A T E R R E B R E A T H E R
A C Q U I S I T I O N S
To complement our internal
development we have acquired a
number of technologies that have
allowed us to both expand our
current product range and build our
capability to be at the forefront of
future development.
A R G U S T I C
M A R K E T L E A D I N G
T H E R M A L I M A G I N G C A M E R A S
F O R F I R E A N D F I R S T
R E S P O N D E R M A R K E T S
M O S T A D V A N C E D
R E S P I R A T O R I N
T H E W O R L D
H U D S TA R P C B ' S
E L E C T R O N I C C O N T R O L
S Y S T E M S F O R P O W E R E D
A N D S U P P L I E D A I R
03
R
A
E
Y
E
H
T
F
O
W
E
I
V
R
E
V
O
S
S
E
N
I
S
U
B
R
U
O
N
U
R
E
W
W
O
H
D
E
M
R
O
F
R
E
P
E
W
W
O
H
N
O
I
T
A
M
R
O
F
N
I
R
E
D
L
O
H
E
R
A
H
S
I M P U L S E
S H E L L S
S P E C I F I C A L LY D E S I G N E D
F O R O P T I M U M
E F F I C I E N C Y W I T H O U R
T R I A N G U L A R L I N E R S
C L U S T E R
E X C H A N G E
P O S I T I O N S M I L K R I T E A S
T H E C O M P L E T E S O L U T I O N
P R O V I D E R , M A N A G I N G
T H E L I N E R C H A N G E C Y C L E
O R G A N I C P R O D U C T
D E V E L O P M E N T
We have evolved from being an OEM
liner and tubing manufacturer to
the leading innovator in all aspects
of the cluster where our Milkrite brand
is now the market leader.
I M P U L S E A I R
I N N O V A T I V E T R I A N G U L A R
M I L K I N G T E C H N O L O G Y
P R O V I D I N G S I G N I F I C A N T
Y I E L D A N D A N I M A L
H E A L T H I M P R O V E M E N T S
I M P U L S E
3 0 0 C L A W
L I G H T W E I G H T A N D
E R G O N O M I C C L A W
D E S I G N E D T O W O R K W I T H
O U R I M P U L S E R A N G E
4
L I N E R S & T U B I N G
P R I M A R Y T E C H N I C A L S O L U T I O N P R O V I D E R
I N T H E M I L K E X T R A C T I O N P R O C E S S
I TA L I A P O R TA B L E
M I L K I N G M A C H I N E
I D E A L F O R S M A L L H E R D S
I N E M E R G I N G M A R K E T S
INTEGRATING OUR
MILKING TECHNOLOGY
i M I L K 6 0 0
M I L K M E T E R
A D V A N C E D E L E C T R O N I C S
A N D S E N S O R S P L A C E T H I S
A T T H E C U T T I N G E D G E
O F M I L K A N A LY S I S
A C Q U I S I T I O N S
The acquisition of InterPuls positions
us as the leading provider of milking
point technology. InterPuls adds a
unique product portfolio of high
technology milking components,
telemetry and software.
P U L S AT O R
S T A T E O F T H E A R T
E L E C T R O N I C P U L S A T O R S
D E S I G N E D T O F A C I L I T A T E
G E N T L E , C O M P L E T E
A N D U N I F O R M M I L K I N G
L I N E R S & T U B I N G
P R I M A R Y T E C H N I C A L S O L U T I O N P R O V I D E R
I N T H E M I L K E X T R A C T I O N P R O C E S S
H E R D
M A N A G E M E N T
R E M O T E C O L L E C T I O N O F A
R A N G E O F D A T A F O R O P T I M A L
H E R D M A N A G E M E N T
5
R
A
E
Y
E
H
T
F
O
W
E
I
V
R
E
V
O
S
S
E
N
I
S
U
B
R
U
O
N
U
R
E
W
W
O
H
D
E
M
R
O
F
R
E
P
E
W
W
O
H
N
O
I
T
A
M
R
O
F
N
I
R
E
D
L
O
H
E
R
A
H
S
G L O B A L P R E S E N C E
Avon Rubber p.l.c.
Corporate Headquarters
Melksham, UK
Avon Protection
Melksham, UK
Avon Dairy Solutions
Melksham, UK
ARTIS
Melksham, UK
Avon Protection
Cadillac, MI
9
2
8
4
3
7
7
8
9
Avon Electronics Centre
West Palm Beach, FL
Avon Dairy Solutions
Johnson Creek, WI
Milkrite
Modesto, CA
Avon Protection
Baltimore, MD
10
Milkrite
Rudnik, Czech Republic
Avon Protection - AEF
Picayune, MS
Avon Protection
Kuala Lumpur, Malaysia
Avon Protection
Brussels, Belgium
11
12
13
Milkrite InterPuls
Albinea, Italy
Milkrite
Shanghai, China
Milkrite
Castro, Brazil
1
1
1
1
2
3
4
5
6
13
6
I N T E G R A T I N G T E C H N O L O G Y A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 5
1
1
1
1
6
10
11
12
5
Agents and Distributors
Distribution countries
A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 5 I N T E G R A T I N G T E C H N O L O G Y
7
R
A
E
Y
E
H
T
F
O
W
E
I
V
R
E
V
O
S
S
E
N
I
S
U
B
R
U
O
N
U
R
E
W
W
O
H
D
E
M
R
O
F
R
E
P
E
W
W
O
H
N
O
I
T
A
M
R
O
F
N
I
R
E
D
L
O
H
E
R
A
H
S
2291,180
C H A I R M A N ' S S TAT E M E N T
“Our strategy has delivered strong organic growth
in 2015. The completion of strategic acquisitions
combined with internal product development
will allow us to integrate technologies,
providing increased future opportunities."
David Evans, Chairman, Avon Rubber p.l.c.
Introduction
I am pleased to report that in 2015, Avon’s business strategy has
delivered strong growth for the third year in succession with operating
profit increasing by 19% on the previous year and diluted earnings per
share increasing by 29%.
We have further strengthened our business, both organically and
through two strategic acquisitions completed towards the end of
the year. We continue to maintain our focus on creating a robust and
sustainable business and, by investing in and integrating technology
in both divisions, we are creating exciting future international
growth opportunities.
Continuing sound operational management has both improved our
margins and delivered strong operating cash flows, enabling us to fund
the recent acquisitions whilst retaining a robust balance sheet.
Revenue of £134.3m (2014: £124.8m) increased by £9.5m or 8%.
Operating margins have increased by 1.5% to 15.1% with an operating
profit of £20.2m (2014: £17.0m). Diluted earnings per share rose to 54.6p
(2014: 42.3p).
In Protection & Defence we are growing internationally in all our
market sectors and now have a range of products for military and first
responders wherever their threat may be, across land, air or sea.
In Dairy we are increasing our own brand Milkrite’s market share,
expanding our product and service offerings both organically and
through the acquisition of InterPuls and we further enhanced our
distribution in emerging markets with the opening during the year
of a sales and distribution operation in Brazil. We are now positioned
as the complete milking point solution provider.
£21m
INVESTMENT IN
ACQUISITIONS
Acquisitions
We made a significant strategic acquisition in InterPuls,
which was completed in August 2015 for a total
consideration of €29.75m, including the assumption
of InterPuls's net debt of €4.0m. This acquisition
combined with our existing activities makes our
Dairy business a leading international provider of
milking point technology, providing complete teat
to pipeline solutions for the dairy sector.
29%
INCREASE IN DILUTED EPS
InterPuls meets our criteria for adding high technology products
that can be sold under the Milkrite-InterPuls brand. This provides
the farmer with a range of high margin technical solutions including
pulsators, milk meters, automatic cluster removers and vacuum
pumps, enabling customers throughout the world to configure
state of the art milking systems. In addition to traditional milking
components, InterPuls is expanding into high technology sensors and
devices to monitor the life cycle of a cow, analysing milk production,
reproduction and health data to provide critical management
information to increase the operational efficiency of the farm.
The combination of the largely non-overlapping sales forces of
InterPuls with Milkrite should drive higher sales growth than either
company could have achieved alone by extending international
reach and cross fertilising the product ranges.
In combination, the larger business created will increase the higher
margin market sectors which we have targeted for expansion.
In June 2015 the Group also completed the acquisition of
Hudstar Systems Inc. for $5.1m. Hudstar designs and manufactures
electronics for breathing apparatus for firefighters and this
acquisition both secures the supply chain for some key components
of our Deltair products and provides electronics expertise with
applications across the rest of our product range.
After the year end the Group announced the acquisition of Argus, the
thermal imaging camera business of e2v plc. This further strengthens
our product range in the fire and first responder markets.
Protection & Defence
Protection & Defence revenue increased 7% to £98.8m.
Under our US Department of Defense (DOD) long-term M50 mask
contract we supplied 240,000 mask systems during the financial year,
bringing the total to over 1.4m systems so far under this contract.
Having received orders for 172,000 mask systems during the year,
this left us with an order book of 50,000 systems as we entered our
2016 financial year. Further follow-on DOD M50 orders are expected
in the first half of our next financial year as 2016 DOD budgets are
released.
The filter requirement has less short-term visibility, but we expect
this consumable item to be a good source of repeat revenue in the
8
I N T E G R A T I N G T E C H N O L O G Y A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 5
long term as more masks enter service. As expected, the DOD qualified
a second source to provide filters during 2015 and in the second half
of the year we received our first order under this new arrangement for
124,000 filter pairs.
have softened, with the end of the European quota system and
Russian sanctions increasing these pressures, the consumable nature
of our products means that the impact on our revenues is somewhat
protected.
During the year the Joint Service Aircrew Mask (JSAM) programme
design, development and testing work progressed well. This will
provide respiratory protection to a wide range of operators on the
DOD’s fleet of fixed-wing aircraft. As previously announced, the DOD
has extended its testing phase of this development contract which is
now due to conclude at the end of our 2016 financial year and should
lead to a production contract which could be worth in excess of $70m.
The non-DOD side of the business includes the North American first
responder market and the Rest of World military and law enforcement
market. Both markets are currently being driven by an increasing need
to provide improved protection against growing global CBRN threats
as recently seen in a number of geographies around the world.
In the US, while budgets remain constrained, we offer the respirator
of choice for law enforcement which enables us to displace incumbent
product and grow our market share, in particular as less effective
equipment procured post 9/11 is replaced. In addition, our expanded
product portfolio being delivered under Project Fusion is creating
further opportunities within this sector.
In the competitive fire market, we are increasing our market share with
our new Deltair self-contained breathing apparatus (SCBA)which is one
of only four approved to the new standard. The acquisition of Hudstar,
which designs and manufactures electronics for breathing apparatus
for firefighters, both secures the supply chain for some key Deltair
components and provides electronics expertise with applications
across the rest of our product range.
Whilst the timing of end-user procurement remains difficult to predict
in the Rest of World markets, we are the CBRN respiratory protection
provider of choice and we continue to build business, particularly in
the Middle East. We have also built our position in the previously
identified new market, oil and gas, where our escape products have
been particularly successful. We see opportunities for further
growth in the broader industrial sector with our enhanced and
differentiated technologies.
Our proven ability to convert profit into cash continues to support
investment in new products, laying the foundation for further
growth. Our Project Fusion development programme to expand
and enhance our product range is substantially complete in terms
of engineering with remaining regulatory approvals expected in 2016.
The development of our rebreather for military diving markets is
also well underway.
Dairy
Dairy revenue increased by 11% to £35.5m. Market conditions have
been positive for the majority of the year and in global markets, milk
prices have remained at acceptable levels. Farmer input costs have
also been favourable, leading to less pressure on farmer revenues and
margins and therefore normal levels of demand for our consumable
products. While in the last quarter of 2015 milk prices in some markets
Our existing dairy business has become substantially less dependent on
original equipment manufacturers (OEMs) in recent years as we continue
to grow sales of our own higher margin Milkrite branded products.
Five years ago Milkrite customers represented 53% of our revenue; at the
end of this financial year this had risen to 72%, reflecting the growth of
the higher margin Milkrite brand and some OEM re-sourcing.
In recent years the business has demonstrated through the launch
of our Impulse Air liner that the industry is receptive to new technology
which improves farm efficiency and animal health. This proprietary
product now enjoys a 25% market share in the US and continues to gain
traction in the more fragmented markets in Europe with market share
increasing to 3.5% following its launch in this market late in 2013.
Our Cluster Exchange service was launched in the US and Europe in 2013
and growth rates are now exceeding our earlier expectations. Under this
programme farmers outsource their liner change process to us through
Avon service centres with the support of our dealers and third-party
logistics specialists. By the end of the year it was servicing 430,000 cows
on 1,262 farms in the US and Europe. This added-value service enhances
the value of each direct liner sale we make and should lead to a more
robust and sustainable business model, with the potential to grow a
significant recurring revenue stream in the years to come as more farms
continue to sign up.
Huge potential remains in emerging markets, especially in Brazil,
Russia, India and China where the growing demand for animal protein
in diets and the expanding middle class has led to an increase in
demand for dairy products, driving demand for our consumable
product. We opened a sales and distribution centre in Brazil in the
year to service Brazil and the wider South American market following
the same model as our Chinese operation where we established a
sales and distribution facility during 2012. Sales in China have grown
substantially and our Brazilian operation is progressing to plan.
The acquisition of InterPuls, which is strong in these emerging markets
gives us further opportunity to enhance our Milkrite sales through
InterPuls’s established distribution relationships.
Group results
Group revenue increased 8% to £134.3m (2014: £124.8m) with Protection
& Defence higher by 7% at £98.8m (2014: £92.8m) and Dairy up 11%
to £35.5m (2014: £32.0m). Operating profit before depreciation and
amortisation (EBITDA) rose 19% to £27.3m (2014: £22.9m) and operating
profit rose 19% to £20.2m (2014: £17.0m).
The progressive strengthening of the US dollar during the year gave the
Group a foreign exchange translation tailwind. The US $/£ average rate
was $1.54 (2014: $1.65) and this 11 cent tailwind was equivalent to £7.2m
at a revenue level and £1.0m at an operating profit level.
Operating profit in Protection & Defence rose to £15.9m (2014: £13.6m)
reflecting the revenue growth in DOD and fire markets and at AEF and
improved operational performance. Dairy operating profit grew strongly
R
A
E
Y
E
H
T
F
O
W
E
I
V
R
E
V
O
S
S
E
N
I
S
U
B
R
U
O
N
U
R
E
W
W
O
H
D
E
M
R
O
F
R
E
P
E
W
W
O
H
N
O
I
T
A
M
R
O
F
N
I
R
E
D
L
O
H
E
R
A
H
S
A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 5 I N T E G R A T I N G T E C H N O L O G Y
9
C H A I R M A N ' S S TAT E M E N T
to £6.4m (2014: £5.7m) reflecting the success of our Cluster Exchange
service and the growth of the Milkrite brand in Europe.
Interest costs were £0.2m (2014: £0.3m) and the Group effective tax
rate fell from 21% to 15% due to a more favourable geographic mix of
profits and the recognition of a deferred tax asset in the UK as tax losses
have now been fully utilised and the UK trading company is expected to
be tax paying in the future, to give a post-tax profit for the year of £16.9m
(2014: £13.1m). This equates to earnings per share of 56.1p (2014: 43.7p).
On a fully-diluted basis, earnings per share rose 29% to 54.6p (2014: 42.3p).
We continue to invest in product development which is reflected in
our expanding product range in both sides of the business. Our total
investment in research and development (capitalised and expensed)
amounted to £7.1m (2014: £7.0m) of which £3.8m (2014:£4.5m) was
customer funded.
After completing two acquisitions with a total value of £21.2m, net debt
at year end was £13.2m (2014: net cash of £2.9m), reflecting the strong
operating cash conversion from the business. Committed bank facilities
of £26.4m run to 30 November 2018.
Dividend
Based on the Group’s improved profitability, cash generation and the
confidence the Board has in the Group’s future prospects, the Board
is pleased to propose a 30% increase in the final dividend to 4.86p
per ordinary share (2014: 3.74p). This, combined with the 2015 interim
dividend of 2.43p, results in a full year dividend of 7.29p (2014: 5.61p),
up 30%.
Employees
Our employees have risen to the challenge in supporting the Group’s
progression from a traditional manufacturing business to a customer
and technology driven, sales and marketing led organisation. We are
succeeding in creating a culture of innovation to enable us to take full
advantage of opportunities in developing new technologies and new
markets while maintaining the manufacturing excellence for which the
Group is so highly regarded. Our people have continued to respond
positively as we have moved into the next phase of our growth, acquiring
InterPuls and Hudstar and more recently, Argus and we welcome the
employees in Albinea, West Palm Beach and Chelmsford to the Avon team.
I thank everyone for their valued contribution on behalf of the Board.
Opportunities
Last year I said our strong balance sheet would support complementary
acquisitions which could deliver synergistic benefits. The management
team has successfully identified a number of businesses meeting this
criterion across both sides of the business and I am pleased to report
we completed the acquisitions of InterPuls and Hudstar during the year
and since the year end we have announced the acquisition of the Argus
thermal imaging camera business from e2v plc. Looking forward we
see these acquisitions, together with our existing growth strategies,
enhancing our global market leading positions which will deliver further
opportunities for growth. We will continue to invest in innovative new
technologies and products and in building our brand and market reach to
bring these opportunities to fruition.
Board changes
After serving as a Non-Executive Director since March 2005 Stella Pirie
stood down at the AGM in January 2015. Pim Vervaat was appointed
on 1 March 2015. Pim is Chief Executive of RPC Group Plc, the UK based
manufacturer of rigid plastic packaging and a FTSE 250 listed company.
After fifteen years with the Group, the last seven of which have been
as Chief Executive, Peter Slabbert stepped down from his role as Chief
Executive and retired from the Company on 30 September 2015.
The Board is immensely grateful to Peter for the contribution he has
made during his time with Avon Rubber. Early on he was an instrumental
part of the successful transformation of the Group, helping to build the
foundations that have led to the recent consistent record of growth in
profits. He leaves behind a strong executive team which the Board is
confident will continue to grow the Group.
We look forward to welcoming our new Chief Executive, Rob Rennie on 1
December 2015. Rob joins Avon having held a number of senior positions
at Invensys plc. His most recent role was President of the Energy Controls
group, a division with annual sales in excess of $400m. This group
included Eurotherm, the global supplier of industrial and process control,
measurement and data management solutions, where Rob started his
career and was ultimately appointed Managing Director. Rob was the
driving force behind the evolution of Eurotherm and, as a member of the
Invensys Executive Committee, was part of the team that successfully
sold Invensys to Schneider Electric in 2014.
My thanks to Andrew Lewis our Group Finance Director for ably carrying
out the role of Interim Group Chief Executive in the period to
1 December 2015.
Outlook
Our strategy of integrating new technologies from product development
and acquisitions has provided strong results in 2015 and increased our
future opportunities.
In our global Protection & Defence business we have good visibility of
DOD revenues for 2016 and a strong underlying portfolio of non-DOD
business which we expect to be enhanced by the increasing impact
of the recently launched new products and supplemented by impact
orders, although the timing of these remains difficult to predict.
While the year end softness in milk prices has continued, the acquisition
of InterPuls provides the Dairy business with both new products
and access to new markets through the integration of the sales and
distribution channels of the two businesses.
We remain confident in our strong and proven management team’s
ability to maintain the momentum of growth in our business.
David Evans
Chairman
17 November 2015
10
I N T E G R A T I N G T E C H N O L O G Y A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 5
S T R AT E G I C R E P O R T
Strategic overview
Group objectives
Group strategy
We have two strategic priorities at Group level:
Expanding our Protection & Defence business in military,
first responder and industrial markets globally; and
Developing our Dairy operation through its Milkrite
and InterPuls brands in traditional and emerging markets
with both existing and innovative new products.
We measure progress against our strategic priorities by reference
to our financial performance (as shown on page 19) and a broader
set of key performance indicators (KPIs) which are shown on
pages 26 and 27.
The Group is committed to generating shareholder value
through the development of new products and serving global
markets that can deliver long-term sustainable revenues at higher
than average margins.
Business overview
The Group has transformed itself over recent years into an
innovative design and engineering group specialising in two
core businesses, Protection & Defence and Dairy. With a strong
emphasis on research and development we design, test and
manufacture specialist products from a number of sites in the US
and Europe, serving markets around the world. We achieve this
through nurturing the talent and aspirations of our employees to
realise their highest potential.
Avon Protection Systems is the recognised global market leader
in advanced CBRN respiratory protection systems for the world’s
military, homeland security, first responder, fire and industrial
markets. With an unrivalled pedigree in mask design dating
back to the 1920s, Avon Protection’s advanced products are the
first choice for PPE users worldwide and are placed at the heart
of many international defence and tactical PPE deployment
strategies. Our expanding global customer base now includes
military forces, civil and first line defence troops, emergency
service teams and industrial, marine, mineral and oil extraction
site personnel. All put their trust in Avon’s advanced respiratory
solutions to shield them from every possible threat whether land,
air or sea based.
Our world-leading Dairy supplies business and its Milkrite
and InterPuls brands have a global market presence.
With a long history of manufacturing liners and tubing for the
dairy industry, we have become the leading innovator and
designer for products and services right at the heart of milking.
The acquisition of InterPuls in 2015, a milking components
specialist in electromechanical components, such as pulsators,
milk meters, automatic cluster removers, milking clusters, washing
systems, vacuum pumps, bucket milkers and pipeline system
components has added significantly to our product range, making
us the complete milking point solution provider.
Working with leading scientists and health specialists in the global
dairy industry, we continue to invest in technology to further
improve the milking process and animal welfare. Our products
provide exceptional results for both the animal and the milker,
making the milk extraction process more efficient. As our market
share and milking experience continue to grow, so does our
global presence.
R
A
E
Y
E
H
T
F
O
W
E
I
V
R
E
V
O
S
S
E
N
I
S
U
B
R
U
O
N
U
R
E
W
W
O
H
D
E
M
R
O
F
R
E
P
E
W
W
O
H
N
O
I
T
A
M
R
O
F
N
I
R
E
D
L
O
H
E
R
A
H
S
A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 5 I N T E G R A T I N G T E C H N O L O G Y
11
S T R AT E G I C R E P O R T
Protection & Defence strategy
We have a world-leading range of military respirators, developed
over many years and funded partially by our customers, where we
own the intellectual property.
Our strategy is to build a strong position in the US military market
and use this position to sell to other governments and first
responder markets globally.
We initially demonstrated this through our long-term sole-source
mask systems contract to supply the US military. Our status as a
prime contractor to the DOD, which regards us as experts in our
field, has brought us a number of other opportunities to replicate
this with our recently developed respiratory protection products.
Strategic imperatives for success in Protection & Defence
Our product range and manufacturing capability is increasing.
Developing through-life revenues with greater consumable sales
and service revenue, such as filters, is also a key objective.
We believe that our expanding product range and customer
base, together with our credibility and development expertise,
will put us in a market-leading position to supply into all accessible
global markets.
Leverage our relationship with the DOD to aid
and facilitate next generation products for
commercialisation.
Ensure customers and stakeholders recognise the
Avon brand as synonymous with advanced CBRN
respiratory protection.
Develop a global operating platform to support
business demands.
Maximise profitable growth through new
business development and products.
Create stable organic growth by ensuring our core
products exceed customer expectations.
Attract, retain and develop our employees.
Avon Training & Consultancy
Avon Protection’s new training and consultancy team provide
consultancy on risk situations and the best CBRN products and also
provide bi-monthly risk updates to clients.
Insight CBRN is available to all Avon Protection customers.
12
I N T E G R A T I N G T E C H N O L O G Y A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 5
and Brazil, where we had opened sales and distribution facilities.
Innovative new product and service offerings and continued
world class low cost manufacturing excellence should allow our
enhanced dairy business to sustain growth, profitability and
cash generation.
Dairy strategy
Our strategy for long-term sustainable profit growth is to continue
to grow our market-leading Milkrite brand in the US, to replicate
that position in our European business and establish a Milkrite
presence in emerging markets. In both of our developed markets
we have added a service offering, Cluster Exchange, which provides
efficiency gains for the farmer and provides us with an increased,
more predictable revenue base.
The acquisition of InterPuls allows us to broaden our product
range and our geographic reach, both key strategic objectives.
The addition of InterPuls’s products makes us the complete milking
point solution provider and its established distribution relationships
in emerging markets will allow us to accelerate our growth in these
regions building on the investments we have already made in China
Strategic imperatives for success in Dairy
Expansion of our product and service range.
Expansion of in-country sales presence.
and
brand development
Expansion of distribution and dealer network.
and positioning.
Leverage the benefit of our world class
manufacturing operations.
Attract, retain and develop our employees.
Milkrite opens new distribution facility
A new regional distribution facility opened in Brazil this year to support
growth in the South America region.
The facility is similar to the sales and distribution facility which was
established in Shanghai in 2012, now providing a strong platform for
future growth in the emerging markets.
The investment in South America comes at a time when there is a rapid
increase in demand in the region. Milkrite will now be able to better
serve the South American market through better distribution capability
and an in-country network.
A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 5 I N T E G R A T I N G T E C H N O L O G Y
13
R
A
E
Y
E
H
T
F
O
W
E
I
V
R
E
V
O
S
S
E
N
I
S
U
B
R
U
O
N
U
R
E
W
W
O
H
D
E
M
R
O
F
R
E
P
E
W
W
O
H
N
O
I
T
A
M
R
O
F
N
I
R
E
D
L
O
H
E
R
A
H
S
S T R AT E G I C R E P O R T
Group business model
Our management structure is decentralised and decision-making is delegated to the appropriate executive team. Our Board manages
overall control of the Group’s affairs and is responsible for delivering the Group’s overall objective of generating shareholder value
through developing new products and serving global markets that can deliver long-term sustainable revenues at higher than average
margins. The Group Executive team which comprises the Executive Directors and three key members of our senior management team
is responsible for assisting the Chief Executive in implementing our strategy and the day-to-day management of the Group. This team is
supported by three executive teams covering Protection & Defence, Dairy and Corporate activities.
Protection & Defence business model
Markets
Our respiratory protection products are sold direct to military markets where our primary customer is the DOD (Army, Navy, Marines,
Coastguard and Air Force) as well as a number of approved governments globally. Other significant markets are categorised under the
first responder banner and include the police and other emergency services and are addressed either directly or through distribution
channels. SCBA and thermal imaging equipment is targeted at fire services and other industrial users, primarily through a distribution
network in the US. All of these products are safety-critical and the markets are consequently highly regulated with the approval standards
creating significant barriers to entry. Product life cycles are long and standardisation to a particular product by users is typical.
US DOD
FIRE
We have a long-term sole-source contract with the US
DOD for the supply of mask systems. Our products have
earned a reputation for quality and comfort and the
business is currently developing a new aircrew mask
system funded by the DOD.
We provide a total solutions option, manufacturing a broad
portfolio of high-performance, timesaving respiratory
personal protection equipment that employs the most
advanced features in the fire-service industry. In 2014 we
launched Deltair, our completely redesigned fire SCBA
which meets the latest NFPA regulatory standard.
OTHER MILITARY, LAW ENFORCEMENT
AND FIRST RESPONDER
AEF
Our respiratory protection products are sold to foreign
military, law enforcement and first responder customers in
over 60 countries around the globe.
We continue to provide the US Army and Navy with
hovercraft skirting assemblies. We also supply a wide range
of collapsible storage tanks for static fuel and water storage
for military applications and other industrial applications
such as fracking.
14
I N T E G R A T I N G T E C H N O L O G Y A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 5
Products
Our Protection & Defence business consists of a growing range of respiratory products. The main products are respirators or gas masks
(product names M50, C50, ST53, M53 and FM12) together with a range of spares and accessories; the NIOSH-approved emergency hood
(NH15); rebreathers for escape and underwater use; and SCBA (primarily the Deltair product range). We also manufacture the consumable
filters used by these products and thermal imaging camera equipment. The respirators and escape hoods offer breathing protection to
varying degrees against CBRN threats while the SCBA equipment offers protection in oxygen depleted environments. We also have a
flexible fabrications business which manufactures fuel and water storage tanks and hovercraft skirts.
M50
M61
The most advanced general service respiratory protection
mask to date, offering advanced comfort, usability,
operational effectiveness and protection.
Pioneering conformal filter technology for closer integration
and designed with bayonet quick fit for use only with the
M50 mask.
C50
MILCF50
Developed using the same platform as our M50 based US
military mask. The innovative design features optimise the
user’s time in the operational arena for CBRN protection in
law enforcement or counter-terrorism operations.
The filter has a unique conformal shape providing a low
profile close fit with the mask. The filter design minimises
snag and pull hazards as well as reducing neck loading.
ST53
DELTAIR
One system for all missions combining the FM53 mask
technology with an advanced modular breathing apparatus
for specialist operations.
As the firefighting industry’s first new SCBA innovation in
years, Deltair offers superior air management, single power
supply, clearer communication and optimal weight
distribution for firefighters and other first responders.
EEBD
UNDERWATER REBREATHERS
Our Emergency Escape Breathing Device for which
we recently obtained NIOSH certification has military
applications on-board ship and we are targeting applications
in the mining and commercial shipping industries.
Following the acquisition of VR Technology Holdings we are
designing a product range for military use and developing
a multi-capability mine counter-measures rebreather.
JSAM
NH15
We are developing upgraded CBRN respiratory
protection equipment for aircrew on the DOD’s fleet
of fixed wing aircraft.
The smallest NIOSH-certified CBRN air purifying escape
respirator on the market ideal for police, emergency medical
services and fire officers seeking immediate or emergency
respiratory protection in a CBRN scenario.
AEF
CS PAPR
Offering design and manufacture of flexible storage tanks,
containers and other air-supported rubber structures.
Our latest product is the CS PAPR, a combination system powered
air purifying respirator, which can be used as a complete system
or as individual modules. It allows the wearer to switch seamlessly
between purified air and SCBA modes of protection.
R
A
E
Y
E
H
T
F
O
W
E
I
V
R
E
V
O
S
S
E
N
I
S
U
B
R
U
O
N
U
R
E
W
W
O
H
D
E
M
R
O
F
R
E
P
E
W
W
O
H
N
O
I
T
A
M
R
O
F
N
I
R
E
D
L
O
H
E
R
A
H
S
A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 5 I N T E G R A T I N G T E C H N O L O G Y
15
S T R AT E G I C R E P O R T
Product development
Our product development programme, Project Fusion, combines
the skills and expertise of our design and engineering teams
to produce a modular personal protection system comprising
smaller modules with multiple functionalities that can be
combined or used independently in different threat scenarios.
We expect this modular approach to further extend our market
reach into the military, law enforcement and first responder
protective equipment market for air, land or sea based users.
This product range was launched at the Defence and Security
Equipment International exhibition in September 2015.
Hudstar acquisition (Avon Electronics Centre)
Enabling us to design the platform for the next generation of respiratory protection
During the year we acquired Hudstar, a company based in Florida, US. It designs and
manufactures electronics hardware and software for the fire service industry, including
heads-up displays, wireless communication systems, personal alert safety systems,
pressure transducers, telemetry systems and remote air management systems.
It manufactures electronics equipment for our Deltair product, principally the console unit
The vertical integration of this key supplier for the Deltair electronics enables us to
reduce supply chain risk, safeguarding our Deltair production capability and enabling us
to reduce production costs. There are also a number of purchased components across
the rest of our product range that we will be able to insource, for example circuit
boards for our dive computers and rebreathers
The acquisition gives us access to a number of different technologies (some of which
are patented) that can be used across the rest of our product range and in future product
development, for example, in telemetry and more compex in-mask heads-up displays
It has also provided added electronics expertise within Avon's engineering skill
base that can be used to improve existing products and services and in the development
of new products
We are in the process of establishing a centre of excellence for electronics development
and assembly, including both the Deltair electronics package and the PAPR line,
Avon Electronics Centre.
16
I N T E G R A T I N G T E C H N O L O G Y A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 5
Dairy business model
Markets
Our Dairy business designs, manufactures and sells products and services used in the automated milking process, primarily rubberware
such as liners and tubing. These consumable products come into direct contact with the cow and the milk and are replaced regularly
to ensure product hygiene, animal welfare and to maximise milk quality. The acquisition of InterPuls in 2015, a milking components
specialist in electromechanical components, such as pulsators, milk meters, automatic cluster removers, milking clusters, washing
systems, vacuum pumps, bucket milkers and pipeline system components has added significantly to our product range, making us the
complete milking point solution provider. Our customer base is split between OEM customers and customers buying our own-brand
Milkrite and InterPuls products.
The global market is concentrated in high consumption automated milking markets in North America and Western Europe where we
have significant market shares. Potential exists outside these traditional markets, in particular in China, India, Russia, Eastern Europe and
South America, all of which are currently experiencing rapidly increasing demand for dairy products which is being satisfied through
mechanised milking. The acquisition of InterPuls allows us to broaden our geographic reach. The addition of InterPuls’s established
distribution relationships in emerging markets will allow us to accelerate our growth in these regions building on the investments we
have already made in China and Brazil, where we have opened sales and distribution facilities.
US
CHINA
Our Milkrite brand has established a 46% market share
with a total Avon market share of 63%
Contracts secured with China’s largest milk suppliers
and distributors, Mengniu and Yili
Impulse Air has 25% share of the market
Dealer network established
Cluster Exchange is servicing 319,000 cows on 229 farms
Strong InterPuls presence
EU
SOUTH AMERICA
Milkrite market share has increased to 19% of which 3.5%
represents Impulse Air, launched in 2013. Total Avon
market share of 57%
We have opened a sales and distribution centre in Brazil
to service the wider South American market which will
allow further opportunity for growth
Investment made in sales resource in 2013 starting to
deliver Milkrite growth
Strong InterPuls presence
S
W
O
C
F
O
S
N
O
I
L
L
I
M
40
35
30
25
20
15
10
5
0
EU
NA
CHINA
BRAZIL
RUSSIA
INDIA
AVON MARKET SHARE OTHER MACHINE MILKED HAND MILKED
A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 5 I N T E G R A T I N G T E C H N O L O G Y
17
R
A
E
Y
E
H
T
F
O
W
E
I
V
R
E
V
O
S
S
E
N
I
S
U
B
R
U
O
N
U
R
E
W
W
O
H
D
E
M
R
O
F
R
E
P
E
W
W
O
H
N
O
I
T
A
M
R
O
F
N
I
R
E
D
L
O
H
E
R
A
H
S
S T R AT E G I C R E P O R T
Products
Our products are sold through distributors under our own Milkrite and InterPuls brands. We also manufacture for major OEMs. We excel
in product design, materials specification and manufacturing efficiency. We are working to bring a wider range of dairy products to
market under our own brands, enhancing the farmer’s view of us as the primary technical solutions provider in the milk extraction
process. The success of the innovative Milkrite Mouthpiece Vented Liner, Impulse Air, continues and this product has established a 25%
market share in the US since its launch in 2010 and a 3.5% market share in Europe since its launch there in 2013.
Milkrite liners
Milkrite’s Impulse and Impulse Air range provides triangular liners designed for less slip and improved animal
health benefits with their unique interlocking anti-twist shell design. Impulse Air takes innovation one step
further using a unique air flow to draw the milk away quickly. Milkrite’s Ultraliner LT and TLC offer value for
money and the latest in technological innovation.
Milkrite tubing
Milkrite Ultraclean dairy tubing is the first to combine a smooth sanitary interior surface with a durable,
flexible rubber exterior which is chemically cross-linked, resulting in long-lasting tubing that will clean better
and maintain milk purity like no other product on the market today.
InterPuls pulsators
We are the world-leading manufacturer of state of the art electronic pulsators designed to facilitate gentle,
complete and uniform milking.
InterPuls milk meters
We manufacture advanced electronics and sensors placing us at the cutting edge of milk analysis.
Product development
We have invested considerably in product development.
Our Cluster Exchange programme, recently launched in the US and Europe, means Milkrite is a complete solution provider, saving farmers
time on low-value tasks, securing our relationships with our customers and managing the liner change cycle. Further opportunities are
available for this exciting concept.
During the year we completed our Milkrite Impulse Air cluster offering with the launch of our Impulse Claw 300. This is an important
chapter for the Milkrite brand and completes the transition from liner expert to cluster expert. The lightweight and ergonomic
design makes the claw easier to handle and reduces the overall weight of the cluster. In addition, the claw is a combination of quality
components made from high quality material which makes it extremely durable.
The Impulse Claw 300 has been designed with the modern cow in mind which often has narrow rear teats with a strong udder cleft.
Therefore the claw is designed for optimal cluster positioning. The modular design also allows for milking in all parlour types, including
milking through the rear legs as well as down the body of the animal by rotating the claw lid.
The acquisition of InterPuls brings capability in the fields of herd management, sensor technology and telemetry, all of which provide
opportunities for integration with our existing product range.
18
I N T E G R A T I N G T E C H N O L O G Y A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 5
Business review – the year under review
Avon has delivered another strong set of financial results, driven by the investments we have made in integrating technology, positioning
us as the complete solutions provider to our customers.
The increase in profitability and strong cash conversion has enabled the Group to pursue organic and inorganic growth opportunities
during the year, although the timing of the acquisitions we have made in 2015 means they have not contributed significantly to the
results in the current year.
The Group’s key achievements in 2015 have been:
Revenue growth of 8%
Profit before tax up 20%
Acquisition of InterPuls and Hudstar
to £134.3m
to £19.8m
EBITDA growth of 19%
Diluted earnings per share up
to £27.3m
29% to 54.6p
Operating profit growth
Dividend increase of 30% to 7.29p
of 19% to £20.2m
Operating margins improved
by 1.5% to 15.1%
Cash generated from operating
activities of £24.1m, representing
119% of operating profit
Strong DOD sales, excellent year at AEF
and continued commercial progress
Market share growth of Impulse Air
to 25% in the US and 3.5% in Europe
Cluster Exchange servicing 430,000 cows
on 1,262 farms across US and Europe
NOTE: The Directors believe that adjusted measures provide a more useful comparison of business trends and performance. Adjusted results
exclude discontinued operations, exceptional items, defined benefit pension scheme costs and the amortisation of acquired intangibles.
The term adjusted is not defined under IFRS and may not be comparable with similarly-titled measures used by other companies.
All profit and earnings per share figures in the Chairman's Statement and this Strategic Report relate to adjusted business performance
(as defined above) unless otherwise stated.
A reconciliation of adjusted measures to statutory measures is provided below:
2015
2015
2015
2014
2014
2014
Statutory
Adjustments
Adjusted
Statutory Adjustments
Adjusted
Group EBITDA (£m)
Group operating profit (£m)
Other finance expense (£m)
Group profit before taxation (£m)
Taxation (£m)
Group profit for the year (£m)
Basic earnings per share (pence)
Diluted earnings per share (pence)
Protection & Defence EBITDA (£m)
Protection & Defence operating profit (£m)
Dairy EBITDA (£m)
Dairy operating profit (£m)
The adjustments comprise:
27.0
18.9
0.9
17.8
2.7
13.7
45.4
44.2
21.4
15.3
7.5
5.6
0.3
1.3
(0.7)
2.0
0.2
3.2
10.7
10.4
0.2
0.6
0.2
0.8
27.3
20.2
0.2
19.8
2.9
16.9
56.1
54.6
21.6
15.9
7.7
6.4
20.5
14.3
0.2
13.9
3.1
10.8
36.2
35.0
16.5
11.3
6.6
5.7
2.4
2.7
-
2.7
0.4
2.3
7.5
7.3
2.0
2.3
-
-
22.9
17.0
0.2
16.6
3.5
13.1
43.7
42.3
18.5
13.6
6.6
5.7
Amortisation of acquired intangibles
of £1.0m (2014: £0.3m)
Net defined benefit pension scheme credit
of £0.3m (2014: cost £0.4m), which relates
to a scheme closed to future accrual and
therefore do not relate to current operations
Exceptional items of £0.6m (2014: £2.0m)
relating to executive search fees and
acquisition costs (2014: consolidation
of Protection & Defence sites)
Tax effect of adjustments of £0.2m
(2014: £0.4m)
Loss on discontinued
operations of £1.5m
(2014: nil) relating to
dilapidations costs of former
leased premises of a business
disposed of in 2006
Further details are provided in note 3 of the financial statements.
R
A
E
Y
E
H
T
F
O
W
E
I
V
R
E
V
O
S
S
E
N
I
S
U
B
R
U
O
N
U
R
E
W
W
O
H
D
E
M
R
O
F
R
E
P
E
W
W
O
H
N
O
I
T
A
M
R
O
F
N
I
R
E
D
L
O
H
E
R
A
H
S
A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 5 I N T E G R A T I N G T E C H N O L O G Y
19
S T R AT E G I C R E P O R T
Results
Avon has made excellent progress during 2015. Revenue
increased 8% to £134.3m (2014: £124.8m) with Protection &
Defence up 7% and Dairy up 11%.
Operating profit increased to £20.2m (2014: £17.0m) and earnings
before interest, taxation, depreciation and amortisation (EBITDA)
were £27.3m (2014: £22.9m). This represents a return on sales
(defined as EBITDA divided by revenue) of 20.3% (2014: 18.4%).
After net interest and other finance costs the profit before tax
was £19.8m (2014: £16.6m). After tax, the profit for the year was
£16.9m (2014: £13.1m).
Finance expenses
Net interest costs reduced to £0.2m (2014: £0.3m).
Other (non-cash) finance expenses associated with the
unwinding of discounts on provisions were £0.2m (2014: £0.2m).
Taxation
The statutory tax charge totalled £2.7m (2014: £3.1m) on a
statutory profit before tax of £17.8m (2014: £13.9m). In 2015
the Group paid tax in the US, but not in the UK due to brought
forward tax losses. The effective tax rate for the period is
15% (2014: 22%), reflecting a more favourable geographic mix
of profits and the recognition of a deferred tax asset in the UK in
respect of accelerated capital allowances and short-term timing
differences as UK tax losses have now been utilised and the UK
trading compay is expected to be tax paying in the future.
The adjusted effective tax rate, where the tax charge and
the profit before taxation are adjusted for exceptional items,
the amortisation of acquired intangibles and defined benefit
pension scheme costs is 15% (2014: 21%). In 2015 the US Federal
tax rate was 34% and the Group’s effective tax rate reflects the
predominance of US revenues and earnings and the availability
of previously unrecognised tax losses in the UK. Whilst the
acquisition of InterPuls has not had a significant impact on the
Group tax rate in the current year, with a combined Federal
and Regional Italian tax rate of approximately 31%, the Group
effective rate of tax is likely to increase in future years.
Prior period adjustments related to taxation payable in the US
where legislation concerning the timing of deductibility of certain
expenditure was passed by Congress after the 2014 financial
statements were approved but before we filed our US tax returns.
Hence we were able to take the benefit of this in our tax filings
but we had not assumed such a benefit when calculating our tax
liability at the time of approving the 2014 financial statements.
Unrecognised deferred tax assets in respect of tax losses in UK
non-trading companies amounted to £0.3m (2014: £1.4m). In
2015, these relate only to non-trading companies and therefore
these have not been recognised as at the time of approving the
financial statements we do not consider there to be sufficient
evidence to conclude that future taxable profits will be made in
these companies.
Earnings per share
Basic earnings per share were 56.1p (2014: 43.7p) and diluted
earnings per share were 54.6p (2014: 42.3p).
A new look for Cluster Exchange
Our Cluster Exchange Service has grown rapidly over the last 18
months. To support this growth we have introduced two new
washing machines in the UK.
The new machines have significantly increased capacity in our
Hampton Park West facility which will support the further growth of
Cluster Exchange in Europe.
20
I N T E G R A T I N G T E C H N O L O G Y A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 5
Segmental performance
Protection & Defence performance
Protection & Defence represented 74% (2014: 74%) of total
Group revenues. The business saw revenues increase by
7% from £92.8m to £98.8m. The growth was due to strong
performance in all areas of the business.
Operating profit grew strongly to £15.9m (2014: £13.6m) up 17%
and EBITDA was £21.6m (2014: £18.5m), representing
a return on sales (as defined above) of 21.9% (2014: 20.0%).
Our DOD, Fire and AEF businesses have all grown, while our
non-DOD mask volumes have reduced slightly, as expected
given the strong 2014 comparative in this area. Our margins
have improved due to efficiencies and increased prices under
our long-term DOD contract.
Sales of mask systems and filter spares to the DOD increased
from £34.0m to £44.5m as production scheduling, which was
flexed in 2014 to accommodate the higher level of non-DOD
activity, shifted back to DOD production in 2015.
We delivered 240,000 mask systems and 92,000 pairs of filter
spares, compared with 168,000 mask systems and 172,000 pairs
of filter spares in 2014.
Having received orders for 172,000 mask systems during the
year, this leaves us with an order book of 50,000 systems as
we enter 2016. Under our 10 year sole-source contract, further
follow-on DOD M50 orders are expected in the first half of the
new financial year as 2016 DOD budgets are released.
Sales to US law enforcement and non-US military and law
enforcement were £27.7m (2014: £31.0m) as a result of a good
performance from the underlying portfolio and a 10,000 C50
delivery to a customer in the Middle East. This was a small
decrease on the strong comparator period as 2014 included two
large such deliveries.
Our industrial portfolio launched in 2014 continued to make
good progress with particular successes in the oil and gas market
and with further product enhancements in the pipeline, there is
potential to continue to develop this area of the business.
We saw growth in sales to the North American Fire market this
year following the release of our new NFPA-approved Deltair
SCBA. Our product, which is designed to meet the new US
regulations and to deliver enhanced operational performance,
has been well received by the market and remains one of only
four units to receive approval to date.
AEF grew strongly in 2015, winning hovercraft skirt and fuel and
water storage tank orders as we have successfully rolled out our
non-DOD sales strategy to this area of the business.
DOD spares sales have reduced slightly this year, as expected
given the volatility of DOD ordering patterns in this area. Long
term, as the installed base of masks grows so will the DOD’s
requirement to fill its supply chain.
New range of products launched
at UK defence show
Following four years of development, Avon Protection launched a new
range of modular products at the UK defence show, DSEI, in September.
The new products, FM54 APR, EZAir+, MP PAPR, CS PAPR and
Avon/Shield, have been designed for the CBRN environment and
threats of the future and provide maximum operational flexibility
with interchangeable components for multiple protection level
configurations as threats change.
A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 5 I N T E G R A T I N G T E C H N O L O G Y
21
R
A
E
Y
E
H
T
F
O
W
E
I
V
R
E
V
O
S
S
E
N
I
S
U
B
R
U
O
N
U
R
E
W
W
O
H
D
E
M
R
O
F
R
E
P
E
W
W
O
H
N
O
I
T
A
M
R
O
F
N
I
R
E
D
L
O
H
E
R
A
H
S
S T R AT E G I C R E P O R T
Dairy performance
Dairy revenues increased by 11% to £35.5m (2014: £32.0m)
(with a contribution of £1.0m from InterPuls which was acquired
in August 2015). The organic growth was achieved despite markets
in Europe softening in the second half of our financial year,
reflecting the success of our Cluster Exchange service and growth
of the higher margin, technology leading Milkrite products.
Operating profit increased by 12% to £6.4m (2014: £5.7m) which
arose solely from our existing business as, given the timing of the
InterPuls acquisition and the Italian summer holiday season, the
acquired business did not contribute to divisional operating profit
in 2015. EBITDA was £7.7m (2014: £6.6m), giving a return on sales
(as defined above) of 21.7%, up from 20.7% in 2014.
Return on Sales % Dairy
25.0%
20.0%
15.0%
10.0%
5.0%
0.0%
2009
2010
2011
2012
2013
2014
2015
Return on Sales % Dairy
At the start of the year, market conditions improved as global
milk prices were at acceptable levels and farmer input costs
were favourable meaning there was less pressure on farmer
revenues and margins and therefore normal levels of demand
for our consumable products. Towards the end of the year,
these pressures have increased due to lower milk prices in some
markets. Russian import controls and the removal of quotas have
also affected European markets.
Our Cluster Exchange service was launched in the US and
Europe in 2014 and growth rates continue to exceed our initial
expectations. By the end of the year it was servicing 430,000 cows
on 1,262 farms in the US and Europe. This added-value service
enhances the value of each direct liner sale we make and has
delivered a more robust and sustainable business model. Under
this programme farmers outsource their liner change process to
us, which we deliver through service centres established in our
existing facilities, with the support of our dealers and third-party
logistics specialists.
US Cluster Exchange
Monthly Revenue
2
1
t
c
O
3
1
r
p
A
3
1
t
c
O
4
1
r
p
A
4
1
t
c
O
5
1
r
p
A
5
1
p
e
S
EU Cluster Exchange
Monthly Revenue
260
240
220
200
180
160
140
120
100
80
60
40
20
0
110
100
90
80
70
60
50
40
30
20
10
0
0
0
0
$
'
0
0
0
£
'
2
1
t
c
O
3
1
r
p
A
3
1
t
c
O
4
1
r
p
A
4
1
t
c
O
5
1
r
p
A
5
1
p
e
S
Milkrite sales increased as a proportion of total revenue providing
a richer sales mix. Only five years ago OEM customers represented
47% of our revenue; at the end of this year this had fallen to 28%,
reflecting the success of the higher margin Milkrite brand and the
decision of certain OEMs to insource or dual source production.
With the integration of InterPuls we expect the proportion of own
brand revenue to increase further.
22
I N T E G R A T I N G T E C H N O L O G Y A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 5
Dairy Revenue Analysis
In the US, the Milkrite Impulse Air mouthpiece vented liner
continued to perform well, with its market share increasing to
25% (2014: 21%).
)
m
£
(
E
U
N
E
V
E
R
18
16
14
12
10
8
6
4
2
FY11
H1
FY11
H2
FY12
H1
FY12
H2
FY13
H1
FY13
H2
FY14
H1
FY14
H2
FY15
H1
FY15
H2
O E M M I L K R I T E / I N T E R P U L S T O TA L
In Europe, Milkrite’s market share has increased as a result of
the investment we made in our increased sales force, enhanced
technical support and a larger distributor network. Our Impulse
Air mouthpiece vented liner, first launched in Europe late in 2013,
continues to gain traction, with its market share increasing to
3.5% (2014: 2.6%).
EU Market Share
3.5%
3%
2.5%
2%
1.5%
1%
0.5%
0%
Mar
13
Sep
13
Mar
14
Sep
14
Mar
15
Sep
15
EU
Market Share
US Market Share
26%
24%
22%
20%
18%
16%
14%
12%
10%
8%
6%
4%
2%
0%
Sep
10
Mar
11
Sep
11
Mar
12
Sep
12
Mar
13
Sep
13
Mar
14
Sep
14
Mar
15
Sep
15
US
Market Share
This success has given us the confidence to invest further in
product development resource and to commence work on the
next generation of products, the first of which, our Milkrite
claw, was launched in the final quarter of the year. The InterPuls
acquisition further adds to our product portfolio and product
development capability, the benefits of which we expect to see
in future years.
In China, year on year revenue grew strongly as the
industrialisation of the milking process continues apace,
creating excellent long-term potential for our consumable
products.
In South America, where we opened our sales and distribution
facility in the first half of the year, we have started to make good
progress in establishing a strong dealer network and expect to see
growth in this region.
In many other emerging markets, including India, the number of
dairy cows being milked using automated milking processes is
growing strongly. This is adding to the market potential for the
consumable products we sell. We plan to harness this potential
using the distribution network which InterPuls has already
established in these regions.
R
A
E
Y
E
H
T
F
O
W
E
I
V
R
E
V
O
S
S
E
N
I
S
U
B
R
U
O
N
U
R
E
W
W
O
H
D
E
M
R
O
F
R
E
P
E
W
W
O
H
N
O
I
T
A
M
R
O
F
N
I
R
E
D
L
O
H
E
R
A
H
S
A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 5 I N T E G R A T I N G T E C H N O L O G Y
23
S T R AT E G I C R E P O R T
Group position
Acquisitions
On 19 June 2015, the Group completed the acquisition of 100%
of the share capital of Hudstar Systems Inc. for $5.1million in
cash from existing cash resources, with deferred contingent
consideration of up to $0.5m.
On 5 August 2015, the Group acquired 100% of the share capital
and shareholder loan notes of InterPuls S.p.A. (‘InterPuls’) for
an enterprise value of €29.75m, including the assumption
of InterPuls’ net debt of approximately €4.0m. The cash
consideration of €25.75m was paid on completion and was
funded from existing Group cash balances and existing
debt facilities.
Net cash and cash flow
Net debt at the end of the year was £13.2m (2014: net cash
of £2.9m). At the year end, total bank facilities were £26.4m,
which are US dollar denominated and committed to 30
November 2018.
In the year we invested £21.2m in the acquisitions noted above
and £6.2m (2014: £6.8m) in property, plant and equipment and
new product development. In the Protection & Defence business
this focused on our new product development programme,
Project Fusion. In Dairy we invested in the development of our
new claw and the hardware required to support our Cluster
Exchange service offering.
Operating activities generated cash of £24.1m (2014: £26.5m),
representing 119% of operating profit (2014: 156%). Through
sound operational management the Group has driven strong
conversion of profits into cash. The timing of shipments to
customers can impact all aspects of working capital and at the
2015 year end inventory was higher from a combination of foreign
exchange translation, acquisitions and the launch of our Fusion
products. Receivables decreased as in the prior year a large
order was shipped immediately prior to year end. Lower advance
receipts from customers, cash outflows in relation to the prior
year restructuring provision and timing of payments to suppliers
following the acquisition of InterPuls resulted in cash outflows in
respect of payables.
119%
OPERATING PROFIT
CONVERTED
TO CASH
Milkrite transfer warehouse to new
facility in Czech Republic
Milkrite has taken an important next step in the management of
its European supply chain by merging all their European logistics
into a new distribution centre in Prague, Czech Republic with service
partner CEVA Logistics. The move will improve:
•
Logistics capacity (more warehouse space for a growing business)
• Responsiveness (all products at one location, avoiding part
shipments, etc.)
•
Flexibility (direct connections in Prague with all leading
transport companies)
24
I N T E G R A T I N G T E C H N O L O G Y A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 5
UK retirement benefit obligations
The balance, as measured under IAS 19 (revised), associated with
the Group’s UK retirement benefit obligation, which has been
closed to future accrual, has moved from a £16.0m deficit at 30
September 2014 to a £16.6m deficit at 30 September 2015.
This movement has resulted from an increase in liabilities as
the AA corporate bond rate has fallen partially offset by strong
performance from our return-seeking assets and Liability
Driven Investment.
A settlement gain of £0.7m (2014: nil) was realised following
a trivial commutation exercise. See note 3 of the financial
statements for further details.
During 2015, the Group paid total contributions of £0.8m
(2014: £0.5m).
The last triennial actuarial valuation took place as at 31 March
2013. That valuation showed the scheme to be 98.0% funded
on a continuing basis and under the deficit recovery plan,
the payments for the Group financial years ending 30
September are as follows: 2016: £0.7m, 2017: £0.7m and
2018: £0.7m. These amounts include £0.3m p.a. in respect
of administration expenses.
Research and development
Intangible assets totalling £41.3m (2014: £17.2m) form a significant
part of the balance sheet as we invest in new product development
and acquisitions. This can be seen from our expanding product
range in both Protection & Defence and Dairy. The annual charge
for amortisation of development costs was £1.9m (2014: £1.5m).
Our total investment in research and development (capitalised
and expensed) amounted to £7.1m (2014: £7.0m) of which £3.9m
(2014: £4.5m) was customer funded and has been recognised
as revenue.
In Dairy we have started to expand our product range under
the Milkrite brand beyond liners and tubing into non-rubber
goods such as liner shells and claws.
We have started to see the benefits of these efforts, which
underpin the long-term prosperity of the Group, during our
2015 financial year.
Research and development expenditure
Protection & Defence
£m
Dairy
£m
Total expenditure
Less customer funded
Group expenditure
Capitalised
Income statement impact
of current year expenditure
Amortisation
Total income statement impact
Revenue
R&D spend as % of revenue
6.9
(3.9)
3.0
(2.5)
0.5
1.8
2.3
98.8
7.0%
0.2
-
0.2
(0.1)
0.1
0.1
0.2
35.5
0.6%
Total
£m
7.1
(3.9)
3.2
(2.6)
0.6
1.9
2.5
134.3
5.3%
Avon Wins Prince Philip Award
Avon Rubber p.l.c. has won The Institute of Materials, Minerals and Mining
(IOM3) Prince Philip Award for ‘Materials in the Service of Mankind’.
Avon was selected as a company always striving to produce the best
possible materials and products made from rubber; products recognised
as the best by the people who use them.
Our heritage, including the manufacture of products used in the Second
World War, and the two million people currently protected by these
products, were the deciding factors in Avon receiving the award. It was
decided that, on the centenary of the First World War, a company that
produces a major product borne out of that conflict should be recognised
for the contribution it has made to the protection of mankind.
Prince Philip presented the award to Avon on 10 November 2015.
A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 5 I N T E G R A T I N G T E C H N O L O G Y
25
R
A
E
Y
E
H
T
F
O
W
E
I
V
R
E
V
O
S
S
E
N
I
S
U
B
R
U
O
N
U
R
E
W
W
O
H
D
E
M
R
O
F
R
E
P
E
W
W
O
H
N
O
I
T
A
M
R
O
F
N
I
R
E
D
L
O
H
E
R
A
H
S
S T R AT E G I C R E P O R T
Key Performance Indicators (KPIs)
The Group uses a variety of performance measures which are detailed below.
12 MONTH MOVING TOTAL REVENUE
135
130
125
120
£m 115
110
105
100
95
REASON FOR CHOICE
This looks at revenue for a cumulative 12 month period and is used
to identify the directional trend in revenue.
HOW WE CALCULATE
This is measured at sales value.
COMMENTS ON RESULTS
Revenue has increased in 2015, as both divisions have seen
growth which has been supplemented by the translation effect
of a stronger US dollar.
Sep
Oct
Nov Dec
Jan
Feb Mar
Apr May
Jun
Jul
Aug
2014
Sep
2015
8% I N C R E A S E D BY
PROTECTION & DEFENCE ORDERS IN HAND
REASON FOR CHOICE
This demonstrates the orders in hand for fulfilment and future sales.
£31m
£15m
£16m
2013
£33m
£21m
£12m
2014
£20m
£14m
£6m
2015
DOD
NON DOD
RETURN ON SALES
16.0%
18.4%
20.3%
2013
2014
2015
HOW WE CALCULATE
This is measured at sales value.
COMMENTS ON RESULTS
We focused on fullfilling our DOD order book in 2015, hence as
expected our year end order book is lower than in prior years.
D E C R E A S E D T O
£20m
REASON FOR CHOICE
This measure brings together the combined effects of procurement
costs and pricing as well as the leverage of our operating assets.
HOW WE CALCULATE
Earnings before interest, taxation, depreciation, amortisation,
discontinued operations, defined benefit pension scheme costs and
exceptional items (EBITDA) divided by revenue.
COMMENTS ON RESULTS
We have succeeded in growing profit in our Protection & Defence
business through operational efficiences and improved pricing on our
long-term DOD contract. In Dairy, an increasing proportion of higher
margin Milkrite sales contributed to an increased return on sales.
I N C R E A S E D T O
20.3%
26
I N T E G R A T I N G T E C H N O L O G Y A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 5
TRADE WORKING CAPITAL
TO REVENUE RATIO
20.8%
17.8%
20.8%
REASON FOR CHOICE
Management of working capital ensures that profit growth converts
into cash generation.
HOW WE CALCULATE
Trade working capital is defined as inventory + trade receivables
- trade payables and advance receipts from customers, expressed as
a percentage of revenue.
COMMENTS ON RESULTS
Overall, working capital was reasonably stable during the year
but was impacted at the year end by both the strengthening of
the US dollar and the acquisitions we made in the second half of
the year.
2013
2014
2015
I N C R E A S E D T O
20.8%
DILUTED EARNINGS PER SHARE
REASON FOR CHOICE
This measure is designed to include the effective management
of interest costs and the tax charge and measure the total return
achieved for shareholders.
HOW WE CALCULATE
Profit after tax excluding the impact of discontinued operations,
the amortisation of acquired intangibles, defined benefit pension
scheme costs and exceptional items divided by the fully diluted
number of ordinary shares.
COMMENTS ON RESULTS
Higher operating profit and a lower Group effective tax rate in
2015 have contributed to an improved EPS position.
32.5p
42.3p
54.6p
2013
2014
2015
I N C R E A S E D T O
54.6p
Our non-financial KPIs in relation to health and safety and employees are detailed in our Environmental and Corporate Social
Responsibility report on pages 34 to 42.
A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 5 I N T E G R A T I N G T E C H N O L O G Y
27
R
A
E
Y
E
H
T
F
O
W
E
I
V
R
E
V
O
S
S
E
N
I
S
U
B
R
U
O
N
U
R
E
W
W
O
H
D
E
M
R
O
F
R
E
P
E
W
W
O
H
N
O
I
T
A
M
R
O
F
N
I
R
E
D
L
O
H
E
R
A
H
S
S T R AT E G I C R E P O R T
Principal risks and uncertainties
The Group has an established process for the identification and
management of risk across the two divisions working within
the governance framework set out in our corporate governance
statement (see pages 48 to 52). Ultimately the management
of risk is the responsibility of the Board of Directors, and the
development and execution of a comprehensive and robust
system of risk management has a high priority at Avon.
The Board’s role in risk management includes promoting a culture
that emphasises integrity at all levels of business operations,
embedding risk management within the core processes of the
business, approving appetite for risk, determining the principal
risks, ensuring that these are communicated effectively across the
businesses and setting the overall policies for risk management
and control.
The principal risks affecting the Group are identified by the Group
Executive team and reviewed by the Board.
The process involves a quarterly risk assessment and a process
for ensuring that the Group’s approach to dealing with individual
risks is robust and timely. Each risk has priority tasks allocated
to it that are the responsibility of the members of the Group
Executive to deliver during the financial year. Regular sessions
are held throughout the year to review progress in delivery of the
priority tasks at an operational level.
We identify three main risk areas:
Strategic risks – risks affecting
the strategic aims of the business, or
those issues that affect the strategic
objectives faced by the Group
Financial risks – issues that
could affect the finances of the
business both externally and from
the perspective of internal controls
Operational risks – matters arising
from the operational activities
of the Group relating to areas
such as procurement, product
development and interaction
with commercial partners
Risk management within the business involves:
Identification and assessment
of individual risk
The principal risks identified through the risk management
process are listed on the following page in order of severity and
with the categorisation given to them internally shown alongside.
Mitigation, where possible, is shown by each identified risk area.
Design of controls
KEY
Testing of controls through
internal audits
Formulating a conclusion on
the effectiveness of the control
environment in place
ARROWS INDICATE WHETHER THE
LEVEL OF RISK RELATIVE TO THE
OTHER RISKS OF THE BUSINESS
HAS INCREASED (), DECREASED ()
OR REMAINED THE SAME ()
DURING THE YEAR .
28
I N T E G R A T I N G T E C H N O L O G Y A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 5
S T R AT E G I C R E P O R T
1
MARKET THREAT
BUSINESS RISK
L ACK OF SALES GROW TH
LOSS OF MA JOR CONTR AC T OR
BUSINESS TO COMPE TITOR E.G .
PRICE COMPE TITION IN THE DAIRY
MARKE T AND THE IMPAC T OF
MILK PRICES AND FEED COSTS
MITIGATION
SAFE T Y APPROVALS AND SOLE SOURCE SUPPLY
CONTR AC TS PROVIDE SIGNIFICANT BARRIERS TO ENTRY
CONTINUED INVESTMENT IN PRODUC T DEVELOPMENT
TO ENSURE COMPE TITIVE ADVANTAGE E.G . OUR
IMPULSE AIR DAIRY LINERS WHICH OFFER SUPERIOR
QUALIT Y AND MILK YIELD AND OUR INNOVATIVE
PROTEC TION PROJEC T TO INTEGR ATE OUR SUITE
OF MASK S AND BREATHING APPAR ATUS
SE T TING THE STR ATEGY FOR
i) SECURING US GOVERNMENT FUNDING;
ii) WINNING ADDITIONAL BUSINESS
FROM EXISTING CUSTOMERS; AND
iii) CAPTURING NEW CUSTOMERS AND
REVENUE STREAMS
CONTINUING RECRUITMENT OF SALES PERSONNEL
LIK E LIH O O D
IM PAC T O N
SA L E S VO LUM E
& PR O FI TA B I L I T Y
2
PRODUC T DEVELOPMENT
BUSINESS RISK
MITIGATION
FAILURE TO MEE T REGUL ATORY
PUBLICATION OF AND ADHERENCE TO A
PRODUC T/SYSTEM REQUIREMENTS
TECHNOLOGY ROADMAP, INTELLEC TUAL PROPERT Y
L ACK OF INVESTMENT IN
NEW PRODUC TS
FAILURE TO IDENTIFY AND IMPLEMENT
NEW PRODUC TS E.G . PROTEC TION
MANUAL AND NEW PRODUC T INTRODUC TION
(NPI) PROCESS
LIK E LIH O O D
FOCUS ON DELIVERY OF PROJEC TS IN THE ROADMAP
ON TIME, TO BUDGE T AND COST
EQUIPMENT AND DAIRY PRODUC TS
SALES AND PRODUC T DEVELOPMENT HAVE THE
REQUIRE REGUL ATORY APPROVALS
OBJEC TIVE OF DELIVERING EX TERNAL FUNDING
IN EACH MARKE T IN WHICH THEY ARE
AND NEW REVENUE STREAMS
SOLD. OBTAINING APPROVAL CAN
LEAD TO DEL AYS IN PRODUC T
L AUNCHES OR SIGNIFICANT REWORK
FOR DIFFERENT MARKE TS
IM PAC T O N
SA L E S VO LUM E
& PR O FI TA B I L I T Y
AS PROJEC T FUSION NEARS COMPLE TION, PRODUC T DEVELOPMENT IS NO LONGER CONSIDERED THE GROUP 'S HIGHEST RISK .
TALENT MANAGEMENT IS CONSIDERED AN INCREASINGLY IMPORTANT PRIORIT Y FOR THE BUSINESS. DUE TO THE ACQUISITION
AC TIVIT Y, INTEGR ATION RISK HAS BEEN ADDED. THE REMAINING RISK S HAVE BEEN RE- ORDERED ACCORDINGLY.
A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 5 I N T E G R A T I N G T E C H N O L O G Y
29
R
A
E
Y
E
H
T
F
O
W
E
I
V
R
E
V
O
S
S
E
N
I
S
U
B
R
U
O
N
U
R
E
W
W
O
H
D
E
M
R
O
F
R
E
P
E
W
W
O
H
N
O
I
T
A
M
R
O
F
N
I
R
E
D
L
O
H
E
R
A
H
S
S T R AT E G I C R E P O R T
Principal risks and uncertainties (continued)
3
TALENT MANAGEMENT
BUSINESS RISK
MITIGATION
INSUFFICIENT SKILLS OF EMPLOYEES
FOCUS ON CELEBR ATING AND REWARDING
POOR ENGAGEMENT AND MOR ALE
DYSFUNC TIONAL ORGANISATIONAL
STRUC TURE /REPORTING LINES
ACHIEVEMENTS AND PROMOTING POSITIVE AC TION
BY EMPOWERING OUR PEOPLE AND ENGAGING
AND INVOLVING THEM THROUGH EFFEC TIVE
COMMUNICATION, INCLUDING CEO ANNUAL
PRESENTATIONS TO EACH LOCATION
CONTINUE TO REALIGN TEAMS AND STRUC TURES,
RECRUITING WHERE APPROPRIATE TO ENSURE
THAT AS THE BUSINESS GROWS THE STRUC TURE
REMAINS FIT FOR PURPOSE
AC TIVE MANAGEMENT BY SUCCESSION PL ANNING,
THE ANNUAL PERFORMANCE MANAGEMENT PROCESS
AND THE REWARD AND INCENTIVES STRUC TURE
LIK E LIH O O D
IM PAC T O N
M ED I UM -T ER M COS T
& Q UA L I T Y I SSU E S
4
BUSINESS INTERUPTION – SUPPLY CHAIN
BUSINESS RISK
MITIGATION
DEPENDENC Y ON SOLE
PR OAC T I V E A PPR OACH TO T H E A PPR OVA L O F
SUPPLIER /SUBCONTR AC TOR
SECO N D S O U R CE S A N D R ED U CI N G COS T
LIK E LIH O O D
AVAIL ABILIT Y/QUALIT Y OF
R AW MATERIALS
FAILURE TO MANAGE DISTRIBUTORS
T H R O U G H PU R CHA SI N G I N I T IAT I V E S
R O B US T SU PPL I ER Q UA L I T Y
M A NAG E M EN T PR O CED U R E S
AND DEALERS CORREC TLY
N EG OT IAT I O N S W I T H CUS TO M ER S TO PA SS
O N I N CR E A SE S I N R AW M AT ER IA L PR I CE S
5
ACQUISITION INTEGR ATION
BUSINESS RISK
MITIGATION
LOSS OF KEY CUSTOMERS
PREPAR ATION AND EXECUTION OF
LOSS OF KEY EMPLOYEES
EROSION OF INTELLEC TUAL
PROPERT Y BASE
FAILURE TO INTEGR ATE
MANAGEMENT REPORTING
STRUC TURES AND DISCIPLINES
CROSS - FUNC TIONAL INTEGR ATION PL ANS
EARLY EMPLOYEE ENGAGEMENT BY ON -SITE
PRESENCE OF AVON MANAGEMENT
EARLY INTEGR ATION INTO EXISTING INTERNAL
CONTROL FR AMEWORK
IM PAC T O N
COS T S , SA L E S &
PR O FI TA B I L I T Y
NEW
LIK E LIH O O D
IM PAC T O N
SA L E S , COS T S &
PR O FI TA B I L I T Y
30
I N T E G R A T I N G T E C H N O L O G Y A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 5
S T R AT E G I C R E P O R T
6
QUALIT Y RISK S AND PRODUC T RECALL
BUSINESS RISK
MITIGATION
POOR QUALIT Y SYSTEMS
FOCUS ON SIX SIGMA MANUFAC TURING
ALLOW FAULT Y PRODUC T TO
DISCIPLINES, SITE QUALIT Y PROCEDURES
REACH CUSTOMER
AND EMPLOYEE ENGAGEMENT
PROCESS/MATERIAL /EQUIPMENT
FOCUS ON PRODUC T DEVELOPMENT TO
INADEQUAC Y E.G . OUR PROTEC TION
IMPROVE DESIGN OF PRODUC TS
PRODUC TS ARE SAFE T Y CRITICAL
THEREFORE ALL PRODUC T
REACHING THE END CONSUMER
MUST MEE T SPECIFICATION
CONTINUE WITH EQUIPMENT AND
PROCESS IMPROVEMENTS
LIK E LIH O O D
IM PAC T O N
FI NAN CIA L LOSS ,
R EPU TAT I O NAL
DA M AG E
7
CUSTOMER DEPENDENC Y
BUSINESS RISK
MITIGATION
OVER RELIANCE ON A FEW
FOCUS ON CUSTOMER SERVICE
CUSTOMERS E.G . US GOVERNMENT,
DAIRY OEMS
GROWING SALES TO OTHER CUSTOMERS
E.G . CONTINUING TO EXPAND PROTEC TION SALES
POOR CUSTOMER REL ATIONSHIPS
INTO NEW COUNTRIES AND MARKE TS AND EXPANDING
AND COMMUNICATION DUE TO
DAIRY SALES INTO DEVELOPING MARKE TS
INCOMPLE TE UNDERSTANDING
OF CUSTOMERS OR FAILURE TO
MEE T EXPEC TATIONS
SE T TING AND REGUL AR MONITORING OF
SALES BUDGE TS AND MA JOR SALES PROSPEC TS
BY THE GROUP EXECUTIVE AND THE BOARD
LIK E LIH O O D
IM PAC T O N
SAL E S AN D
PR O FI TA B I L I T Y
8
NON - COMPLIANCE WITH LEGISL ATION
BUSINESS RISK
MITIGATION
FAILURE TO COMPLY WITH
REGUL AR FOCUS AND REVIEW OF THE EXPORT
EXPORT CONTROLS,
AND ITAR CONTROL FR AMEWORK , NPI PROCESS
THE INTERNATIONAL TR AFFIC
AND THE INTERNAL CONTROL PROCEDURES
LIK E LIH O O D
IN ARMS REGUL ATIONS (ITAR),
BRIBERY AC T AND
PRODUC T APPROVALS
INTERNAL AND EX TERNAL AUDIT
IM PAC T O N
FI NAN CIA L LOSS ,
R EPU TAT I O NAL
DA M AG E
A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 5 I N T E G R A T I N G T E C H N O L O G Y
31
R
A
E
Y
E
H
T
F
O
W
E
I
V
R
E
V
O
S
S
E
N
I
S
U
B
R
U
O
N
U
R
E
W
W
O
H
D
E
M
R
O
F
R
E
P
E
W
W
O
H
N
O
I
T
A
M
R
O
F
N
I
R
E
D
L
O
H
E
R
A
H
S
S T R AT E G I C R E P O R T
Trends affecting the future
Protection & Defence – DOD spending
Our Protection & Defence business is well placed to meet the
challenges of a continuing period of instability in the global
defence market. Providing safety-critical equipment to the
warfighter under a long-term sole-source contract with the DOD
provides a degree of certainty in our biggest market, while our
rapid growth in homeland security and military markets around
the globe demonstrates the success of our strategy of investing
in sales, marketing and product development.
In May 2008 we were successful in obtaining a single-source
$112m, five year full rate production (FRP) contract from the DOD
for the M50 military respirator at the supply rate of 100,000 mask
systems per annum. The DOD also exercised its ‘requirements’
option to extend the order for a further five years allowing it to
take up to a further 200,000 mask systems per annum, resulting
in total potential quantities of up to 300,000 mask systems per
annum over a ten year period.
Budget funding for our ten year sole-source respirator
programme with the DOD has been largely unaffected by the
current economic instability although the procedural process
of doing business with the US Government has slowed. Despite
continued downward pressure on military budgets globally
and in particular uncertainty about the size and timing of the
approval of DOD budgets, we expect spend on PPE for the
warfighter to remain stable, although the timing of orders may
again be unpredictable. At the year end we carried forward
orders for 50,000 M50 masks for delivery in 2016. We also
expect further mask orders in our 2016 financial year from 2016
DOD budgets.
The buying pattern of filter spares has been less stable and
predictable as is often the case when a new product is first fielded
to the front line. The combination of filling the logistics chain and
replacement of filters which have been used or where the shelf-
life has expired provides a long-term source of demand for filter
spares. Avon is now one of two sources for filters for the DOD.
Dairy – market conditions
The market for our consumable product can be affected by
macro issues that impact farmers’ short-term cash flow and thus
their purchasing patterns. The milk price, which determines the
farmer’s revenue, is impacted by both short-term commodity
markets (it is a traded item in the US) and the medium-term
cycle of cow population, as herds are bred or culled. Feed is the
farmer’s major input cost and the price of feed is determined by
the success or otherwise of the harvest and competing demand
for the crops.
20%
INCREASE IN PROFIT
BEFORE TAX
AEF celebrates 30 years
Avon Engineered Fabrications (AEF), a division of Avon Protection
Systems, is celebrating 30 years as a major contractor to the DOD. AEF is
recognised as an industry leader in flexible fabricated solutions.
Based in Mississippi, it was opened in 1985 as the only specialised
manufacturer of hovercraft skirt systems in North America.
Today the business is working with the Navy to develop the next
generation skirt system and provides a variety of engineered solutions
to the DOD and commercial markets.
32
I N T E G R A T I N G T E C H N O L O G Y A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 5
Group – treasury and exchange rates
The Group uses various types of financial instruments to manage
its exposure to market risks which arise from its business
operations, full details of which are included in note 19 of the
financial statements. The main risks continue to be movements in
foreign currency and interest rates.
The Group’s exposure to these risks is managed by the Group
Finance Director who reports to the Board. The Group faces
translation currency exposure on its overseas subsidiaries and is
exposed in particular to changes in the US dollar and, following
the acquisition of InterPuls in 2015, the euro.
Each business hedges significant transactional exposure by
entering into forward exchange contracts for known sales
and purchases. The Group reports trading results of overseas
companies based on average rates of exchange compared
with sterling over the year. This income statement translation
exposure is not hedged as this is an accounting rather than cash
exposure and as a result the income statement is exposed to
the following:
Based on the 2015 results a 5¢ movement in the average
US dollar rate would have impacted reported operating
profit by £0.7m (2014: £0.4m) and profit after tax by £0.6m
(2014: £0.3m).
The balance sheets of overseas companies are included in
the consolidated balance sheet based on the local currencies
being translated at the closing rates of exchange. Balance sheet
translation exposure can be partially hedged by matching either
with foreign currency borrowings within the subsidiaries or with
foreign currency borrowings which are held centrally.
At the end of the year the asset exposure was 10% hedged
(in 2014 the asset exposure was not hedged as there were no
borrowings). As a result of the remaining balance sheet exposure,
the Group was exposed to the following:
Based on the 2015 balance sheet a 5¢ movement in the
year-end US dollar rate would have impacted Group net
assets by £1.3m (2014: £1.4m).
Based on the 2015 balance sheet a 5¢ movement in the
year-end euro rate would have impacted Group net assets
by £0.8m (2014: nil).
The Group is exposed to interest rate fluctuations and with net
debt of £13.2m (2014: net cash of £2.9m), a 1% movement in
interest rates would impact the interest costs by £0.1m (2014:
no impact as the Group had net cash). The Group assesses the
need to obtain the best mix of fixed and floating interest rates in
conjunction with the maturity profile of its debt. There were no
fixed interest borrowings at the year end (2014: £nil).
Andrew Lewis
Interim Group Chief Executive
17 November 2015
Sarah Matthews-DeMers
Associate Group Finance Director
17 November 2015
R
A
E
Y
E
H
T
F
O
W
E
I
V
R
E
V
O
S
S
E
N
I
S
U
B
R
U
O
N
U
R
E
W
W
O
H
D
E
M
R
O
F
R
E
P
E
W
W
O
H
N
O
I
T
A
M
R
O
F
N
I
R
E
D
L
O
H
E
R
A
H
S
A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 5 I N T E G R A T I N G T E C H N O L O G Y
33
E N V I R O N M E N TA L A N D C O R P O R AT E S O C I A L R E S P O N S I B I L I T Y
Annual report on environmental
and corporate social responsibility
The sustainability of the business is directly impacted by the
environment in which we operate. In order to secure the future of
the business we are committed to contributing to economic, social
and environmental sustainability both locally and globally. The
Directors acknowledge that this involves balancing the interests
of shareholders, employees, customers, suppliers and the wider
communities in which our businesses operate.
As we continue to work to strengthen our position as the world
leader in the markets in which we do business, we will also seek to
honour our obligations to society. At many of our sites we remain
one of the largest employers in the local area. As an integral part
of these communities we ensure our impact is one of being an
economic, intellectual and social asset.
We are committed to minimising the impact of our operations
on the environment. We encourage all employees to think about
ways of modifying their behaviour to reduce our impact on
the environment by, for example, reducing waste, cutting out
unnecessary travel and saving water and energy.
As a company with many manufacturing sites a forward thinking
approach to the health and safety of our employees is of
paramount importance and we constantly endeavour to improve
our systems to maintain our excellent health and safety record.
We strive to:
Manage the Group as a sustainable business for the benefit
of shareholders and other stakeholders
Develop and motivate our employees, ensuring they are fully
engaged in the Group’s strategy
Minimise waste and emissions that contribute to
climate change
Maintain our excellent standards of health and safety in
the workplace
Code of Conduct
A revised Code of Conduct (the Code) was released at the start
of the year. The Code sets out the values and standards of
behaviour expected from employees with a guide as to what
is expected of them as representatives of Avon and provides
information on how to report concerns.
All those working for or on behalf of Avon are required to confirm
each year that they have read and understood the Code.
Ethics and anti-corruption
The Code covers a wide range of rules and responsibilities for
employees to ensure they carry out their business activities in
a way that will attract the respect of those they deal with and
will not bring Avon’s reputation into disrepute. This includes
complying with the laws and regulations in the countries in which
we operate and do business. The Code also contains guidance
on avoiding conflicts of interest, confidentiality, adherence to
export controls, our approach to gifts and hospitality, bribery and
corruption and managing relationships with third parties.
We are committed to acting professionally, fairly and with
integrity in all our business dealings and relationships.
We implement and enforce effective systems to uphold our zero
tolerance approach to bribery and corruption. To ensure we only
A visit to Melksham Oak School
Russell Edwards, Design Engineer at Avon Protection in Melksham, paid a visit
to a local school, Melksham Oak, to talk about what Avon does, the range
of design and technology roles at the company, and the education Russell
needed to become a design engineer there.
A presentation on Avon was followed by the opportunity to try on some
current masks, the M50, FM53, Viking Z Seven, and FM12, and to test variations
of a new prototype.
34
I N T E G R A T I N G T E C H N O L O G Y A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 5
work with third parties whose standards are consistent with our
own, all agents and third parties who act on behalf of the Group
are obliged by written agreement to comply with the standards set
out in the Code. A programme of supplier audits exists to ensure
suppliers adhere to Avon’s standards.
Upholding the Code is the responsibility of all employees at Avon.
We encourage everyone to report any behaviour which may be
a breach of the Code, or is unethical or illegal. This is achieved
by fostering a culture of openness and accountability and by
providing a formal procedure that enables any individual working
for the Group to raise breaches of policy or malpractice directly at
the highest level.
A copy of the Code is available to all employees in addition to
being available on the Group website.
Human rights
Avon is fully committed to respecting the human rights of all
those working with or for us. We do not accept any form of child or
forced labour and we will not do business with anyone who fails to
uphold these standards.
Environmental responsibility
At the start of the year we set significant environmental
improvement goals. Each site has delivered a number
of improvements:
Cadillac, US
Program of installing motion light sensors to save
energy and money
Installed grounding clamps and bars at work stations in areas
where chemicals are transferred from one container to another
Picayune, US
Boiler upgrade, installed water treatment to eliminate
scale resulting in less water and gas used
Melksham, UK
Recycling of both used machinery oil and cooking oil
introduced in 2015
Used pallets being upcycled for external buildings within
Hampton Park West
Automated trade effluent dosing systems introduced to
Cluster Exchange area
An external energy survey conducted at our Melksham
site revealed that excessive power was being fed into our
building. Our power supplier has subsequently reduced our
supply to the input level required
Introduction of extra LED lights within the production area
being investigated for 2016
Health, Safety & Environmental employee representatives
attending safety and environmental meetings with Trade
Union and management
Recycling
At all of our sites we continue to recycle:
Waste cardboard
Waste polythene
Paper
Used products
Toners and inks
Metal
WEEE
In the UK the government’s reluctance to continue subsidies for
the recycling of cured rubber in road surface repairs, equestrian
centres and children’s playground surfaces into 2015 has led to
many rubber recycling companies ceasing to trade. Cured rubber
was also banned from being used as a fuel source for power
stations in Europe to meet emissions targets. Therefore, all of
our cured rubber waste produced throughout 2014/15 was sent
to landfill. This has been a significant setback to achieving our
annual target of 85% recycled waste.
Below is just one example of upcycling at Hampton Park West
with previously used pallets being reused to make a lean-to
shed, which houses our trade effluent automatic dosing system.
Environmental concerns
We have experienced no external environmental incidents or
concerns throughout 2014/15 at any of our locations.
Energy
The three main energy sources of electricity, gas and water used
at Hampton Park West are being monitored on a weekly basis for
trends which differ from the normal distribution. The aim of this is to
recognise spikes in usage and implement improvements to reduce
energy consumption on these processes. It is hoped to roll this
approach out to the US sites in due course.
R
A
E
Y
E
H
T
F
O
W
E
I
V
R
E
V
O
S
S
E
N
I
S
U
B
R
U
O
N
U
R
E
W
W
O
H
D
E
M
R
O
F
R
E
P
E
W
W
O
H
N
O
I
T
A
M
R
O
F
N
I
R
E
D
L
O
H
E
R
A
H
S
A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 5 I N T E G R A T I N G T E C H N O L O G Y
35
E N V I R O N M E N TA L A N D C O R P O R AT E S O C I A L R E S P O N S I B I L I T Y
ISO 14001
External auditors visited Avon in 2015 to conduct a
re-certification of our ISO14001 standard. This audit was
conducted to ensure the integration of Avon Underwater
Systems, Poole and Hampton Park West's generic Environmental
Management System was appropriate. The audit was very successful
with no deficiencies recorded. Two observations were noted and
addressed immediately. We have also undertaken two subsequent
surveillance visits, both resulting in a clean bill of health.
What is ISO 14001?
ISO 14001 was developed to provide a management system to help
organisations reduce their environmental impact.
The standard provides the framework for organisations to
demonstrate their commitment to preserving and protecting
the environment by:
Reducing harmful effects on the environment
Providing evidence of continual improvement of
environmental management
Environmental management system
By achieving ISO 14001 certification Avon is able to clearly
demonstrate its commitment to reducing waste and recycling
materials where appropriate. The benefits to the organisation are
not just in cost savings; ISO 14001 accreditation is also beneficial
when tendering for new business.
Legislation
With evolving environmental legislation within the EU, US and
the UK, Avon ensures compliance through regular environmental
updates from its membership to the Institute of Environmental
Management and Assessment (IEMA).
Mandatory carbon reduction scheme
The Companies Act 2006 (Strategic Report and Directors’ Reports)
Regulations 2013 requires quoted companies to include within their
annual report details of greenhouse gas emissions for which they
are responsible and other environmental matters for which key
performance indicators are selected.
Avon has employees in each of its facilities who are responsible
for collecting and acting on the data. The collected data allows
the organisation to monitor and examine carbon emission trends.
Greenhouse Gas (GHG) emissions
Description
Mandatory reporting
of emissions directly
from our operations
which include fuel in
our vehicles and
refrigeration leakage
Mandatory reporting
of emissions from
electricity, gas and
water usage at
each facility
Scope
1
Scope
2
Total
GHG
emissions
in tons
2012/13
GHG
emissions
in tons
2013/14
GHG
emissions
in tons
2014/15
7
5
5
8,496
8,185
9,206
8,503
8,190
9,211
Ratio of emissions to revenue
7%
7%
7%
Belcamp self-defence challenge
The community group ‘Streetwise’ recently came to the Belcamp office in the
US to teach basic self-defence techniques and how to recognise, react to and
survive an attack.
A team of twelve Avon employees and family members took part in the
workshops. The day involved lectures and hands-on defence methods including
defensive stance, voice, jab/cross, palm and knee strikes, and wrist escape.
36
I N T E G R A T I N G T E C H N O L O G Y A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 5
Facility
2013/4
Scope 2
Emissions
2014/5
Scope 2
Emissions
2013/4
Average
Headcount
2014/5
Average
Headcount
Melksham
2,686
3,117
Cadillac
2,066
2,020
Picayune
1,019
1,061
Belcamp
155
148
205
304
37
44
205
275
43
44
Picayune, US
Improvements made include removing unsafe scaffolding,
installing appropriate permanent fixings for the propane
tank and installing a new concrete wheelchair ramp in front
of the building.
Emergency Action and First Aid Responder training
conducted and a defibrillator installed.
New forklift paths and parking were laid out, rerouting them
away from pedestrian spray booth areas.
Ergonomic upgrade to buffers to reduce risk of injury to
Johnson Creek
2,259
2,860
160
160
operators when buffing.
Health and Safety (H&S)
Over the year monthly global H&S meetings are held at the UK
and US sites. Through information sharing, knowledge and ideas
we are able to implement best practice across our global sites.
Monthly meeting reports are displayed in our facilities and on
our Avon Communication Exchange (ACE) intranet site for all
employees and invited visitors to view.
Our management teams put considerable focus on potential
hazard reporting. This reporting ensures that any potential
hazards are reported early and appropriate action taken before
they cause an incident or an accident. These actions are key to
ensure our facilities are safe places in which to work.
Safety teams
A best practice initiative from our Cadillac site, which we will
roll out across all sites next year, is that of empowering our
employees to become more involved in health and safety
decisions and best practices. Safety teams will be established at
each of the facilities to conduct internal audits, inspections and
lead by example, further increasing the positive safety culture
throughout our organisation.
Cadillac, US
Safety guards installed and updated in all high areas
including roof and mezzanines.
Established a new lockout program for mechanical and
electronic equipment to ensure only fully trained
operators are able to operate equipment.
Job safety analysis conducted at all production stations.
Training programmes implemented for contractors and
employees on departmental safety data sheets, PPE
guidelines and hazard assessment.
Improved fire exit signage.
All compressed air containers are now labelled and securely
stored according to local regulations.
Created a safety calendar to track events, schedule trainings,
and inspections.
Plant wide 5S activities undertaken.
Melksham, UK
No reportable accidents.
Legionella two yearly legal requirement risk assessments
completed with appropriate control measures implemented.
Lowest number of recorded accidents at Hampton Park West
for five years.
Successful survey from Wiltshire Fire Brigade who were very
happy with the emergency systems at Hampton Park West.
A second visit from the Fire Brigade in October enabled ARTIS's
sour gas testing facility to be signed off as safe to operate.
Formal H&S induction for new employees introduced.
Mississippi State University Center for Safety and Health
conducted an environmental audit at Picayune specifically to
assess toluene exposure.
It was found that toluene levels were high but within the OSHA
allowable limit. As an engineering control a fan was installed above
the spray area to dissipate the toluene fumes, reducing exposure
to employees and visitors to an acceptable level.
R
A
E
Y
E
H
T
F
O
W
E
I
V
R
E
V
O
S
S
E
N
I
S
U
B
R
U
O
N
U
R
E
W
W
O
H
D
E
M
R
O
F
R
E
P
E
W
W
O
H
N
O
I
T
A
M
R
O
F
N
I
R
E
D
L
O
H
E
R
A
H
S
A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 5 I N T E G R A T I N G T E C H N O L O G Y
37
E N V I R O N M E N TA L A N D C O R P O R AT E S O C I A L R E S P O N S I B I L I T Y
Corporate social responsibility
Investing in our people
Our success depends on our people. The Group recognises
the importance of our employees in helping us to achieve our
corporate goals.
We are committed to providing a working environment where
everyone feels respected and valued and we pursue equality of
opportunity in all employment practices, policies and procedures
regardless of race, nationality, gender, age, marital status, sexual
orientation, disability and religious or political beliefs. A formal
diversity policy is in place, setting out our approach to diversity.
A copy can be found in the corporate governance section of
our website.
The Group aims to support all employees to develop to their full
potential and we are committed to recognising, encouraging and
developing talent across our business. We encourage talented
employees by matching the right people to the right roles and by
ensuring professional development opportunities are available
throughout their employment within the Group. Our flagship
global Professional Development Programme is now in its second
year. This enables participants across our business to manage
their own career development through setting self-learning
objectives with the help and guidance of a mentor from within the
organisation and an external facilitator.
We strive to be a great place to work for all our employees and it
is under this banner that we have reinvigorated and re-launched
our CREED recognition and reward programme. The Group’s core
values are embodied by the acronym CREED, a set of principles
and cultural values which are rigorously pursued and adhered
to across the Group.
All employees have a part to play in
ensuring Avon remains a great place
to work. One of our corporate values
is to motivate our people through
appropriate recognition and reward
programmes. Under our CREED
reward programme, employees can
nominate colleagues whom they
believe embody one or more of
the CREED values in their job performance. Each month all those
nominated receive a recognition award from the Group, with a
quarterly and annual winner selected from those nominated.
Target
2015
2014
Response rate
>50%
74%
45%
Avon is a great place to work
>60%
77%
75%
C
R
E
E
D
Understanding and delivering our CUSTOMER
(internal or external) needs and expectations
Motivating our people through appropriate
RECOGNITION and reward programmes
Providing responsibility through meaningful
employee EMPOWERMENT
Ensuring a friendly and ENGAGED environment
that embraces worthwhile communications
where innovation is encouraged
Recognising the value of cultural DIVERSITY
and talent across our business
The new graduate scheme
The new Avon Rubber graduate scheme is based on a two year ‘work & learn’
programme to bring new talent to our organisation.
Core elements include strategy, design and innovation, operations and sales
and marketing.
The first person to be selected for the scheme is Jack Wallman, a chemistry
graduate from University of Bristol.
38
I N T E G R A T I N G T E C H N O L O G Y A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 5
The gender of our staff at 30 September 2015 was as follows:
Non-Executive Directors
Executive Directors
Senior Managers
Other Employees
Total
Male
Female
3
2
16
503
524
-
-
4
324
328
The survey results are another of the Group's key
performance indicators.
We listened to the 2015 results and acted to make positive
change across the company:
The continuation of our ‘Professional Development
Programme’ will help employees develop to their full potential
The launch of our Great Place to Work employee portal
Improved employee communications, including new
employee newsletter, 'Exchange'
Six of the senior managers (four male, two female) are also
directors or officers of subsidiary undertakings.
Nurturing talent
In the UK we support student engineers by enabling two second
year university students to spend a year as members of our
respirator design team, working on new product development.
In the US, we support a number of student summer placements and
internship placements where students are able to alternate college
semesters with full-time work semesters from their freshman year
to graduation. We are also able to provide additional opportunities
through secondments between our global sites.
The students help us tackle real-world engineering problems as
they learn about the engineering profession as well as having the
potential for long-term employment within Avon. A number of our
student placements have taken up full time employment with the
Group following their graduation and contribute significantly to
Group achievements.
We operate group-wide employee share plans to encourage
our staff to participate in the future of the Group through share
ownership. All UK employees are entitled to participate in the Share
Incentive Plan (SIP) whilst US employees are invited to join the
Employee Stock Purchase Plan (ESPP). Both provide the opportunity
to purchase shares through payroll deductions.
Employee Opinion Survey
We understand that to provide growth and expand our future
opportunities, we need a happy and motivated workforce.
Understanding and acting on the concerns of our employees is
the key to our future and we encourage active engagement
across our sites throughout the year. Our annual employee opinion
survey gives the opportunity for employees to give anonymous
feedback to management, which we assess and use to inspire
improvement plans.
The survey helps to ensure Avon listens to its employees and strives
for continuing improvement. The responses are evaluated by each
level of management and it will continue to be an annual forum
that helps Avon invest in its people and drive success.
2015
Community and charitable contributions
We aim to work with and for the communities in which we
operate, recognising our role as a major employer in our
geographical site locations. We are aware of the impact the
Group has on its local environment and seek to contribute to its
economic, social and environmental sustainability.
Engaging with, and giving back positively to, the local
community ensures that we are supporting our employees,
their friends and families. We also work with many charitable
organisations who are involved in some way with the areas of
business in which we operate.
We recognise the value provided to local and wider communities
by members of the reserve forces and those in public service.
We are proud to have employees serving and a number of
our employees are part of service families. We support their
commitment and dedication to serve.
In the US we support our employees and their families in
extracurricular activities through sponsoring local sports and
school teams. In the UK, we have regular charitable giving events
aimed at raising funds for both local and national causes.
We listen and drive forward
improvements to make Avon a
Great Place to Work
R
A
E
Y
E
H
T
F
O
W
E
I
V
R
E
V
O
S
S
E
N
I
S
U
B
R
U
O
N
U
R
E
W
W
O
H
D
E
M
R
O
F
R
E
P
E
W
W
O
H
N
O
I
T
A
M
R
O
F
N
I
R
E
D
L
O
H
E
R
A
H
S
A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 5 I N T E G R A T I N G T E C H N O L O G Y
39
E N V I R O N M E N TA L A N D C O R P O R AT E S O C I A L R E S P O N S I B I L I T Y
Listed below are a few examples of the organisations we have
helped this year across our US and UK sites:
Michigan Advanced Technician Training
Cadillac supports a collaboration with the Michigan Economic
Development Corporation and Baker College of Cadillac with the
MAT2 programme.
MAT2, the Michigan Advanced Technician Training Program, is an
innovative, industry-driven approach to education. Developed
in conjunction with global industry technology leaders to
combine theory, practice and work to train a globally competitive
workforce, MAT² addresses two critical issues facing the
manufacturing and technology industries; a widening skills gap
and an ageing workforce.
This initiative is similar to an apprenticeship programme, where
students alternate between classroom instruction and on-the-job
training, gaining the necessary hands-on skills and real-world
experiences for them to become successful and productive
members of the workforce.
We are currently supporting one student through this three year
commitment and are looking forward to the skill set he will bring
to Cadillac on completion of the programme.
Feeding America Food Truck
Our Cadillac site sponsored the local Feeding America Food Truck.
This bi-weekly programme provides over 100 families in the local
area with fresh produce and other food and is primarily funded
by local donations. Our Cadillac team members also volunteered
their time and energy to help hand out food and support the
event. The team is planning to continue to volunteer on a bi-
weekly basis to support this valuable community cause.
Wiltshire Community Foundation
The Company established a fund with a local community charity
in Wiltshire, the Wiltshire Community Foundation (WCF), in 1993.
This fund was invested by the WCF and the interest earned to date
has been used to support a wide range of charities and groups
in the Wiltshire area.
Since 2001, £39,072 has been donated from this fund to the local
community surrounding the Melksham headquarters.
In total 37 projects have been supported. Here are a few examples:
Wiltshire Mind received £1,000 towards a 'You in Mind' support
centre that offers both group and one-to-one advice and
support sessions.
HELP Counselling Services offers its
services to any adults (16+ years)
who are referred, or self-referred
to us from within the community.
Their clients’ lives may be disrupted
by a variety of problems such as
those to do with family or marital
relationships, depression, anxiety, stress or abuse. Avon’s grant
was used to pay for counselling supervision.
The programme provides nearly 500 children and young people
with profound and multiple learning disabilities the opportunity
to take part in a music festival. This builds their self-awareness
and confidence, encourages creativity and develops music and
performance skills. The grant of £420 was used for artist fees,
workshops costs and performance costs.
40
I N T E G R A T I N G T E C H N O L O G Y A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 5
Georgia worked on a range of projects including building water
tanks, safe housing, pit latrines, animal pens and many more
whilst she was in Tanzania.
Cricket Without Boundaries
Cricket Without Boundaries works to educate the youth of
Sub-Saharan Africa about the dangers of HIV and AIDS and how
best to avoid infection. The scale of the problem is huge with
HIV rates in some areas of Africa still running at over 40%, the
ingrained attitudes within the population at large to poverty
and disability, and both national and local governments either
unwilling or unable to tackle the problems that exist.
Cricket coaching is used to engage kids while important
messages are delivered in an enjoyable and engaging format,
hopefully cementing the knowledge to a much greater degree
than simply lecturing. The charity aims to make a positive impact,
even if only for an hour or two whilst the kids play cricket or
people from the charity simply spend time with them.
Avon sponsored a local cricket coach Jon Haines of Goatacre
Cricket Club who went as a volunteer on a three week Cricket
Without Boundaries trip to Kenya to coach over 4,000 children,
train over 50 local coaches, and form strong links with
orphanages and charities along the way. Avon's contribution was
used to purchase cricket equipment which was left with the local
children as a lasting legacy of the trip.
Wiltshire Scrapstore
With recycling high on Hampton Park West’s agenda we are
working with a local voluntary business, Scrapstore, which accepts
waste that can be reused rather than sent to landfill. Scrapstore
takes in used furniture, old equipment, composite materials and
excess stock, and gives it to schools, colleges and nurseries for just
the cost of the transportation.
We recently had a visit from some of the Scrapstore staff who
amazed us with their vision for some of our scrap material:
• Euro tunnel anti vibration strips which have extruded grooves,
used to hold marble race championships in primary schools
• Attaching dock fender off-cuts to sharp edges in the
playground to protect vulnerable children from injuring
themselves should they fall
• Webbing from the moulding process - used to make
rubber animals
• Granulated rubber - used in areas which could cause injury
to children
• Extruded components - used as seating
Africa fundraising trip
Avon recently raised funds towards UK-based charity Go Make
a Difference (GoMAD) to support Georgia Fraser, a placement
student, to do charity work in Musoma, Tanzania.
The charity offers medical education, supplies and care to
residents, and funds housing adaptions for those who need
it including easier access for people disabled by leprosy.
They also visit the local orphanage to help care for the children
there, providing them with valuable play time and attention.
R
A
E
Y
E
H
T
F
O
W
E
I
V
R
E
V
O
S
S
E
N
I
S
U
B
R
U
O
N
U
R
E
W
W
O
H
D
E
M
R
O
F
R
E
P
E
W
W
O
H
N
O
I
T
A
M
R
O
F
N
I
R
E
D
L
O
H
E
R
A
H
S
A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 5 I N T E G R A T I N G T E C H N O L O G Y
41
E N V I R O N M E N TA L A N D C O R P O R AT E S O C I A L R E S P O N S I B I L I T Y
Listed below are a few more examples of the organisations we
have helped this year across our US and UK sites:
• Cadillac Firefighters
• Soccer Field Improvement
• Creative Embroidery
• Friends of the Library
• Mercy Hospital surgical wing
• Pines Pin Busters
• Wexford Habitat sponsorship of a habitat house
• Wexford County historical museum restoration
• American Red Cross - Service to Armed Forces
• Cadillac Community Schools
• Cadillac Area Festival hospice motorcycle ride
• First Baptist Church shepherd's table
• United Way - Corp Pledge
• Cadillac Leadership lakefront playground
• Cadillac Area Hockey
• Franklin PTO technology upgrade
• Tight Lines for Troops
•
JDRF - Diabetes Ride sponsorship
• Cadillac Leadership playground project
• Oasis Family Resource cigar dinner
• Alex Harrison Memorial bullying stance
• DbarD Ranch Ride for A Cure, Spectrum Health Cancer Center
• Feeding America Food Truck
• Army Cricket Officials Association
• Combined Services Cricket Officials Association India 2013 tour
• British Mastitis Conference
• KL National Herdsman’s Conference
• National Mastitis Council Regional
• Cancer Research UK
• 1st Bowerhill Scout Group, Melksham
• Alzheimer’s Support, Trowbridge
• Splash Wiltshire, Melksham
• Children’s Hope Charity
• Melksham and Corsham Gateway Club
• Center Lake Fund field trips for school kids
• French American Chamber table sponsorship for Comerica
• Wexford Missaukee CTC
• CASA - Sponsorship of baseball team
Miles Ingrey-Counter
Company Secretary
17 November 2015
42
I N T E G R A T I N G T E C H N O L O G Y A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 5
B O A R D O F D I R E C T O R S
D A V I D E V A N S
C H A I R M A N
A N D R E W L E W I S
I N T E R I M G R O U P
C H I E F E X E C U T I V E
“OUR STRATEGY HAS DELIVERED STRONG ORGANIC GROWTH
IN 2015. THE COMPLETION OF STRATEGIC ACQUISITIONS
COMBINED WITH INTERNAL PRODUCT DEVELOPMENT WILL
ALLOW US TO INTEGRATE TECHNOLOGIES, PROVIDING
INCREASED FUTURE OPPORTUNITIES."
Aged 44. Andrew joined Avon in September 2008 as
Group Finance Director. He holds a first class joint honours
degree in Mathematics and Accounting from the University
College of North Wales, Bangor and is a Fellow of the ICAEW.
Andrew was awarded the Young Finance Director of the
Aged 69. David took up the position of Chairman of the
Year Award at the ICAEW Financial Directors' Excellence
Board in February 2012 having served on the Board from the
Awards in May 2011. He gained a wide range of international
time of his appointment in June 2007. He has been working
experience as a Director at PricewaterhouseCoopers in
in the defence sector for over 30 years and has extensive
Bristol and New Zealand before joining Rotork p.l.c. as
knowledge of the US market. David spent 17 years with
Group Financial Controller. On 1 October 2015 following
GEC-Marconi before joining Chemring Group PLC in 1987 and
the retirement of Peter Slabbert, Andrew was appointed
was appointed Chief Executive in 1999. He remained on the
Interim Group Chief Executive for the two months to
Chemring Board as a Non-Executive Director following his
1 December 2015.
retirement in April 2005 but stood down from this role during
2012 to focus on his role as Chairman of Avon Rubber p.l.c.
He was previously a Non-Executive Director of Whitman PLC.
P I M V E R V A AT
N O N - E X E C U T I V E
D I R E C T O R
R I C H A R D W O O D
N O N - E X E C U T I V E
D I R E C T O R
Aged 50. Pim joined the Board in March 2015 and chairs the
Aged 70. Richard joined the Board in December 2012.
Audit Committee. Pim is Chief Executive of RPC Group Plc,
Richard is a graduate Chartered Chemical Engineer.
the UK based manufacturer of rigid plastic packaging and a
He worked for ICI for 23 years and is a former Managing
FTSE 250 listed company. Pim was appointed RPC’s CEO in
Director of ICI Seeds UK. Following this time he entered the
2013, having previously been their Finance Director since
pharmaceutical industry, firstly as Chief Executive of Daniels
2007. Prior to this, Pim worked for Dutch metals producer,
Pharmaceutical Limited until it was acquired by Lloyds
Hoogovens Groep, before joining Dutch ship propulsion
Chemist plc, and then as Managing Director of a Lloyds
producer Lips Group as Chief Financial Officer in 1996. In 1999
division. He was Chief Executive of Genus plc for 15 years
he returned to Hoogovens Groep (acquired by Corus) and in
until his retirement in September 2011. He is currently
2004 became divisional Finance Director of the £3bn turnover
Chairman of Atlantic Pharmaceuticals Limited, Innovis Limited
Corus Distribution and Building Systems Division.
and Silent Herdsman Holdings Limited.
R
A
E
Y
E
H
T
F
O
W
E
I
V
R
E
V
O
S
S
E
N
I
S
U
B
R
U
O
N
U
R
E
W
W
O
H
D
E
M
R
O
F
R
E
P
E
W
W
O
H
N
O
I
T
A
M
R
O
F
N
I
R
E
D
L
O
H
E
R
A
H
S
A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 5 I N T E G R A T I N G T E C H N O L O G Y
43
D I R E C T O R S ' R E P O R T
F O R T H E Y E A R E N D E D 3 0 S E P T E M B E R 2 0 15
The Directors submit the annual report and audited financial statements of Avon Rubber p.l.c. (‘the Company’) and the Avon Rubber
group of companies, ('the Group') for the year ended 30 September 2015. The Company is registered in England and Wales with company
registration number 32965.
Strategic Report
The Strategic Report, which contains a review of the Group’s
The only significant agreements to which the Company is a
business (including by reference to key performance indicators),
party which take effect, alter or terminate upon a change
a description of the principal risks and uncertainties facing the
of control of the Company following a takeover bid are
Group, and commentary on likely future developments is set out
the Company's revolving credit facility agreement and the
on pages 11 to 33.
Performance Share Plan.
Financial results and dividend
The unsecured revolving credit facility of up to $40 million
provided by Barclays Bank PLC and Comerica Bank contains
The Group statutory profit for the year after taxation amounts
a provision which, in the event of a change of control of the
to £13,666,000 (2014: £10,811,000). Full details are set out in the
Company, gives the lending banks the right to cancel all
Consolidated Statement of Comprehensive Income on page 78.
commitments to the Company and to declare all outstanding
An interim dividend of 2.43p per share was paid in respect of the
year ended 30 September 2015 (2014: 1.87p).
The Directors recommend a final dividend of 4.86p per share (2014:
3.74p) resulting in a total dividend distribution per share for the
year to 30 September 2015 of 7.29p (2014: 5.61p).
Share capital
As at 17 November 2015, the issued share capital of the Company
was 31,023,292 ordinary shares of £1 each. Details of the shares in
issue during the financial year are set out in note 20 of the financial
statements.
The rights and obligations attaching to the Company’s shares are
set out in the Company’s Articles of Association (Articles), copies
of which can be obtained from Companies House or by writing to
the Company Secretary. Shareholders are entitled to receive the
Company’s reports and accounts, to attend and speak at general
meetings, to exercise voting rights in person or by appointing
credit and accrued interest immediately due and payable.
A change of control will be deemed to have occurred if any
person or persons acting in concert (as defined in the City
Code on Takeovers and Mergers) gains direct or indirect control
of the Company.
Under the rules of the Performance Share Plan, on a takeover
a proportion of each outstanding grant will vest. The number
of shares that vest is to be determined by the Remuneration
Committee, including by reference to the extent to which the
performance condition has been satisfied and the number of
months that have passed since the award was made.
The employment contracts for the Executive Directors do not
contain any specific right to compensation for loss of office on a
takeover bid.
Substantial shareholdings
At 3 November 2015, the following shareholders held 3% or more
a proxy and to receive a dividend where declared or paid out of
of the Company’s issued ordinary share capital:
profits available for that purpose. There are no restrictions on
the transfer of issued shares or on the exercise of voting rights
attached to them, except where the Company has suspended
their voting rights or prohibited their transfer following a failure
to respond to a notice to shareholders under section 793 of the
Schroder Investment Management
BlackRock Investment Management
JPMorgan Asset Management
Companies Act 2006, or where the holder is precluded from
Henderson Global Investors
transferring or voting by the Financial Services Authority’s Listing
Standard Life Investments
Rules or the City Code on Takeovers and Mergers. The 887,315
shares held in the names of the two Employee Share Ownership
Trusts on a jointly owned basis or as a hedge against awards
previously made or to be made pursuant to the Performance Share
Plan are held on terms which provide voting rights to the Trustee
and, in certain circumstances under the terms of joint ownership
awards, to the recipient of the awards.
Franklin Templeton Investments
13.2%
9.5%
7.5%
3.4%
3.1%
3.1%
44
I N T E G R A T I N G T E C H N O L O G Y A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 5
Acquisition of own shares
During the year the Directors had the power to make market
Mr. P Vervaat, who, having been appointed since the Company’s
purchases of up to 4,653,492 of the Company’s own shares in issue
last AGM, retires in accordance with Article 79 of the Articles and,
on the basis as set out in the explanatory note on page 143. The
being eligible, offers himself for re-election.
Company did not acquire any of its own shares in 2015 but it did
fund the purchase of 162,095 shares with a nominal value of £1
each by one of the Employee Share Ownership Trusts as described
in note 20.
The Board confirms that Mr. Vervaat has contributed substantially
to the performance of the Board since his appointment.
The Chairman gives his full support to Mr. Vervaat’s offer of
re-election and draws the attention of shareholders to his profile
The Directors also had the authority to allot shares up to an
on page 43.
aggregate nominal value of £10,341,097 which was approved by
shareholders at the last annual general meeting (AGM).
As part of the Board’s annual evaluation process, each
Director undertook a performance evaluation which included
In addition, shareholders approved a resolution giving the
considering the effective contribution of Board members and the
Directors a limited authority to allot shares for cash other than pro
effectiveness of the Board committees.
rata to existing shareholders.
All Executive Directors’ service contracts with the Company
These resolutions remain valid until the conclusion of this
require one year’s notice of termination. Neither Mr. Lewis or
year’s AGM when resolutions to renew these authorities will be
the new Chief Executive Mr. Rennie is currently appointed as a
proposed. Dividends on shares held by the two Employee Share
non-executive director of any limited company outside
Ownership Trusts have been waived.
the Group.
Directors
None of the Directors have a beneficial interest in any contract
to which the Company or any subsidiary was a party during the
The names of the Directors as at 17 November 2015 are set out
year. Beneficial interests of Directors, their families and trusts in
on page 43.
ordinary shares of the Company can be found on page 74.
The Company’s rules about the appointment and replacement of
Directors, together with the powers of Directors, are contained in
Directors’ and officers’ indemnity insurance
the Articles. Changes to the Articles must be approved by special
Subject to the provisions of the Companies Act 2006 (the Act),
resolution of the shareholders.
During the year there have been three changes to the
membership of the Board. Mrs. S Pirie, having completed ten
years as a Non-Executive Director, retired from the Board with
effect from the conclusion of the AGM on 29 January 2015.
the Articles provide for the Directors and Officers of the Company
to be appropriately indemnified. In accordance with section 233
of the Act the Company has arranged an appropriate Directors
and Officers insurance policy to provide cover in respect of legal
action against its Directors.
Mr. P Vervaat was appointed as a Director and Chairman of
The Company’s Articles allow the Company to provide the
the Audit Committee on 1 March 2015. After seven years as Chief
Directors with funds to cover the costs incurred in defending
Executive, Mr. P Slabbert retired as a Director on 30 September
legal proceedings. The Company is therefore treated as providing
2015. Mr. R Rennie will assume the role of Chief Executive on 1
an indemnity for its Directors and Company Secretary which is
December 2015 and Mr. A Lewis assumed the position of Interim
a qualifying third party indemnity provision for the purposes of
Group Chief Executive from 1 October 2015 to 30 November 2015.
the Act.
The Board is satisfied that Mr. D Evans, Mr. P Vervaat and
Mr. R Wood are independent Non-Executive Directors.
Mr. D Evans retires by rotation and, being eligible, offers himself
for re-election.
The Board confirms that Mr. Evans has contributed substantially
to the performance of the Board. Mr. R Wood, the Senior
Independent Non-Executive Director, gives his full support to Mr.
Evans’ offer of re-election and draws the attention of shareholders
to his profile on page 43.
DIVIDEND UP
30%
R
A
E
Y
E
H
T
F
O
W
E
I
V
R
E
V
O
S
S
E
N
I
S
U
B
R
U
O
N
U
R
E
W
W
O
H
D
E
M
R
O
F
R
E
P
E
W
W
O
H
N
O
I
T
A
M
R
O
F
N
I
R
E
D
L
O
H
E
R
A
H
S
A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 5 I N T E G R A T I N G T E C H N O L O G Y
45
D I R E C T O R S ' R E P O R T
F O R T H E Y E A R E N D E D 3 0 S E P T E M B E R 2 0 15
Research and development
The Group continues to utilise its technical and materials expertise
to further advance its products and remain at the forefront of
technology in the fields of respiratory protection, dairy milking
technology and polymer engineering. The Group maintains its
links to key universities in the US and UK and continues to work
with new and existing customers and suppliers to develop
its knowledge and product range. Total Group expenditure
on research and development in the year was £7,139,000
(2014: £7,046,000) further details of which are contained in the
Strategic Report on pages 11 to 33.
Through ARTIS, the Group’s research and development arm,
the Group is recognised as a world leader in understanding the
composition and use of polymer products.
Environmental and corporate
social responsibility
Matters relating to environmental and corporate social
responsibility including reference to our policy on diversity are
set out on pages 34 to 42.
Political and charitable contributions
No political contributions were made during the year or the prior
year. Contributions for charitable purposes amounted to £17,053
(2014: £13,542) consisting exclusively of numerous small donations
to various community charities in Wiltshire, Maryland, Michigan,
Wisconsin and Mississippi.
Financial instruments
An explanation of the Group policies on the use of financial
instruments and financial risk management objectives are
contained in note 19 of the financial statements.
Post balance sheet events
On 8 October 2015 the Group acquired the Argus thermal imaging
camera business from e2v technologies plc for £3.5m. There have
been no other significant events affecting the Company or Group
since the year end.
Statement of Directors’ responsibilities for
preparing the financial statements
The Directors are responsible for preparing the Annual Report, the
Remuneration 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. The Directors have prepared
the Group financial statements in accordance with International
Financial Reporting Standards (IFRSs) as adopted by the
European Union, and the parent company financial statements in
accordance with United Kingdom Generally Accepted Accounting
Practice (United Kingdom Accounting Standards and applicable
law). In preparing the Group financial statements, the Directors
have also elected to comply with IFRSs issued by the International
Accounting Standards Board (IASB). 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 the 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 IFRSs as adopted by the European Union
and IFRSs issued by the IASB and applicable UK Accounting
Standards have been followed, subject to any material
departures disclosed and explained in the Group and
parent company financial statements respectively
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 Company’s
transactions and disclose with reasonable accuracy at any time the
financial position of the Company and the Group and enable them
to ensure that the financial statements and the Remuneration
Report comply with the Companies Act 2006 and, as regards the
Group financial statements, Article 4 of the IAS Regulation.
They are also responsible for safeguarding the assets of the
Company and the Group and hence for taking reasonable steps
for the prevention and detection of fraud and other irregularities.
The Directors are responsible for the maintenance and integrity
of the Company’s website. Legislation in the United Kingdom
governing the preparation and dissemination of financial
statements may differ from legislation in other jurisdictions.
RETURN ON SALES
INCREASED TO
20.3%
46
I N T E G R A T I N G T E C H N O L O G Y A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 5
Having taken advice from the Audit Committee, the Board
The auditors, PricewaterhouseCoopers LLP, have indicated their
considers that the Annual Report and Accounts, taken as a whole,
willingness to continue in office and a resolution concerning
is fair, balanced and understandable and provides the information
their reappointment will be proposed at the annual general
necessary for shareholders to assess the Company’s performance,
meeting.
business model and strategy.
Each of the Directors, whose names and functions are listed on
Corporate governance
page 43 confirm that, to the best of their knowledge the Group
The Company’s statement on corporate governance can be
financial statements, which have been prepared in accordance
found in the Corporate Governance Report on pages 48 to 52.
with IFRSs as adopted by the EU, give a true and fair view of the
The Corporate Governance Report forms part of this Directors’
assets, liabilities, financial position and profit of the Group; and the
Report and is incorporated into it by cross-reference.
Strategic Report contained on pages 11 to 33 includes a fair review
of the development and performance of the business and the
position of the Group, together with a description of the principal
risks and uncertainties that it faces.
Creditor payment policy
Annual general meeting
The Company’s annual general meeting will be held at our
Hampton Park West facility, Semington Road, Melksham,
Wiltshire SN12 6NB on 26 January 2016 at 10.30am. The Notice of
Meeting can be found on pages 138 to 146. Registration will be
Operating businesses are responsible for agreeing the terms
from 10:00am.
and conditions under which business transactions with their
suppliers are conducted. It is Group policy that payments are
made in accordance with these terms, provided that the supplier
is also complying with all relevant terms and conditions. For the
year ended 30 September 2015, the number of days' purchases
outstanding at the end of the financial year for the Group was
5 days (2014: 2 days) based on the ratio of trade creditors at the
end of the year to the amounts invoiced during the year by trade
creditors. At 30 September 2015 there were no trade creditors in
the balance sheet of the parent company (2014: nil).
Independent auditors
Each Director confirms that on the date that this report was
approved so far as they are aware, there was no relevant audit
information of which the auditors are unaware; and each Director
has taken all the steps they ought to have taken as a Director in
order to make themselves aware of any relevant audit information
and to establish that the Company’s auditors are aware of
that information.
Miles Ingrey-Counter
Company Secretary
17 November 2015
PROFIT BEFORE
TAX UP
20%
A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 5 I N T E G R A T I N G T E C H N O L O G Y
47
R
A
E
Y
E
H
T
F
O
W
E
I
V
R
E
V
O
S
S
E
N
I
S
U
B
R
U
O
N
U
R
E
W
W
O
H
D
E
M
R
O
F
R
E
P
E
W
W
O
H
N
O
I
T
A
M
R
O
F
N
I
R
E
D
L
O
H
E
R
A
H
S
C O R P O R AT E G O V E R N A N C E
Statement of compliance with the UK Corporate Governance Code
The Board of Directors believes in high standards of corporate governance, notwithstanding the Company’s size and status as a member
of the FTSE SmallCap index, and is accountable to shareholders for the Group’s performance in this area. This statement describes how
the Group is applying the relevant principles of governance, as set out in the UK Corporate Governance Code (the Code) which is available
on the website of the Financial Reporting Council (FRC).
The Company is a smaller company for the purposes of the Code
and in consequence certain provisions of the Code either do not
apply to the Company or may be judged to be disproportionate
or less relevant in its case.
The Board considers that, subject to the Senior Independent
Director not attending meetings with the major shareholders
to listen to their views (which is explained further below)
the Company met the requirements of the Code throughout
the year ended 30 September 2015. This statement will
address separately the main subject areas of the Code namely
leadership, effectiveness, accountability and relations with
shareholders. Remuneration is dealt with in the Remuneration
Report on pages 56 to 77.
The Board has an established framework of internal
controls covering both financial and non-financial controls.
In addition, there is an ongoing process for identifying,
evaluating and managing significant business risks faced
by the Group. This process was in place throughout the
2015 financial year and accords with the Revised
Guidance for Directors on Internal Control (formerly
called the Turnbull Guidance).
Leadership and effectiveness
During the year the Board of Avon Rubber p.l.c. comprised a
Chairman, two Non-Executive Directors (the Non-Executive
Directors), and two Executive Directors who are the Chief
Executive and the Group Finance Director. The Board treats
the two Non-Executive Directors as independent. Following
the retirement of Mrs. S Pirie from the Board at the conclusion
of last year’s AGM, Mr. R Wood was appointed Senior
Independent Director.
Mr. P Slabbert retired as Chief Executive on 30 September
2015 and Mr. R Rennie will be appointed to the Board as Chief
Executive on 1 December 2015. Mr. A Lewis has assumed the
position of Interim Group Chief Executive from 1 October 2015
until 1 December 2015.
Rules concerning the appointment and replacement of Directors
of the Company are contained in the Articles of Association.
Amendments to the Articles must be approved by a special
resolution of shareholders. Under the Articles all Directors are
subject to election by shareholders at the first annual general
meeting following their appointment, and to re-election thereafter
at intervals of no more than three years.
The Board is aware of the FRC’s suggestion that companies outside
the FTSE 350 should consider the annual re-election of all directors.
On the basis that this is not a requirement of the Code and it has not
been raised as an issue by any shareholders the Board has chosen
not to change its existing practice.
Non-Executive Directors submit themselves for annual re-election
if they have served for more than nine years since first election.
Additionally, the Non-Executive Directors are appointed by
the Board on terms which allow for termination on three
months’ notice.
Biographies of the Directors appear on page 43. These illustrate the
range of business and financial experience upon which the Board
is able to call. The intention of the Board is that its membership
should be balanced between executives and non-executives and
have the appropriate skills and experience. The special position
and role of the Chairman under the Code is recognised by the
Board and a written statement of the division of responsibilities of
the Chairman and Chief Executive has been agreed. The Chairman
is responsible for the leadership of the Board and ensuring its
effectiveness on all aspects of its role and the Chief Executive
manages the Group and has the prime role, with the assistance of
the Board, of developing and implementing business strategy.
One of the roles of the Non-Executive Directors under the
leadership of the Chairman is to undertake detailed examination
and discussion of strategies proposed by the Executive Directors,
so as to ensure that decisions are in the best long-term interests
of shareholders and take proper account of the interests of the
Group’s other stakeholders. The Chairman ensures that meetings of
Non-Executive Directors without the Executive Directors are held.
48
I N T E G R A T I N G T E C H N O L O G Y A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 5
How the Board operates
The Chairman ensures through the Company Secretary that
the Board agenda and all relevant information is provided
to the Board sufficiently in advance of meetings and that
adequate time is available for discussion of all agenda items,
in particular strategic issues. The Chief Executive and the
Company Secretary discuss the agenda ahead of every meeting.
At meetings the Chairman ensures that all Directors are able to
make an effective contribution throughout meetings and every
Director is encouraged to participate and provide opinions
for each agenda item. The Chairman always seeks to achieve
unanimous decisions of the Board following due discussion
of agenda items. The Non-Executive Directors fully review the
Group’s operational performance and the Board as a whole has,
with a view to reinforcing its oversight and control, reserved a
list of powers solely to itself which are not to be delegated to
management. This list includes appropriate strategic, financial,
organisational and compliance issues, including the approval
of high level announcements, circulars and the report and
accounts and certain strategic and management issues.
Examples of strategic and management issues include
the following:
Approval of the annual operating budget and the three
year plan
The extension of the Group’s activities into new business
and geographic areas (or their cessation)
Changes to the corporate or capital structure
Financial issues, including changes in accounting policy,
the approval of dividends, bank facilities and guarantees
Changes to the constitution of the Board
The approval of significant contracts, for example the
acquisition or disposal of assets worth more than £1,000,000
or the exposure of the Company or the Group to a risk
greater than £1,000,000
The approval of unbudgeted capital expenditure
exceeding £250,000
The approval of quotations and sale contracts where
the sales commission payable to an intermediary exceeds
10% of the net invoice price
Consideration and approval of all proposed acquisitions
and mergers
Each Director has full and timely access to all relevant information
and the Board meets regularly with appropriate contact
between meetings. All Directors receive a tailored induction to
the Group from the Company Secretary on joining the Board.
When appointed, Non-Executive Directors are made aware of
and acknowledge their ability to meet the time commitments
necessary to fulfil their Board and Committee duties. Procedures
are in place, which have been agreed by the Board, for Directors,
where necessary in the furtherance of their duties, to take
independent professional advice at the Company’s expense and
all Directors have access to the Company Secretary. The Company
Secretary is responsible to the Board for ensuring that all Board
procedures are complied with. The removal of the Company
Secretary is a decision for the Board as a whole.
Performance evaluation
An internal annual performance evaluation was undertaken
by the Board during the year and there are no plans to move
towards an externally facilitated evaluation (which is compulsory
for FTSE 350 companies) at this time. The Chairman acted as the
sponsor of the evaluation process and each Director was required
to score a questionnaire for review by the Board. The Company
Secretary acted as facilitator to the Board and issues arising
from the process were incorporated into the Board’s business as
appropriate. Within the evaluation exercise, the Board addressed
three key areas: the extent to which the Board focuses on the
right issues, interacts effectively and has the right mechanics
in place. A separate Chairman evaluation was also carried out in
the same manner.
119%
OF OPERATING PROFIT
CONVERTED
TO CASH
R
A
E
Y
E
H
T
F
O
W
E
I
V
R
E
V
O
S
S
E
N
I
S
U
B
R
U
O
N
U
R
E
W
W
O
H
D
E
M
R
O
F
R
E
P
E
W
W
O
H
N
O
I
T
A
M
R
O
F
N
I
R
E
D
L
O
H
E
R
A
H
S
A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 5 I N T E G R A T I N G T E C H N O L O G Y
49
C O R P O R AT E G O V E R N A N C E
Committees of the Board
Of particular importance in a governance context are the three
committees of the Board, namely the Remuneration Committee,
the Nominations Committee and the Audit Committee.
The members of the Committees comprise the Chairman and
all the Non-Executive Directors. The Non-Executive Directors
continue to regard the Chairman as adding significant value to
the deliberations of the Audit Committee and his membership
is ratified by Provision C.3.1. of the Code, which permits listed
companies outside the FTSE 350 to allow the Chairman to
sit on the audit committee where he or she was considered
independent on appointment as Chairman. Mr. P Vervaat is
Chairman of the Audit Committee. The Board is satisfied that
Mr. Vervaat has recent relevant financial experience and his
profile appears on page 43. Mr. D Evans is Chairman of the
Nominations Committee and Mr. R Wood is Chairman of the
Remuneration Committee.
The Remuneration Committee’s principal responsibilities are
to decide on remuneration policy on behalf of the Board and
to determine remuneration packages and other terms and
conditions of employment, including appropriate performance
related benefits for the Executive Directors and other senior
executives. The Chief Executive and the Company Secretary
attend meetings of the Committee by invitation, but are absent
when issues relating to each of them are discussed. More details
of the activities of the Remuneration Committee are set out in the
Remuneration Report on pages 56 to 77.
The Board schedules eight regular meetings per year. This year
two further meetings have been held on an ad hoc basis,
by telephone conference, in connection with the acquisition
of InterPuls S.p.A.
Meetings during year ended 30 September 2015
Board
Audit
Committee
Remuneration Nominations
Committee
Committee
SJ Pirie**
RK Wood
DR Evans
PC Slabbert
AG Lewis
PRM Vervaat***
3
8
8
8
8
5
1
3
3
3 *
3 *
2
3
6
6
4 *
1 *
3
-
5
5
3*
-
4
*
Attendance by invitation
**
SJ Pirie retired from the Board on 29 January 2015
*** PRM Vervaat was appointed to the Board on 1 March 2015
Copies of the terms of reference of the Nominations,
Remuneration and Audit Committees and the terms and
conditions of appointment of the Non-Executive Directors are
available on the Company’s website or from the
Company Secretary.
Relations with shareholders
The Directors regard communications with shareholders as
extremely important. All members of the Board receive copies
of analysts’ reports of which the Company is made aware.
In terms of published materials the Company issues a detailed
annual report and accounts and, at the half year, an interim
report. Trading statements have been issued during the year,
together with a number of other event updates. Dialogue takes
place regularly with institutional shareholders and general
presentations are given following the preliminary and interim
results. The Board receives comments from analyst meetings
and shareholder meetings after both interim and final results
and at other times during the year. Shareholders have the
opportunity to ask questions at the annual general meeting and
also have the opportunity to leave written questions with the
Company Secretary for the response of the Directors.
The Directors meet informally with shareholders after the
annual general meeting and respond throughout the year
to any correspondence from individual shareholders.
Annual general meetings provide a venue for the shareholders
to meet the Non-Executive Directors in addition to any other
meetings shareholders may request.
The Non-Executive Directors, having considered the Code with
regard to relations with shareholders, are of the view that it is
most appropriate for the shareholders to have regular dialogue
with the Executive Directors. The results of all dialogue with
shareholders are communicated to the Board and reviewed by
all Non-Executive Directors. However, should shareholders have
concerns, which they feel cannot be resolved through normal
shareholder meetings, the Chairman, Senior Independent
Non-Executive Director and the remaining Non-Executive
Director may be contacted through the Company Secretary.
50
I N T E G R A T I N G T E C H N O L O G Y A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 5
At the annual general meeting on 26 January 2016, the Board
will be following the recommendations in the Code regarding
the constructive use of annual general meetings; as usual,
the agenda will include a presentation by the Chief Executive
on aspects of the Group’s business and an opportunity for
shareholders to ask questions. The Board has no plans to
introduce poll voting on all business at general meetings as a
substitute for using proxy votes, as this is not a requirement of
the Code.
Accountability
The Code requires that Directors review the effectiveness
of the Group’s system of internal controls on a continuing
basis. The scope of this review covers all controls including
financial, operational and compliance controls as well as risk
management. As indicated earlier, the Board has put in place
a framework of internal controls and the Audit Committee
has responsibility to review, monitor and make policy and
recommendations to the Board upon all such matters.
The Directors acknowledge their responsibility for the Group’s
system of internal control. The Board, through the Audit
Committee, keeps this system under continuous review and
formally considers its content and its effectiveness on an annual
basis. Such a system can provide only reasonable, and not
absolute, assurance against material misstatements or losses.
The section on internal control in the Audit Committee Report
on pages 54 to 55 and the following paragraphs describe
relevant key procedures within the Group’s systems of internal
control and the process by which the Directors have reviewed
their effectiveness.
Systems exist throughout the Group which provide for the
creation of three year plans and annual budgets; monthly
reports enable the Board to compare performance against
budget and to take action where appropriate.
Procedures are in place to identify all major business risks
and to evaluate their potential impact on the Group.
These risks are described within the Strategic Report on pages
28 to 31.
Assessment
and analysis
Identification
Risk register
Elimination /
minimise / control
or transfer
Review of
effectiveness
of control
Risk management
Risk is managed by the Group Executive team at its quarterly
meetings during the year, led by the Company Secretary and
the Chief Executive. At each meeting the Group Executive team
sets its key priorities for successfully managing the Group’s
businesses in the coming quarter. This process inherently
addresses risk and the Company Secretary sponsors an exercise
that ensures the known risks to the businesses, together with
any newly identified risks, are assessed and analysed effectively
and that the priorities eliminate, minimise, control or transfer
risk (or the effect thereof) as appropriate. The Company
Secretary also sponsors a review of the continuing
effectiveness of other aspects of the control environment
by the executive team.
The Board carried out quarterly reviews of the key risks facing
the Group during the year, following the quarterly reviews
conducted by the Group Executive management team.
The Board also carried out an annual review of the major
business risks affecting the Group, including the macro risks.
In the year under review, the risk assessments carried out both
at business level and at Board level continue to be reviewed
and strengthened as part of the Board’s ongoing response to
the FRC’s Revised Guidance on Internal Control: Guidance
to Directors.
OPERATING
PROFIT UP
19%
R
A
E
Y
E
H
T
F
O
W
E
I
V
R
E
V
O
S
S
E
N
I
S
U
B
R
U
O
N
U
R
E
W
W
O
H
D
E
M
R
O
F
R
E
P
E
W
W
O
H
N
O
I
T
A
M
R
O
F
N
I
R
E
D
L
O
H
E
R
A
H
S
A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 5 I N T E G R A T I N G T E C H N O L O G Y
51
C O R P O R AT E G O V E R N A N C E
The risk management process
Going concern
There is a clearly defined delegation of authority from the
Board to the business units, with appropriate reporting lines
to individual Executive Directors. There are procedures for the
authorisation of capital expenditure and investment, together
with procedures for post-completion appraisal.
Internal controls are in existence which provide reasonable
assurance of the maintenance of proper accounting records and
the reliability of financial information used within the business
or for publication.
The Group finance department manages the financial reporting
process to ensure that there is appropriate control and review
of the financial information including the production of the
consolidated annual accounts. Group Finance is supported
by the operational finance managers throughout the Group,
who have the responsibility and accountability for providing
information in keeping with our policies, procedures and
internal best practices as documented in the internal finance
manual.
The Board has issued a Code of Conduct which reinforces the
importance of a robust internal control framework throughout
the Group. The Board recognises that an open and honest
culture is key to understanding concerns within the business
and to uncovering and investigating any potential wrongdoing.
The Code sets out the procedure whereby individuals may raise
concerns in matters of financial reporting or any other matter
of concern with management and directly with the Chairman of
the Audit Committee to ensure independent investigation and
appropriate follow up action. The Code is reviewed annually.
Although the Board itself retains the ultimate power and
authority in relation to decision making, the Audit Committee
meets at least three times a year with management and, on
two occasions, external auditors to review specific accounting,
reporting and financial control matters. This Committee also
reviews the interim, preliminary and annual statements and has
primary responsibility for making a recommendation on the
appointment, reappointment and removal of external auditors.
Disclosure and transparency rules
Disclosures in respect of the DTR requirements under DTR 7.2.6
are given in the Directors’ Report on page 46 and have been
included by reference.
After making appropriate enquiries, the Directors have, at
the time of approving the financial statements, formed a
judgement that there is a reasonable expectation that the
Company and Group have adequate resources to continue in
operational existence for the foreseeable future. For this reason,
the Directors continue to adopt the going concern basis in
preparing the financial statements.
This conclusion is based on a review of the resources available
to the Group, taking account of the Group's financial projections
together with available cash and committed borrowing.
In reaching this conclusion, the Board has considered the
magnitude of potential impacts resulting from uncertain
future events or changes in conditions, the likelihood of their
occurrence and the likely effectiveness of mitigating actions
that the Directors would consider undertaking.
Long-term viability statement
The Directors have assessed the viability of the Group over
a three-year period to September 2018, taking account of
the Group's current position and the potential impact of the
principal risks documented in the Strategic Report. Based on this
assessment, the Directors have a reasonable expectation that
the Company will be able to continue in operation and meet its
liabilities as they fall due over the period to September 2018.
In making this statement the Directors have considered the
resilience of the Group, taking account of its current position,
the principal risks facing the business in severe but reasonable
scenarios, and the effectiveness of any mitigating actions.
This assessment has considered the potential impacts of these
risks on the business model, future performance, solvency
and liquidity over the period.
The Directors have determined that the three-year period to
September 2018 is an appropriate period over which to provide
its viability statement. In making their assessment, the Directors
have taken account of the Group's robust gearing position with
a gearing ratio of around 4% (see note 19), its ability to raise
new finance in most market conditions and other potential
mitigating actions such as restricting dividend payments.
Pim Vervaat
Chairman of the Audit Committee
17 November 2015
52
I N T E G R A T I N G T E C H N O L O G Y A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 5
N O M I N AT I O N S C O M M I T T E E R E P O R T
Further information, including the number of women in senior
management and within the organisation is shown in the
Environmental and Corporate Social Responsibility Report on
pages 34 to 42.
Recent appointments to the Board
During 2015 recruitment consultants Korn Ferry provided
search and selection services in connection with the
appointments of Mr. P Vervaat as Non-Executive Director
and Mr. R Rennie as Chief Executive. Korn Ferry have no other
connection with the Company and are an independent
provider of services to the Company.
Each member of the Nominations Committee met and
interviewed a number of candidates put forward by Korn Ferry
as part of the recruitment process for filling both of the
above roles.
Evaluation
The annual evaluation of the Committee’s effectiveness
was undertaken as part of the Board and committee
evaluation process.
David Evans
Chairman
17 November 2015
The Nominations Committee, to which the Chief Executive is
normally invited, reviews the Board structure, leads the process
for Board appointments and makes recommendations to the
Board, including on Board succession planning. The Nominations
Committee evaluates the balance of skills, knowledge and
experience on the Board and, in the light of this evaluation,
prepares a description of the role for new appointments.
In identifying potential candidates for positions as Non-Executive
Directors, the Committee has full regard to the principles of the
Code regarding the independence of Non-Executive Directors.
The Committee met five times during the year in connection
with identifying replacements for Mrs. S Pirie, who retired on 29
January 2015 and Mr. P Slabbert, who retired from the Board
on 30 September 2015.
Main responsibilities
The main responsibilities of the Committee are as follows:
To lead the process for identifying and nominating
candidates for the approval of the Board, to fill Board
vacancies as and when they arise
To put in place plans for succession
To regularly review the Board's structure, size and
composition taking into account the challenges and
opportunities facing the Group and the skills, knowledge
and experience needed by the Board and make
recommendations to the Board with regard to any changes
The Committee’s terms of reference are available within
the Corporate Governance section of the Company’s website
All Directors are appointed by the Board following a rigorous
selection process and subsequent recommendation by the
Committee. Board appointments are made on merit, against
criteria identified by the Committee having regard to the benefits
of diversity on the Board, including gender.
The Nominations Committee is also responsible for the Board’s
policy on diversity.
The Board recognises the benefits of diversity. Diversity of skills,
background, knowledge, international and industry experience,
and gender, amongst many other factors, will be taken into
consideration when seeking to appoint new directors to the
Board. Notwithstanding the foregoing, all Board appointments
will always be made on merit.
The Board’s diversity policy can be found in the Corporate
Governance section of the Company’s website.
R
A
E
Y
E
H
T
F
O
W
E
I
V
R
E
V
O
S
S
E
N
I
S
U
B
R
U
O
N
U
R
E
W
W
O
H
D
E
M
R
O
F
R
E
P
E
W
W
O
H
N
O
I
T
A
M
R
O
F
N
I
R
E
D
L
O
H
E
R
A
H
S
A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 5 I N T E G R A T I N G T E C H N O L O G Y
53
A U D I T C O M M I T T E E R E P O R T
Main responsibilities
Reviewing the effectiveness of the Company’s financial
reporting, internal control policies and procedures for the
identification, assessment and reporting of risk
Reviewing significant financial reporting issues
and judgements
Monitoring the integrity of the Company’s
financial statements
Keeping the relationship with the auditors under review,
including their terms of engagement, fees and independence
Monitoring the role and effectiveness of the internal
audit function
Advising the Board on whether the Committee believes
the Annual Report and Accounts, taken as a whole, is fair,
balanced and understandable and provides the information
necessary for shareholders to assess the Company’s
performance, business model and strategy
Activities during the year
The Audit Committee meets three times a year. Meetings are
also attended by the Executive Directors and on at least two
occasions by representatives of the Group’s external auditors.
At meetings attended by the external auditors time is allowed
for the Audit Committee to discuss issues with the external
auditors without the Executive Directors being present.
An annual rolling agenda is reviewed to ensure that all matters
within the Audit Committee’s Terms of Reference during the
year are appropriately covered. The Committee operates
under formal terms of reference and these are reviewed
annually. The Committee considers that it has discharged its
responsibilities as set out in its terms of reference to the extent
appropriate during the year.
Financial reporting
During the year the Committee reviewed the appropriateness of
the Group’s half year and full year financial statements including
considering significant financial reporting judgments made
by management, taking into account the reports of the Group
Finance Director and the external auditors. The main areas of
focus considered by the Committee during 2015 were as follows:
The presentation of the financial statements and, in
particular, the presentation of adjusted performance and
the adjusting items. The Committee reviewed a paper
prepared by management detailing enhanced internal
guidance on the classification of costs and reviewed the
disclosure of adjusted items within the Group’s full year
and half year results, agreeing that the position taken in
the financial statements is appropriate
Review of the key judgements made in estimating the Group’s
tax charge. The review and discussion included an update
on the current position, the status of discussions with the
relevant tax authorities and the requirement to recognise
a UK deferred tax asset following the utilisation of all available
UK trading losses. The Committee agreed that the position
taken in the financial statements is appropriate
The need to perform an impairment review in respect of
intangible assets. Following review of a report summarising
the key issues in relation to impairment, the Committee
concurred with management's assessment that there were no
triggering events in 2015 requiring an impairment review
except for goodwill arising on acquisitions made during the
year where such a review is mandated by IFRS. The Committee
concurred with management's assessment that the carrying
value of goodwill was not impaired
Review of the value ascribed to the the intangible assets
of the acquisitions made during the year. The Committee
reviewed a paper prepared by management summarising
the key judgements and agreed that the position taken in the
financial statements is appropriate
Review of the ongoing funding level of the defined benefit
pension scheme. As the costs, assets and liabilities are
regularly reviewed and advice is taken from an independent
actuary on the appropriateness of the assumptions used,
the Committee agreed this was being managed appropriately
At the request of the Board, the Committee considered
whether the 2015 annual report was fair, balanced and
understandable and whether it provided the necessary
information for shareholders to assess the Company’s
performance, business model and strategy. Having taken
account of the other information provided to the Board
throughout the year, the Committee was satisfied that,
taken as a whole, the annual report was fair, balanced
and understandable
The Committee was content, after due challenge and debate,
with the assumptions made and the judgements applied in the
accounts and agreed with management’s recommendations.
In addition the Committee reviewed and recommended the
approval of the statements on corporate governance, internal
control and risk management in the annual report and the half
year and trading statements.
External auditors
The Committee oversees the relationship with the external
auditors and monitors all services provided by and fees
payable to them, to ensure that potential conflicts of interest
are considered and that an objective and professional
relationship is maintained.
54
I N T E G R A T I N G T E C H N O L O G Y A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 5
In particular the Committee reviews and monitors the
independence and objectivity of the external auditors and the
effectiveness of the audit process. At the outset of the audit
process, the Committee receives from the auditors a detailed
audit plan, identifying their assessment of the key risks and their
intended areas of focus. This is agreed with the Committee to
ensure coverage is appropriately focused.
Feedback on the audit process is requested from management.
For the 2015 financial year management were satisfied that
there had been appropriate focus and challenge on the primary
areas of audit risk and assessed the quality of the audit process
as satisfactory. The Committee concurred with the view of
management. The Committee also keeps under review the nature,
extent, objectivity and cost of non-audit services provided by the
external auditors.
PricewaterhouseCoopers LLP (PwC) have been the Company’s
external auditors for a number of years. The Committee last
reviewed the external audit mandate in 2012 and confirmed the
continuing appointment of PwC. This was on the basis that the
Committee was comfortable that the PwC audit team remained
objective and independent on the basis of the regular rotation of
the audit partner, which occurred in 2015 and specific assurance
provided by PwC to the Committee on the arrangements it
has in place to maintain its independence. The provision of
external audit and tax compliance are separated with tax
compliance services provided by BDO in the US and Tax Partner
in the UK. The Committee considers the reappointment of the
external auditor and their independence on an annual basis.
The new regulatory requirement to rotate the external audit
mandate does not affect the Company until 2020. However, in
order to ensure the independence and objectivity of the external
auditors and avoid a situation where the auditor’s familiarity
with the Group’s affairs results in excessive trust, the Committee
maintains a formal Auditor Independence Policy. This policy
provides clear definitions of services that the external
auditors can and cannot provide. They may only provide
non-audit services where those services do not conflict with their
independence. A formal authorisation policy is in place for the
provision of non-audit services to ensure that appropriate pre-
approval is obtained as necessary. The latest version provides that
non-audit services with a value of more than £50,000 or which
cumulatively exceed the annual audit fee require the approval
of the Board. This approach was preferred to capping the value
of non-audit services performed by the external auditor by
reference to the external audit fee. The policy also establishes
guidelines for the recruitment of employees or former employees
of the external auditor. To ensure compliance with this policy
the Audit Committee carried out a review during the year of the
remuneration received by PwC for audit services, audit-related
services and non-audit work. The breakdown of the fees paid
to the external auditor, including the split between audit and
non-audit fees, is included in note 5 on page 91 of the financial
statements. No non-audit services were carried out by PwC
during the year. These reviews ensure a balance of objectivity,
value for money and compliance with this policy. The outcome
of these reviews was that no conflicts of interest existed between
such audit and non-audit work.
Internal control
The Committee regularly reviews the effectiveness of the Group’s
system of internal controls and risk management. This involves
the monitoring and reviewing of the effectiveness of internal
audit activities, which included a review of the audits carried
out and the results thereof, the management response and the
programme and resourcing for 2015 and 2016. The Committee
believes it is appropriate that the internal audit process is
undertaken by members of the finance team who conduct
financial reviews of the sites on a rotational basis.
In addition, site controllers and plant managers are obliged
to positively confirm, on a bi-annual basis, that the controls as
documented in the internal control manual are in place and are
being adhered to, with specific reference to key controls such as
bank and control account reconciliations. This process has been
in place for the year under review and up to the date of approval
of the annual report and financial statements. It has been
reviewed by the Board and continues to be monitored by the
Committee, which remains satisfied with the arrangements.
During the year, the new business management software system
continued to be rolled out throughout the Group. The 2015
internal audit programme included three post-implementation
reviews to ensure the new system was operating effectively.
No significant failings or weaknesses were identified by the
internal audit process but several minor improvements were
identified and implemented. As part of its work, and in line
with its terms of reference, the Committee also considers the
discharge of the Board’s responsibilities in the areas of corporate
governance, financial reporting and internal control, including
the internal management of risk, as identified in the FRC’s
revised guidance on Internal Control: Guidance to Directors.
Risk management activities are dealt with in more detail in
the Corporate Governance Report on pages 48 to 52.
Pim Vervaat
Chairman of the Audit Committee
17 November 2015
R
A
E
Y
E
H
T
F
O
W
E
I
V
R
E
V
O
S
S
E
N
I
S
U
B
R
U
O
N
U
R
E
W
W
O
H
D
E
M
R
O
F
R
E
P
E
W
W
O
H
N
O
I
T
A
M
R
O
F
N
I
R
E
D
L
O
H
E
R
A
H
S
A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 5 I N T E G R A T I N G T E C H N O L O G Y
55
R E M U N E R AT I O N R E P O R T
F O R T H E Y E A R E N D E D 3 0 S E P T E M B E R 2 0 15
Letter from the Chairman of the Remuneration Committee
On behalf of the Board I am pleased to present the Directors’
Remuneration Report for the year ended 30 September 2015.
The new three year remuneration policy approved overwhelmingly
by shareholders at the annual general meeting in February 2014 has
continued to deliver impressive results by rewarding success through
the delivery of sustained high levels of growth. It includes a relatively
significant proportion of variable pay together with a 25% deferment to
protect against under or variable performance and a claw back for mis-
statements.
During the year, the Committee oversaw the process of retirement for the
Chief Executive Officer including the terms of his departure. I believe that
the terms agreed fairly reflect the successful contribution Peter Slabbert
has made to the growth of the Company and represent good value for
shareholders. Details of the terms agreed are set out later in my report.
Because we have a small executive team, comprising just two Executive
Directors, the Board decided to mitigate the continuity risk associated
with Peter’s retirement on 30 September 2015 by offering to pay a one off
retention bonus to the Group Finance Director, Andrew Lewis. This also
aims to reflect the extra work and responsibility he has to carry during an
extended recruitment and transition period. The quantum of this bonus
is subject to performance conditions and will only be payable if Andrew
is in-post at the end of the 2016 financial year. In addition, Andrew will
receive a salary supplement in return for taking on the additional role of
Interim Group Chief Executive during October and November 2015.
The Committee has reviewed the employment contract for the new Chief
Executive along with his remuneration package and believes that both
are in line with contemporary practice, are appropriate and fully reflect
the approved policy on recruitment remuneration. His employment
commences on 1 December 2015.
As usual, my report covers the remuneration of both Executive and
Non-Executive Directors.
We are not proposing to change the principles of the current three year
policy which will remain in force until reviewed at the end of its term in
2016. However, we are proposing, for shareholder approval, a number of
minor amendments and clarifications to remove some ambiguities and
incorporate the measures we have taken this year in connection with the
change of Chief Executive.
In addition, we will be asking shareholders to approve amendments to the
rules of the Performance Share Plan as a result of the Committee’s mid-
term review and the introduction of two new employee share plans.
During the year the Company launched a graduate recruitment
programme as part of its plan to develop future managers from within
to enable the Company to meet its strategic objectives. The two new
plans are specifically aimed at incentivising and retaining junior business
managers who are becoming an increasingly important resource for
managing the Company as it grows.
For the year under review, the key features and impacts of the current
remuneration policy have been as follows:
1. Base salaries
1.1 Executive Directors
Basic salaries were frozen in October 2013 for the three year period of the
remuneration policy. Accordingly, the 2% annual cost of living increase
recently awarded to the wider workforce was not paid to the Executive
Directors and the percentage change in remuneration between the Chief
Executive and other employees over the current three year remuneration
policy will narrow further, as illustrated later in my report. Andrew Lewis
will receive a monthly salary supplement for acting as Interim Group
Chief Executive between 1 October 2015 when Peter Slabbert retired
and 1 December 2015 when the replacement Chief Executive takes up
his new role.
The existing Remuneration Policy did not envisage such salary
supplements for Executive Directors so this has been clarified in a policy
amendment this year.
1.2 Non-Executive Directors
Non-Executive Director fees were reviewed last year and have been frozen
under the terms of the existing remuneration policy until October 2017.
2. Executive Directors' variable pay
This has been year two in the operation of the two tier annual bonus
award scheme introduced in the 2013 remuneration policy and we believe
the strength of the financial results achieved in continued challenging
economic conditions continues to demonstrate its effectiveness. The
Committee continues to believe that the ratcheted performance condition
and the increase in the cap to 150% of salary are appropriate and supportive
of the Company’s growth objectives.
The annual bonus deferral rule requires that 25% of the annual bonus
payment related to the business performance conditions must be deferred
into shares which are held for two years. These shares are not subject to the
executive shareholding guidelines. In this way, if earnings are not sustained
over that two year period, any reduction in the share price effectively
reduces the value of the bonus earned. The number of shares subject to
that deferral is separately identified in the annual remuneration report.
Andrew Lewis has been granted a special retention bonus for 2015/16
relating to the transitional period in which the new CEO will become
established and runs until the end of November 2016. We have sought
to align this potential payment with shareholder interests by applying
adjustment factors linked to the total shareholder return of the Company's
shares when compared with the FTSE All Share Index.
The bonus is payable in two parts, the first part after the release of the
FY16 interim results and the second after the release of the FY16 year end
results. The existing Remuneration Policy does not provide for such an
important and exceptional provision because the issue was not envisaged
at the time the policy was compiled. An amendment and clarification has
therefore been included in the policy for this year.
3. Long-term incentives for Executive Directors
The long-term incentive grants made for both the Chief Executive and
Group Finance Director in 2014 were at the historical level of 100% of
salary. As noted in my report last year, we have, this year, concluded a
review of our five year old Performance Share Plan. As a result of this
56
I N T E G R A T I N G T E C H N O L O G Y A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 5
review, we are proposing some changes to bring the scheme and the
level of future awards into line with current market practice. Some of
the proposed changes will require amendments to the Plan rules and a
shareholder resolution is therefore being proposed.
A two year holding period will be introduced following the three
year performance period for any exceptional awards made in excess
of 100% of salary. The current shareholding guidelines will remain
in place for awards of up to 100% of salary.
The remit of the Committee’s review was to:
Confirm that the Plan remained appropriately structured
when compared with current FTSE market practice and
corporate governance standards;
Consider ways of extending the Plan to give greater
flexibility on the timing, value and purpose of awards; and
Consider alternative options for making share awards for
valued employees who are not senior executives to avoid
using the current Plan too widely.
The Committee concluded that the Plan had served the Company
well in its formative years but that it was not sufficiently aligned to the
challenges associated with the growth strategy targets that have been
set by the Board. Also, some changes need to be made in order to comply
with evolving corporate governance standards and FTSE practice.
In particular, there is no flexibility in the Plan to provide incentives in
exceptional circumstances. Examples include for recruitment or to
support strategic change such as a major acquisition. In these cases,
awards above the existing 100% salary cap may be appropriate and
should be considered on a case by case basis. Associated performance
targets may need to be modified to be more appropriate and stretching.
The Committee believes that such exceptional awards should be
based on achieving challenging and measurable strategic targets
that supplement the existing targets currently being used in normal
operation of the Plan. At the same time we believe it is appropriate to
increase the long-term holding of shares delivered under this increased
flexibility to improve retention.
No awards were made to the new Chief Executive, who will join on
1 December 2015, under the Plan in connection with his recruitment.
The changes recommended to the Board as a result of this review
and now being put to shareholders in the revised remuneration policy
can be summarised as follows:
The normal award level will remain capped at 100% of annual
salary per year. However, the overall cap will be increased to 200%
of salary so that above standard level special awards may be made
to selected people, in exceptional circumstances, if an appropriate
challenge warrants such treatment.
The TSR comparator group historically used in the TSR performance
condition will be changed. The current index of companies being
used as a comparator is no longer thought to represent a sufficiently
stretching bench mark for the increasingly successful Avon team.
We propose, instead, to use the FTSE All Share index (excluding
investment trusts). This is preferable to defining a bespoke
comparator basket of companies which would result in distorted
comparisons, given the two diverse business divisions and the
large size of many defence industry comparators.
The EPS performance condition will be amended to refer to CPI
rather than RPI for future awards on the basis that RPI is no longer
an approved national statistic.
In line with market practice, the median vesting level for normal
awards made at the 100% salary level will be reduced from 30%
to 25% so that fewer shares vest for median performance.
A clean break option will be introduced for exiting executives.
The Committee already has discretion to allow good leaver status
on a case by case basis but for added flexibility, the rules will be
amended to allow for a clean break when executives leave.
This will permit vesting to be triggered at the point of leaving by
reference to performance at that date, rather than waiting until
the end of the performance period. This, in turn, will allow vesting
at rates appropriate to the Board’s strategy for managing an exit,
for example to offset cash compensation by allowing earlier vesting.
In addition, we propose to implement new UK and US share option
schemes to incentivise junior executives with shares in a variety of
circumstances and for use as a future annual bonus deferral tool.
An approved Company Share Option Plan (CSOP) will be implemented
in the UK and an Incentive and Non-Qualified Stock Option Plan (ISO)
will be introduced in the US. Unapproved options will be used to
supplement awards made under both plans. Shareholder approval is
being sought for the CSOP and the ISO on the basis that they may be
supported by newly issued shares. Any issuance of new shares in support
of the CSOP or ISO, or in connection with the higher cap on awards under
the Plan, will only occur within existing, approved dilution limits.
With regard to the three-year performance under the Performance
Share Plan for the period which ended on 30 September 2015, both the
earnings per share target and the total shareholder return targets are
expected to be met in full. 100% of the awards are therefore likely to vest
in November 2015. An announcement will be made at the time.
Conclusions
In a year of change, the Committee has met the challenge of allowing
Peter Slabbert to leave on mutually agreeable terms, retaining the
services of the existing Group Finance Director to protect shareholder
value and aligning the future Chief Exectutive’s remuneration package
with short, medium and long-term shareholder interests.
The Committee remains confident that the current remuneration
structure has continued to incentivise the executive team to deliver
strong and sustainable growth without encouraging undue risk taking.
I believe that this result will be enhanced by the changes now being
proposed for the Performance Share Plan and from the introduction of
the new option plans for junior business managers.
The revised remuneration policy, the amended PSP rules, the new CSOP
and ISO share plans and the remuneration policy report will all be subject
to your vote at the AGM to be held on Tuesday 26 January 2016.
I have requested feedback from the largest shareholders on the proposed
changes to the remuneration policy as I did when the policy was originally
proposed in 2013. No feedback was received but I remain available to
discuss the proposed changes prior to the annual general meeting.
A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 5 I N T E G R A T I N G T E C H N O L O G Y
57
R
A
E
Y
E
H
T
F
O
W
E
I
V
R
E
V
O
S
S
E
N
I
S
U
B
R
U
O
N
U
R
E
W
W
O
H
D
E
M
R
O
F
R
E
P
E
W
W
O
H
N
O
I
T
A
M
R
O
F
N
I
R
E
D
L
O
H
E
R
A
H
S
R E M U N E R AT I O N R E P O R T
F O R T H E Y E A R E N D E D 3 0 S E P T E M B E R 2 0 15
Remuneration Policy Report
Executive Directors
Remuneration Committee
The Remuneration Committee is responsible for developing
and implementing remuneration policy and for determining the
Executive Directors' individual packages and terms of service
together with those of the other members of the Group Executive
management team.
The Committee comprises Mr. R Wood (Chairman), Mr. D Evans
and Mr. P Vervaat. The Committee uses external independent
professional advisers when needed. KPMG are the Company's
independent actuarial advisor on pension matters and will
provide the Committee with information on executive pension
arrangements when this cannot be provided by the pension
scheme actuary AonHewitt. EY provide annual performance
monitoring data and share award valuations for review by the
Committee in relation to the Performance Share Plan. EY also
provide remuneration benchmarking of the reward packages
received by the Executive Directors, the Group Executive and
the fees received by the Chairman and the other Non-Executive
Directors as well as more general advice on executive remuneration.
The Company’s solicitors TLT provide advice on remuneration
governance and all share plans.
The Committee addressed the following main issues during
the last year:
Approved the annual bonus payments to the Executive
Directors in November 2014
Approved the annual bonus plan for the Executive
Directors for the 2015 financial year
Reviewed and confirmed the vesting of the 2011/12
Performance Share Plan awards in December 2014
Reviewed and approved the 2014/15 Performance Share
Plan awards granted in December 2014 and monitored the
performance of the outstanding awards against their
performance targets
Reviewed the executive management succession plan
Oversaw the process of early retirement for the Chief
Executive including the terms of his departure
Approved a retention bonus for the Group Finance Director
to retain his services and to reflect the extra work and
responsibility he has to carry during the recruitment and
transition period for the new Chief Executive
Implemented a short-term salary supplement for the Group
Finance Director for acting as Interim Group Chief Executive
during October and November 2015
Reviewed the employment contract and remuneration
package for the new Chief Executive
Since the end of the 2015 financial year, the Committee has:
Approved the annual bonus payments to the Executive
Directors and the Group Executive management team,
following completion of the external audit in November 2015
Approved the annual bonus plan for the Executive Directors
and the Group Executive management team for the 2016
financial year
Made preparations for the 2015/16 Performance Share Plan
awards to be granted in December 2015
Guiding policy
The Remuneration Committee's terms of reference are available on
the Company's website and include:
Determining and agreeing with the Board the policy for
the remuneration of the Company's Chief Executive, Group
Finance Director, Chairman, the Company Secretary and such
other members of the senior management team as it chooses
to consider or is designated to consider (currently the Group
Executive management team)
Within the terms of the agreed policy, determining the total
individual remuneration package of each Executive Director
including, where appropriate, bonuses, incentive payments,
share options and pension arrangements. The remuneration
of Non-Executive Directors is a matter for the Chairman and
the Executive Directors
Reviewing the design of all share incentive plans for approval
by the Board and shareholders. For any such discretionary
plans, determining each year whether awards will be made,
the overall amount of such awards, the individual awards to
Executive Directors and the Group Executive management
team (and others) and the performance targets to be used
Determining the targets for any performance-related bonus
schemes operated by the Company
Reviewing remuneration trends across the Group, including the
salary increases proposed annually for all Group employees
Agreeing termination arrangements for senior executives
The Committee aims to provide a remuneration structure that
supports the achievement of the Company's performance
objectives and, in turn, increases shareholder value.
The Company's guiding policy on executive remuneration is that:
Executive remuneration packages should take into account
the linkage between pay and performance by both
rewarding effective management and by making the
enhancement of shareholder value a critical success factor in
the setting of incentives, both in the short and the long-term
58
I N T E G R A T I N G T E C H N O L O G Y A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 5
The overall level of salary, incentives, pension and other
benefits should be competitive when compared with other
companies of a similar size and global spread to attract,
retain and motivate executive directors of superior calibre in
order to deliver continued growth of the business
Performance related components should form a significant
proportion of the overall remuneration package, with
maximum total potential rewards being earned through
the achievement of challenging performance targets based
on measures that represent the best interests of shareholders
Approach to recruitment remuneration
The Committee's policy on recruitment remuneration is that
new Executive Directors will be offered a base salary below
the median level in the applicable benchmarking report
until proven, at which point they will receive an uplift to the
benchmark median salary level determined and maintained by
reference to independent benchmarking studies carried out
every three years. Annual bonus awards, performance share plan
awards and pension contributions would not be in excess of
the current levels stated for the Chief Executive and the Group
Finance Director. This is the approach that has been followed in
setting the remuneration package for the new Chief Executive.
In unusual circumstances it may be necessary to pay a joining
incentive to secure the right candidate. The Committee
might consider paying up to 2.5 times base salary in these
circumstances with the actual amount being defined by market
requirements at the time. However, any such payment would
be subject to performance conditions and a claw back on
underperformance during the first two years of employment.
No joining incentives have been paid in connection with the
recruitment of the new Chief Executive.
The process for the change of Chief Executive highlighted two
features of remuneration that were not covered by the current
remuneration policy, because they were not anticipated at the
time the policy was originally drafted. These are being added
this year. Firstly, because the Company has just two Executive
Directors the Board decided to mitigate the continuity risk
associated with Mr. Slabbert’s retirement by agreeing to pay a
one off retention bonus to Mr. Lewis. This also aimed to reflect
the extra work and responsibility Mr. Lewis has to carry during
the extended recruitment and transition period to a new Chief
Executive. The quantum of this bonus is subject to performance
conditions which are aligned to shareholder interests and will
only be paid if Mr. Lewis remains in post and has performed
satisfactorily at the end of the 2016 financial year. The ability to
make such one off bonus awards to Executive Directors in this
limited context is important because the individual is taking on
an additional role as well as continuing to fulfil their own role
and it is therefore being added to the policy this year. Secondly,
the Committee agreed to pay Mr. Lewis a salary supplement
for acting as Interim Group Chief Executive for the short period
between 1 October 2015 and 30 November 2015. The ability to
pay such supplements in this limited context is therefore being
added to the policy this year.
Consideration of conditions elsewhere
in the Company
The experience of Committee members and the 2013 EY
benchmarking report have been relied upon in setting the
remuneration packages for the Executive Directors and this
remuneration policy. Employees have not been specifically
consulted in this regard. In line with other small to mid-sized
companies there is no works council and therefore there is no
established process or platform to consult employees in relation
to executive remuneration. Consistent with this approach annual
cost of living increases granted to the wider workforce are not
paid to the Executive Directors or to the other members of the
Group Executive management team.
The Committee monitors the remuneration of the wider
workforce and, in particular, the divisional management teams
as well as other key employees. As with the current policy for
the Executive Directors, general practice across the Group is to
recruit employees at market rates and this tends to be at the
median salary level or above to attract them to the Group.
Because of the numbers involved and the need to asorb new
recruits at salaries comparable with those already employed,
salaries are normalised upwards over time to the median salary
level so that the pay level of the workforce is always kept close
to the median level and maintained at that level by the cost
of living increases. Employees are then able to earn annual
bonuses in excess of the mid-market rate in return for delivering
exceptional performance.
In addition, the Group Executive management team maintains
a benchmarking database of all management employees in the
Group with the aim of ensuring that each is being paid at or near
the median local benchmark level for their role and that, where
applicable, each has a career and associated salary progression
plan. It is possible that some of the more senior personnel within
that group will be brought within the Committee's remit but
the Committee remains comfortable that the Group Executive
management team sets the remuneration for the divisional
management levels beneath it in the organisation structure.
Consideration of shareholder views
In 2013 the Chairman of the Remuneration Committee consulted
with the three largest Company shareholders with a combined
holding of 40% on the (then) proposed remuneration policy.
This year the Chairman has consulted in the same manner on
the proposed amendments to the remuneration policy and the
changes to the Performance Share Plan.
R
A
E
Y
E
H
T
F
O
W
E
I
V
R
E
V
O
S
S
E
N
I
S
U
B
R
U
O
N
U
R
E
W
W
O
H
D
E
M
R
O
F
R
E
P
E
W
W
O
H
N
O
I
T
A
M
R
O
F
N
I
R
E
D
L
O
H
E
R
A
H
S
A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 5 I N T E G R A T I N G T E C H N O L O G Y
59
R E M U N E R AT I O N R E P O R T
F O R T H E Y E A R E N D E D 3 0 S E P T E M B E R 2 0 15
Detailed policy
The table below summarises the main components of the remuneration policy approved by shareholders at the February 2014 annual
general meeting for the three year period commencing 6 February 2014, together with all proposed changes.
The Remuneration Committee has discretion to amend the remuneration policy in 2016 to the extent described in the table and the
written sections that follow it below.
Element of
remuneration
Purpose and
link to strategy
Operation
Maximum
potential value*
Performance
targets
Changes
from 2014
Base
Salary
To provide
competitive fixed
remuneration
To attract and
retain Executive
Directors of superior
calibre in order to
deliver growth for
the business
Intended to
reflect that paid to
senior management
of comparable
companies
Reflects individual
experience and role
Benefits
As above
Reviewed every three
years by the Remuneration
Committee
Individual salary adjustments
take into account each
Executive Director's
performance against agreed
challenging objectives
and the Group's financial
circumstances, as well as
relative to the external
market as identified in
a benchmarking study
based on an appropriate
comparator group
An Executive Director may
be paid a salary supplement
for fulfilling the role of
another higher paid
Executive Director when
that Executive Director
retires or leaves the
Company. Supplement
capped at the leaving
Director’s base salary
Executive Directors are
entitled to medicals every
two years and private health
insurance. Cash for car
payments were phased out
in 2009. Life assurance is a
benefit under the pension
scheme but paid for by the
Company. Small loans have
been made in connection
with the jointly owned
equity awards under the
Performance Share Plan
2013/14:
Not applicable
For 2015/16:
New Chief Executive
salary confirmed
within existing
approved maximum
potential value for
this role.
Policy proposed
to be amended to
permit payment of a
salary supplement to
Executive Directors for
temporarily fulfilling
the role of higher paid
Executive Directors in
addition to their own
when they retire or
leave the Company.
The Group Finance
Director has been paid
a salary supplement of
£6,500 per month for
acting as Interim CEO
between 1 October
and 30 November 2015
Not applicable
No change
PC Slabbert £330,000
AG Lewis £252,000
2014/15:
No change
2015/16:
New Chief Executive to
be paid £300,000, reviewed
in October 2016
AG Lewis £252,000 plus
£13,000 salary supplement
payable for the period
from 1 October to 30
November 2015
No increase in 2016 unless
found to be below the
median level shown in
a benchmarking report
to be commissioned in
2016 and any adjustments
will be effective from
1 October 2016
Full cost of healthcare
benefits is circa £2k per
Executive Director
Life assurance is provided
as part of a Group-wide
policy and therefore a
specific cost cannot
be attributed to the
Executive Directors
Annual
Bonus
No change
Rewards the
achievement of
annual financial
and strategic
business targets
and delivery of
personal objectives
Maximum bonus only
payable for achieving
demanding targets
Deferred element
encourages long-
term shareholding
and discourages
excessive risk taking
Paid in cash except 25%
is deferred into shares to
be held for two years.
Not pensionable
2013/14 (% of salary):
PC Slabbert 150%
AG Lewis 150%
Up to 150% of basic salary for
the CEO and the FD in 2015
2014/15
(% of salary): No change
2015/16 (% of salary):
No change, including for
the new Chief Executive
Deferral does not apply to
the percentage award
relating to achievement
of personal objectives
Claw back applies if the
financial results which led
to the bonus being paid are
restated due to an error in
the subsequent two years
The first 100% is based
upon a combination
of Group profit budget
achievement (Group
PBITE), year on year
PBITE growth and Group
cash generation (ratio
of operating cash flow
to operating profit)
plus specific personal
performance targets
Bonus in excess of
100% of salary is based
upon EPS growth
occurring in excess
of 20% over the
previous year
60
I N T E G R A T I N G T E C H N O L O G Y A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 5
Element of
remuneration
Purpose and
link to strategy
Operation
Maximum
potential value*
Performance
targets
Changes
from 2014
Performance
Share Plan
Designed to
align Executive
Directors' interests
with both the
strategic objectives
of delivering
sustainable
earnings growth
and the interests of
shareholders
The Company has one Performance
Share Plan, which was approved by
shareholders in 2010.
Annual grants of conditional share
awards which vest after a three
year performance period, subject
to achievement of performance
targets and continued service
2013/14 (% of salary)
For the normal 100% award:
For 2015/16:
PC Slabbert 100%
AG Lewis 100%
2014/15
(% of salary)
No change
2015/16
(% of salary):
New CEO and
AG Lewis: 100%
normal award
and up to a further
100% special
award in exceptional
circumstances
50% TSR (of which30% vests
for median increasing to 100%
vesting for upper quartile of the
FTSE Small Cap Index excluding
investment trusts)
50% EPS (which starts vesting
at nil for RPI +3% rising to
100% at RPI +8%)
For the additional 100%
exceptional award:
Financial performance
conditions dependent on
circumstances of award,
measured over a 3 year period
200% of salary for
Executive Directors for
awards vesting from
December 2014
Special awards in excess
of 100% of salary will
deliver shares to be
held for a mandatory
2 year holding period
2013/14
(% of salary)
PC Slabbert 15%
AG Lewis 15%
2014/15 and 2015/16
(% of salary)
No change, including
for the new CEO
New for 2015/16
One year’s
base salary
Share
ownership
guidelines
To increase
alignment between
executives and
shareholders
Executive Directors are required
to retain a proportion of their
net of tax vested awards until the
guideline is met
Pension
To reward sustained
contribution by
providing retirement
benefits
One off
bonus
To mitigate
continuity risk
amongst Executive
Directors associated
with the departure
of other Executive
Directors by retaining
their services
and to reward
extra work and
responsibility during
the recruitment and
transition period
Mr Slabbert is a deferred member
of the now closed final salary
section of the Plan
Both Mr Slabbert and Mr Lewis are
members of the money purchase
section of the Plan. Where the
promised level of benefits cannot
be provided through the money
purchase scheme the Company
provides benefits through the
provision of salary supplements
Executive Directors may be
awarded a one off bonus capped at
one year’s base salary, payable in
instalments over a defined period
and subject to an adjustment
factor based on the Company’s TSR
compared to a comparator group
TSR over the defined period
* All dates are for the year ending 30 September in any referenced year
Not applicable
Not applicable
No change
New for 2015/16
Payment to be multiplied by an
adjustment factor set by reference
to the Company’s relative TSR
performance when compared to
the FTSE All Share Index excluding
investment trusts over the previous
12 months. If Avon tracks the FTSE
All Share exactly over the period
the adjustment factor is 1. For
example, if Avon underperforms
by 10% the adjustment factor is
0.9, if it outperforms by 10% the
adjustment factor is 1.1
A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 5 I N T E G R A T I N G T E C H N O L O G Y
61
New total higher salary
cap on annual value of awards
under the Plan of 200%
proposed
Additional 100% to be
used for special awards in
exceptional circumstances
Shares delivered under special
awards to be subject to a
mandatory 2 year holding
period after vesting
CPI to replace RPI in the EPS
performance condition for
awards from December 2015
FTSE All Share Index to replace
FTSE Small Cap Index as TSR
comparator group for awards
from December 2015
Median vesting level for
future awards to be reduced
from 30% to 25%
No change to existing
awards up to 100%
of salary
Special awards in excess
of 100% of salary are new
and will deliver shares to be
held for a mandatory 2 year
holding period
R
A
E
Y
E
H
T
F
O
W
E
I
V
R
E
V
O
S
S
E
N
I
S
U
B
R
U
O
N
U
R
E
W
W
O
H
D
E
M
R
O
F
R
E
P
E
W
W
O
H
N
O
I
T
A
M
R
O
F
N
I
R
E
D
L
O
H
E
R
A
H
S
R E M U N E R AT I O N R E P O R T
F O R T H E Y E A R E N D E D 3 0 S E P T E M B E R 2 0 15
There are no elements of remuneration other than basic salary,
benefits and pension that are not subject to performance
requirements.
The chart below illustrates for both the Chief Executive and
Group Finance Director how the remuneration packages vary at
different levels of performance under the current policy, shown
as a percentage of total remuneration opportunity.
100% of variable pay vests
(maximum award)
32%
41%
27%
50% of variable pay vests
(target)
48%
31%
21%
The Group's employees have received an increase of
approximately 7% over the same period, including annual
cost of living, promotional increases and increases based on
exceptional performance.
In connection with the change of Chief Executive, Mr. Lewis
is being paid a salary supplement for acting as Interim Group
Chief Executive between 1 October 2015 and 30 November
2015. The supplement increases Mr. Lewis’s monthly salary to
the level of the outgoing Chief Executive for these two months.
We are seeking to amend the remuneration policy to include
the flexibility to pay such supplements in future where any
Executive Director temporarily takes on another Executive
Director’s role in addition to their own role. The amount of the
supplement will always be capped at the salary level of the
Executive Director being replaced.
0% of variable pay vests
100%
Comparator group of companies
for reward benchmarking:
0% 20% 40% 60% 80% 100%
Consort Medical plc
Trifast plc
Diploma PLC
Victrex plc
James Latham plc
Corin Group PLC
Lonrho plc
Renishaw plc
Renold plc
Future plc
Haynes Publishing Group PLC
Helphire Group plc
Scapa Group plc
Latchways plc
Salary, benefits and pension
Bonus
Performance shares
Basic salary and benefits
The basic salary for each Executive Director is reviewed every
three years by the Remuneration Committee. It is intended
that basic salary levels should reflect the median of a suitable
comparator group selected according to size, industry sector or
location as a suitable benchmark group for the Company and
will be paid subject to the Group's wider financial circumstances.
Current basic salary levels are as follows:
P Slabbert
A Lewis
R Rennie
Year ended 30 September 2015
£330,000
£252,000
n/a
Year commencing 1 October 2015
n/a
£252,000
£300,000
Percentage increase
n/a
0%
n/a
62
I N T E G R A T I N G T E C H N O L O G Y A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 5
Annual cash bonus
2014/15
The Executives' annual bonus arrangements are focused on the
achievement of the Company's short and medium-term financial
objectives. Before the start of each year, the Remuneration
Committee sets financial performance targets for the year. These are
designed to be stretching. Bonus payments are not pensionable.
For the year ended 30 September 2015, 120% of the
Executive Directors’ bonus potential, capped at 150% of salary,
was based on the achievement of Group financial targets.
The remaining 30% was based on achieving measurable
personal performance targets, as shown below:
1. FINANCIAL TARGETS
(a) Group profit budget achievement (Group PBITE)
25%
25%
PC Slabbert
AG Lewis
Less than 90% of budget pays nothing. Bonus is earned from 90% of budget
pro rata up to 110% of budget on a straight line basis. Measured (for foreign exchange
translation) at budget exchange rates.
(b) Profit growth on previous year (year on year PBITE growth)
25%
25%
Bonus will be earned for growth on the previous year between 0% and 10% on a
straight line basis. Measured (for foreign exchange translation) at prior year exchange
rates (i.e. constant currency measure).
(c) Group cash generation (ratio of operating cash flow to operating profit)
20%
20%
As reported in the Annual Report and Accounts each year. Pays on a straight line
basis where the ratio exceeds 80% up to a maximum of 100%. Excludes exceptional
items and other adjustments from both measures.
(d) Earnings per share growth in excess of 20% over the previous year
50%
50%
Calculated according to a ratchet mechanism set out in more detail below.
2. PERSONAL PERFORMANCE TARGETS
A portion of bonus can be earned based on an individual reviewer's assessment
of personal performance against personal performance targets set at the beginning
of the financial year.
30%
30%
TOTAL potential bonus 2015 as a percentage of basic salary
150%
150%
R
A
E
Y
E
H
T
F
O
W
E
I
V
R
E
V
O
S
S
E
N
I
S
U
B
R
U
O
N
U
R
E
W
W
O
H
D
E
M
R
O
F
R
E
P
E
W
W
O
H
N
O
I
T
A
M
R
O
F
N
I
R
E
D
L
O
H
E
R
A
H
S
A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 5 I N T E G R A T I N G T E C H N O L O G Y
63
R E M U N E R AT I O N R E P O R T
F O R T H E Y E A R E N D E D 3 0 S E P T E M B E R 2 0 15
Performance measures (a) to (d) were the same as in previous
years and closely align the performance of the Executive Directors
with the strategy of the Company's business and shareholder
value creation. The personal performance targets are a set of
non-financial personal targets which also support the delivery
of the strategy.
These percentages are fixed for the three years of the current
policy and will be reviewed in 2016.
The additional 50% of salary is only payable for truly exceptional
performance, calculated according to a ratchet based on earnings
per share (EPS). The ratchet only applies to EPS growth in excess
of 20% over the previous year.
For an additional 10% of EPS growth above 20% over the previous
financial year's EPS (i.e. up to a maximum of 30% EPS growth over
the previous financial year's EPS) additional bonus can be earned
on a pro rata basis up to the maximum as follows:
The Committee strongly believes it is necessary to incentivise
the Executive Directors to deliver truly exceptional performance
and to counterbalance the restriction placed on salaries moving
forward only at the median level when the Committee is trying to
implement a strategy for growth, which continues to be targeted
well above the median in the comparator group. This bonus
policy is fixed for the life of the current remuneration policy to
reflect the challenge placed on the team of achieving sustainable
high growth in a non-turnaround situation.
A claw back rule applies if the Group's financial results are
restated due to an error during the two years following their
release and a deferral rule which provides for 25% of annual
bonus payments to be deferred into shares to be held for
two years, then treated as shares which are not subject to the
executive shareholding guidelines.
This applied for the first time last year in connection with the
annual bonus payments made in November 2014 and will be
applied again this year.
PC Slabbert
AG Lewis
EPS measure
One off bonus arrangements
5%
10%
15%
20%
5%
10%
15%
20%
for the first 2.5% of additional growth
for the second 2.5% of additional growth
for the third 2.5% of additional growth
for the fourth 2.5% of additional growth
EPS means, in relation to any year, the fully diluted earnings
per share of the Company as adjusted to exclude the charge/
credit in respect of discontinued operations, exceptional items,
the revaluation or impairment of assets, the charge or credit
related to IAS 19 (revised) and the amortisation of acquired
intangible assets.
The flexibility to pay a one off bonus is being proposed as an
addition to the remuneration policy solely to mitigate continuity
risk associated with the departure of an Executive Director.
The need for this arose during the year in the context of Mr.
Slabbert’s retirement because the Company has just two
Executive Directors. The bonus arrangement was set up on
28 April 2015 in order to retain the services of Mr. Lewis while
the recruitment and transition to a new CEO was completed.
The arrangement is also designed to reflect the extra work
and responsibility Mr. Lewis has to carry during this period.
The quantum of this bonus is £200,000 and is subject to a
performance condition which is aligned to shareholder interests
as follows:
Amount
Payable
Adjustment factor
N
I
S
U
N
O
B
I
L
A
N
O
T
D
D
A
%
I
% ADDITIONAL BONUS EARNED V EPS GROWTH %
£150,000
Y
R
A
L
A
S
F
O
%
0
0
1
F
O
S
S
E
C
X
E
50
40
30
20
10
0
£50,000
22.5
25.0
27.5
30.0
EPS GROWTH %
Within 14
days of the
announcement
of the 2016
interim results
Within 14
days of the
announcement
of the 2016
final results
Payment to be multiplied by an
adjustment factor set by reference
to the Company’s relative TSR
performance when compared to
the FTSE All Share Index excluding
investment trusts over the previous
12 months (in respect of the
first payment) and 18 months
(in respect of the second payment).
If Avon tracks the FTSE All Share
exactly over the period the
adjustment factor is 1. For example,
if Avon underperforms by 10%
the adjustment factor is 0.9, if it
outperforms by 10% the adjustment
factor is 1.1
64
I N T E G R A T I N G T E C H N O L O G Y A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 5
In addition, the total amount of the bonus is capped at Mr. Lewis’
annual salary of £252,000 and will only be paid if he remains in
post and has performed satisfactorily, as determined in the Board’s
sole discretion, at the time payment is due to be made. Any future
one off bonus will be capped at the annual salary of the Executive
Director concerned.
The maximum retention bonus payable to Mr. Lewis and the
adjustment factors applicable to it will not be altered without
prior shareholder approval in general meeting (except for minor
amendments to benefit the administration of the arrangement,
to take account of legislation or obtain or maintain favourable
tax, exchange control or regulatory treatment for Mr. Lewis in the
arrangement or for the Company or the Group). Any retention
bonus payable to Mr. Lewis will not be pensionable.
Long-term incentive plan
- Performance Share Plan (the Plan)
The Remuneration Committee introduced the Plan with
shareholder approval at the AGM in 2002 and in 2010 shareholders
approved an updated plan. The existing Plan therefore came into
effect from 2 March 2010, with the aim of motivating Executive
Directors and other senior executives to achieve performance
superior to the Company's peers and to maintain and increase
earnings levels whilst at the same time ensuring that it is not at
the expense of longer-term shareholder returns. This is reflected
in the Plan's performance conditions which are based on total
shareholder return (TSR) and earnings per share (EPS). As noted
above, the Committee has reviewed the Plan during the year and
is proposing a number of amendments for awards going forward
and these are summarised below.
The current financial performance conditions remain appropriate
for a growing business and the expectations of shareholders over
the life of the current policy. They will therefore be applied to the
next cycle of awards in December 2015. Non-financial performance
conditions are not considered appropriate at the current stage
in the development of the Group although this will be kept
under review.
The TSR measure takes the total return received by the Company's
shareholders in terms of share price growth and dividends over a
three-year period and compares it with the total returns received
by shareholders in companies within a predetermined and
appropriate comparator group.
The EPS measure is based on real growth in earnings over
the performance period where real growth is expressed as a
percentage above inflation.
Under the Plan, Executive Directors and a limited number of
other senior executives and employees receive conditional share
awards (which may be in the form of nil-cost options) in respect
of the Company's shares. The awards are split so that 50% vests
in accordance with the TSR target and 50% in accordance with
the EPS target. The Committee considered as part of its 2015
review whether to make the targets apply concurrently but
decided against this, preferring the balance of measures relating
to earnings growth and long-term strategic performance that
are assessed independently of each other. The actual number of
shares that each participant receives depends on the Company's
performance over a three-year performance period against the
combined EPS/TSR target.
The Committee believes following its review that a three-year
performance period remains appropriate for the Company
and in line with market practice but is proposing an extended
retention period for the proposed awards in excess of 100% of
salary as described below.
For the TSR measure, the performance of the Company's
shares over the performance period is compared with the TSR
performance within a comparator group comprising the FTSE
Small Cap Index, excluding investment trusts. The Committee
considered whether to create a bespoke comparator group as
part of its review but concluded that there are insufficient direct
comparator companies of the right size and diversity in the
relevant industries to warrant a specific peer group. However,
the Committee did conclude that the FTSE All Share Index,
excluding investment trusts, represented a more appropriate
comparator group for future awards.
Over the three-year period:
If the Company's TSR performance is below the median
TSR of the comparator group, no shares will vest
If the Company's TSR performance is equal to the median
TSR of the comparator group, 30% of the shares may vest
If the Company's TSR performance is equal to, or exceeds,
the upper quartile TSR of the comparator group, 100% of
the shares may vest
If the Company's TSR performance is between the median
and upper quartile TSR of the comparator group, shares may
vest on a pro rata basis
The above schedule reflects the Remuneration Committee's
intention to reward only TSR performance which outperforms
the comparator group and the Committee's view is that
measuring this by reference to median and upper quartile
placing remains appropriate. In 2011 the Committee reduced
the minimum TSR vesting target from 40% to 30%. For the
awards due to be made in December 2015 and for all future
awards, as a result of the Committee’s review, the minimum
TSR vesting target will be reduced from 30% to 25% in line with
market practice so that participants receive fewer shares for
delivering median performance.
R
A
E
Y
E
H
T
F
O
W
E
I
V
R
E
V
O
S
S
E
N
I
S
U
B
R
U
O
N
U
R
E
W
W
O
H
D
E
M
R
O
F
R
E
P
E
W
W
O
H
N
O
I
T
A
M
R
O
F
N
I
R
E
D
L
O
H
E
R
A
H
S
A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 5 I N T E G R A T I N G T E C H N O L O G Y
65
R E M U N E R AT I O N R E P O R T
F O R T H E Y E A R E N D E D 3 0 S E P T E M B E R 2 0 15
Vesting according to the ranking of the Company's
TSR in the peer group
Below median
Median
Upper quartile
% of award vesting
Nil
30%
100%
For the EPS measure, the earnings per share over the
performance period are compared with a scale which provides
for nil vesting at RPI +3% and maximum vesting at RPI +8%,
with vesting on a pro rata basis for performance between
these two figures. This range was first introduced for the
awards made in December 2011 and the Committee believes it
remains appropriate. It remains difficult to link the EPS target to
broker forecasts which only look out one year, but if inflation is
assumed to be 3%, then under the EPS measure the Group has
to grow profits by 20% over three years to achieve minimum
vesting and by 35% to achieve maximum vesting. These targets
are ahead of the expectations for those businesses in the
Company's sector where longer-term forecasts are published.
For future awards the Committee has decided to amend the
calculation of the EPS performance condition to use CPI
instead of RPI on the basis that RPI is no longer an approved
national statistic.
EPS growth targets
At or less than RPI +3%
At or greater than RPI +8%
% of award vesting
Nil
100%
In addition, the Committee has discretion to reduce the number
of shares which will vest or decide that no shares will vest if it
considers that the financial performance of the Company or the
performance of the participant does not justify vesting.
The maximum value that can currently be granted under the
Plan rules in any year is 100% of salary. As a result of the
Committee’s review of the Plan, it is proposed that the ‘normal’
award level should remain capped at 100% of annual salary per
year but that the overall cap should be increased to 200% of
salary so that ‘special’ awards may be made in excess of the
normal level in exceptional circumstances, if an appropriate
business challenge warrants such treatment e.g. a major
acquisition or strategic initiative. The performance conditions
for special awards will be financial and will be set at the time
the awards are made. They are likely to be a more challenging
version of the existing TSR/EPS conditions, but the Committee
may decide to use a different financial performance condition
if appropriate in the circumstances.
In addition a clean break option is proposed to be introduced
for exiting executives. The Committee already has discretion to
allow good leaver status on a case by case basis but for added
flexibility, the rules are to be amended to allow for a clean break
when executives leave. This will permit vesting to be triggered
at the point of leaving by reference to performance at that date,
rather than waiting until the end of the performance period if
the Committee so decides. This, in turn, will allow vesting at
rates appropriate to the Board’s strategy for managing an exit,
for example to offset cash compensation by allowing earlier
vesting conditions.
The current remuneration policy is that both the Chief Executive
and Group Finance Director should receive ‘normal’ awards
equal to 100% of salary, being the median level identified in the
2011 EY benchmarking report. This is fixed until 2016 when it
will be reviewed by reference to a new benchmarking report.
The amendment to the Plan rules and remuneration policy
described above would provide scope for a further ‘special’ award
each year in exceptional circumstances of up to another 100%
of salary.
On a change of control, any vesting of awards will be pro-rated by
reference to time and performance.
Under the Plan as introduced in 2010 joint ownership awards were
permitted for the first time. In the Company's case, historically
savings in National Insurance Contributions resulting from this
were not offset by the loss of corporation tax credits because of
the presence of historic corporation tax losses in the UK but this
situation may start to reverse in 2016.
66
I N T E G R A T I N G T E C H N O L O G Y A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 5
The Company loans recipients the small up-front cost of
purchasing their interest in the joint ownership award shares.
For consistency the Executive Directors have been treated in the
same way as other recipients and have therefore received small
loans in connection with their outstanding awards. The total
value of the loans received by the Executive Directors is capped
at £10,000.
As announced to shareholders in December 2014, joint
ownership awards, nil cost options and conditional awards
of shares were granted under the 2010 Plan to the Executive
Directors, members of the Group Executive management team
and other valued employees. A further normal award will be
made in December 2015 within the existing parameters of the
Plan as described above and at 100% of salary for both the new
Chief Executive and Group Finance Director. Special awards in
excess of 100% of salary can only be made following approval
of the Plan amendments at the annual general meeting in
January 2016. Assuming this is approved, these will be notified
to shareholders if and when they are made.
Shareholding guidelines
Under shareholding guidelines originally approved in
2004, executives participating in the Performance Share
Plan are required to build up and retain a shareholding in
the Company. For Executive Directors the shareholding
requirement was originally equivalent to 1.5 times base
salary but this was increased to two times base salary for
awards vesting after December 2014. For other recipients the
shareholding requirement is equivalent to one times base
salary. The Executive Directors and other members of the Group
Executive management team are required to retain a portion
of any awards that vest under the Plan until their respective
shareholding guideline is met. Once the shareholding guideline
is met executives are not required to retain any portion of future
awards that vest.
It is not proposed to amend the above guidelines in respect
of future normal awards under the Plan. For the new special
awards in excess of 100% of salary, a two year mandatory
holding period will be introduced following the three year
performance period for such awards. At the end of this period
the shares subject to the award will not be subject to the
shareholding guidelines for normal awards and may be sold.
Dilution
The Company reviews the awards of shares made under the
all employee and executive share plans in terms of their effect
on dilution limits in any rolling ten-year period. The current
position is set out on page 75 of this report and no change to
this is proposed. In summary, in 2011 shareholders approved a
15% dilution limit for all employee schemes which is in excess of
the 10% recommended by the ABI, and a 10% dilution limit for
discretionary (executive) schemes which is in excess of the 5%
recommended by the ABI. At the time the Company committed to
consult with certain institutional shareholders before exceeding
the 10% limit but has never had cause to do this and has no plans
to exceed 10% in future. In practice there is therefore a 10%
dilution limit on all schemes which the Company will continue
to operate within, including when utilising the higher salary cap
proposed under the Performance Share Plan and the new CSOP
and ISO plans.
Other share plans
Shareholders approved the introduction of the Avon Rubber p.l.c.
Share Incentive Plan (the SIP) at the AGM in February 2012. All UK
tax resident employees of the Company and its subsidiaries are
entitled to participate. Under the SIP, participants purchase shares
in the Company monthly using deductions from their pre-tax pay.
The maximum contribution each month under the SIP is £150, a
sum which is set by the Government. Both Mr. Slabbert and Mr.
Lewis participated in the SIP at the maximum level during the year.
Shareholders also approved the introduction of the Avon Rubber
p.l.c. Employee Stock Purchase Plan (the ESPP) at the AGM in
February 2012. The ESPP is open to all US tax resident employees
and allows participants to accumulate deductions from their
post-tax pay over an offering period of 12 months. The maximum
contribution for each 12 month period is $3,000. At the conclusion
of the offering period the accumulated funds are used to purchase
the Company's shares at a discount. Neither Mr. Slabbert nor Mr.
Lewis are eligible to participate in the ESPP.
This year shareholders are being asked to approve the
introduction of two new share option schemes, the Avon Rubber
p.l.c. 2015 Share Option Plan (the CSOP) in the UK and the Avon
Rubber p.l.c. 2015 Incentive and Non-Qualified Stock Option Plan
(the ISO) in the US. Further details on how the schemes operate
are set out on pages 144 to 146. Awards under both schemes are
targeted at junior management and may be supplemented by
unapproved share options. Neither Mr. Lewis nor the new Chief
Executive will be granted awards under the CSOP and neither will
be entitled to participate in the ISO.
R
A
E
Y
E
H
T
F
O
W
E
I
V
R
E
V
O
S
S
E
N
I
S
U
B
R
U
O
N
U
R
E
W
W
O
H
D
E
M
R
O
F
R
E
P
E
W
W
O
H
N
O
I
T
A
M
R
O
F
N
I
R
E
D
L
O
H
E
R
A
H
S
A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 5 I N T E G R A T I N G T E C H N O L O G Y
67
R E M U N E R AT I O N R E P O R T
F O R T H E Y E A R E N D E D 3 0 S E P T E M B E R 2 0 15
Pension arrangements
Mr. Slabbert and Mr. Lewis are both based in the UK and are
members of the Avon Rubber Retirement and Death Benefits
Plan. Until 30 September 2009, when the final salary section
of the Plan closed to future accrual of benefits, Mr. Slabbert
was a member of the Senior Executive Section which provided
members with a defined level of benefit on retirement depending
on length of service and earnings. Members can receive a pension
of up to two-thirds of pensionable salary on retirement from
age 60, provided the minimum service requirement of 20 years
has been met. On death in service, a lump sum of four times
pensionable salary is paid, along with a spouses' pension of one
half of the member's prospective pension. When an executive
director dies after retirement, a spouse's pension of one half of
the member's pension is paid. At the time the final salary section
of the Plan closed to future accrual of benefits, in return for Mr.
Slabbert giving up this valuable benefit, the Company and the
Trustee agreed to enter into a special benefit arrangement.
Under this arrangement for each complete year subsequently
worked by Mr. Slabbert, the age by reference to which a reduction
would be applied to his pension if he chose to draw it early would
reduce by 5/8ths of a year, with the end result that after eight
years, no reduction would apply if Mr. Slabbert retired on or
after his 55th birthday. On retirement on 30 September 2015 the
age at which Mr. Slabbert may take his pension unreduced was
crystalised at 56 years and 3 months, having reduced by 5/8ths
of a year over the year to 30 September 2015.
Under the current remuneration policy any UK-based Executive
Directors joining the Company are offered defined contribution
arrangements.
Mr. Lewis is a member of the money purchase section of the Plan.
Under this section members receive a pension based upon the
size of their retirement account on retirement from age 65.
On death in service, a lump sum of four times pensionable salary
is paid, along with a spouse's pension of one quarter of the
member's pensionable salary. Both Mr. Slabbert and Mr. Lewis
receive a company pension contribution of 15% of salary.
In January 2012, Mr. Slabbert's total pension benefits reached
the standard lifetime allowance of £1.8m and he ceased making
contributions into the money purchase section of the Plan.
Monthly contributions have been paid to Mr. Slabbert as a
salary supplement since then and until his retirement on 30
September 2015. Mr. Slabbert remained covered by the death in
service insurance until his retirement notwithstanding that he
was no longer an active member of the Plan.
Executive Directors' basic salaries and any salary
supplements are the only pensionable element of their
remuneration packages.
There is no intention to increase pension contributions to
the Executive Directors during the life of the current policy.
Service contracts and policy on payments for loss
of office
The Company's policy is that Executive Directors should
normally be employed under a contract which may be
terminated by either the Company or the Executive Director
giving 12 months' notice. The Company may terminate the
contract with immediate effect with or without cause by making
a payment in lieu of notice by monthly instalments of salary
and benefits to a maximum of 12 months, with reductions for
any amounts received from providing services to others during
this period. There are no obligations to make payments beyond
those disclosed elsewhere in this report.
The Remuneration Committee may vary these terms if the
particular circumstances surrounding the appointment of a
new executive director demand it but this would be exceptional
and has never occurred. The above terms were included in the
contract signed by the new Chief Executive. The parameters
for varying the contractual terms on recruitment are described
in the guiding policy section above.
The Remuneration Committee strongly endorses the
obligation on an executive director to mitigate any loss on early
termination and will seek to reduce the amount payable on
termination where it is appropriate to do so. The Committee
will also take care to ensure that, while meeting its contractual
obligations, poor performance is not rewarded. The Executive
Directors' contracts contain early termination provisions
consistent with the policy outlined above.
68
I N T E G R A T I N G T E C H N O L O G Y A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 5
During the year, with the permission of the Chairman, Mr.
Slabbert was appointed as a Non-Executive Director of Carclo
plc and was permitted to retain the fees paid to him by Carclo.
Mr. Lewis is not currently appointed as a non-executive director
of any limited company outside the Group. The Remuneration
Committee will consider its approach to the treatment of any
fees received by Executive Directors in respect of non-executive
roles as they arise.
The arrangements for Mr. Slabbert’s retirement are set out
in detail in the annual report on remuneration. In summary,
Mr. Slabbert was paid his base salary up until he retired on
30 September 2015. He also received his full annual bonus
entitlement for the 2015 financial year on the basis that he had
worked the full year and because of exceptional results being
reported this year. He will remain covered by the Company
medical insurance until next renewal in April 2016. Mr. Slabbert
has been treated as a good leaver pursuant to the rules of the
Performance Share Plan. As such his 2012 award, the three-year
performance period for which ran until 30 September 2015, has
not been pro-rated and will be permitted to vest in full if the
performance conditions are met. The subsequent 2013 and 2014
awards, which have three year performance periods running to
30 September 2016 and 2017 respectively, have been pro-rated
as set out on pages 74 and 75.
Under the special benefit arrangement for Mr. Slabbert, he
could draw his pension early at the age of 56 years and 3
months on an unreduced basis.
The table below summarises key details in respect of each
Executive Director's contract.
Contract
date
Years to
expected
retirement
Company
notice
period
Executive
notice
period
AG Lewis
28 September 2009
22
12 months 12 months
R
A
E
Y
E
H
T
F
O
W
E
I
V
R
E
V
O
S
S
E
N
I
S
U
B
R
U
O
N
U
R
E
W
W
O
H
D
E
M
R
O
F
R
E
P
E
W
W
O
H
N
O
I
T
A
M
R
O
F
N
I
R
E
D
L
O
H
E
R
A
H
S
A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 5 I N T E G R A T I N G T E C H N O L O G Y
69
All Non-Executive Director appointments may be terminated
on giving three months' notice. There are no provisions for
compensation payments on early termination in the Chairman's
and the Non-Executive Directors' letters of appointment.
The date of each appointment is set out below, together with
the date of their last re-election by shareholders.
Date of initial
appointment
Date of last
re-election
DR Evans
1 June 2007
7 February 2013
SJ Pirie OBE (retired 29 January 2015)
1 March 2005
6 February 2014
RK Wood
PRM Vervaat
1 December 2012
29 January 2015
1 March 2015
n/a
R E M U N E R AT I O N R E P O R T
F O R T H E Y E A R E N D E D 3 0 S E P T E M B E R 2 0 15
Chairman and Non-Executive Directors
The Chairman and Non-Executive Directors receive a fixed fee
for their services. Fee levels are determined by the Board in
light of market research and benchmarking advice provided
by EY. Under the policy approved by shareholders in February
2014, fee levels for the Chairman and Non-Executive Directors
are benchmarked every three years and adjusted to the
median level of the comparator group. The aim is to provide
compensation in line with the demands of the roles at a
level that attracts high calibre individuals and reflects their
experience and knowledge. The first increases pursuant to this
benchmarking were made on 1 October 2014 and fees are now
fixed until October 2017. The Chairman and the Non-Executive
Directors do not participate in any Board discussions on, or
vote on their own remuneration, nor do they participate in any
incentive or benefit plans.
Current fees are as follows:
2016
2015
% increase
Chairman
£125,000
£125,000
Base fee Non-Executive
Committee Chairman fee
Committee attendance fee
£38,500
£10,000
£2,000
£38,500
£10,000
£2,000
-
-
-
-
The Chairman and the Non-Executive Directors each have a
letter of appointment. Mrs. S Pirie retired at the annual general
meeting on 29 January 2015 and was replaced by Mr. P Vervaat
on 1 March 2015. Mr. Vervaat has been appointed on a rolling
annual basis. The initial period of appointment for Mr. D Evans
was three years and this was extended on a rolling annual basis
on 31 May 2010. Mr. R Wood was appointed on a rolling annual
basis with effect from 1 December 2012.
Chairman and Non-Executive Director appointments are subject
to Board approval and election by shareholders at the annual
general meeting following appointment and, thereafter, re-
election by rotation every three years. The Chairman and any
Non-Executive Director who has served for more than nine
years since first election are subject to annual re-election by
shareholders.
70
I N T E G R A T I N G T E C H N O L O G Y A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 5
Annual report on remuneration
The information that follows has been audited by the Company's auditors PricewaterhouseCoopers LLP.
Directors' remuneration for the year ended 30 September 2015 was as follows:
Executive Directors
AG Lewis
PC Slabbert (highest paid Director)
Non-Executive Directors
DR Evans (Chairman)
SJ Pirie OBE (resigned 29 January 2015)
PRM Vervaat (appointed 1 March 2015)
RK Wood
Total 2015
Total 2014
Basic salary
Pension/ other
and fees
£000
supplements
£000
Annual
bonus*
£000
Other
benefits**
£000
252
330
125
22
29
51
809
772
38
50
-
-
-
-
88
88
335
448
-
-
-
-
783
822
2
3
3
-
-
-
8
9
Total
2015
£000
627
831
128
22
29
51
1,688
Total
2014
£000
662
835
104
45
-
45
1,691
* 2015 bonus payments as a percentage of salary were 136% for Mr Slabbert and 133% for Mr Lewis, against maximum percentages of 150%.
** This is the cost of private health insurance, executive medical and the benefit of loans made in relation to PSP awards. No Director
waived emoluments in respect of the year ended 30 September 2015 (2014: nil).
Single total figure of remuneration
The following table gives a single total figure of remuneration for the Chief Executive and Group Finance Director for 2015, 2014 and 2013.
The principal additional component included in this single figure is the Performance Share Plan.
Fixed pay
Pay for performance
Basic
salary
£000
Pension/ other
supplements
£000
Benefits
in kind
£000
Subtotal
£000
Annual
bonus
£000
PSP*
Subtotal
£000
£000
330
330
280
252
252
200
50
50
42
38
38
30
3
3
3
2
2
2
383
383
325
292
292
232
448
452
241
335
370
149
604
703
808
345
388
397
1,052
1,155
1,049
680
758
546
Total
Remuneration
£000
1,435
1,538
1,374
972
1,050
778
P.C. Slabbert
2015
A.G. Lewis
2014
2013
2015
2014
2013
* Calculated by multiplying the number of shares that vested by the share price on the day of vesting, which in 2015 was 720p
(96% vesting), in 2014 was 570p (100% vesting) and in 2013 was 351p (100% vesting).
The table of Directors' remuneration for the year ended 30 September 2015 above gives the single total figure for the Non-Executive
Directors for 2015, 2014 and 2013.
R
A
E
Y
E
H
T
F
O
W
E
I
V
R
E
V
O
S
S
E
N
I
S
U
B
R
U
O
N
U
R
E
W
W
O
H
D
E
M
R
O
F
R
E
P
E
W
W
O
H
N
O
I
T
A
M
R
O
F
N
I
R
E
D
L
O
H
E
R
A
H
S
A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 5 I N T E G R A T I N G T E C H N O L O G Y
71
R E M U N E R AT I O N R E P O R T
F O R T H E Y E A R E N D E D 3 0 S E P T E M B E R 2 0 15
Percentage change in remuneration of the CEO compared with other employees (unaudited)
The Committee believes it remains inappropriate to compare the percentage change in remuneration of the CEO with the wider
workforce because an increase within the last three years brought the CEO’s salary (and those of other executives) up to the median
level, whereas the wider workforce were largely already at the median level. Nevertheless in line with current practice, we have reported
changes in the CEO’s remuneration against the wider workforce. As the CEO's salary is now at the median level, future increases to keep
track with the median, which will occur every three years, should start to align with the total of annual increases made to other employees
each year when measured over a three-year period.
The following table sets out the percentage change in remuneration between the reported year and the preceding year in certain aspects
of the CEO's remuneration and the average of employees across the Group:
CEO
All employees
2012/2013
2013/2014
2014/2015
2012/2013
2013/2014
2014/2015
Salary
Benefits
0%
0%
Annual Bonus
+126%
+18%
0%
+88%
0%
0%
-1%
+3%
0%
+74%
+3%
0%
+15%
+3%
0%
+8%
The ratio of CEO fixed pay to average employee fixed pay is 11.3 :1 for the year under review.
Relative importance of spend on pay (unaudited)
The following table shows actual expenditure of the Group and the change in expenditure between current and previous financial
periods on remuneration paid to all employees globally, set against distributions to shareholders and other uses of profit or cash flow
being profits retained within the business and investments in research and development and property, plant and equipment:
Global
remuneration
spend
Other expenditure in £'000 and as a percentage of global remuneration spend
Dividends to
shareholders
Profit
retained
Research
and development
expenditure
Expenditure
on property, plant
and machinery
2015
2014
2013
£'000
34,344
32,423
33,314
£'000
1,859
1,422
1,132
%
5.4%
4.4%
3.4%
£'000
%
£'000
11,807
34.4%
7,139
%
20.8
£'000
3,222
%
9.4
9,389
29.0%
7,046
21.7%
3,731
11.5%
7,705
23.1%
6,407
19.2%
6,175
18.5%
72
I N T E G R A T I N G T E C H N O L O G Y A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 5
Annual bonus
The Remuneration Committee determined at its meeting on 10 November 2015 that the criteria for making an award under the annual
bonus scheme had been met. No discretion was exercised by the Committee to reduce or increase payments. The breakdown is as follows:
1. Financial Targets
(a) Group profit budget achievement (Group PBITE)
(b) Profit growth on previous year (year on year PBITE growth)
(c) Group cash generation (ratio of operating cashflow to operating profit)
(d) Earnings Per Share growth (ratchet based on additional EPS
growth above 20% over the previous financial year)
2. Personal Performance Targets
PC Slabbert
AG Lewis
Actual
Max.
Actual
Max.
18%
25%
20%
43%
30%
25%
25%
20%
50%
30%
18%
25%
20%
43%
27%
25%
25%
20%
50%
30%
Total potential bonus as a percentage of basic salary
136%
150%
133%
150%
Actual performance against the targets has not been reproduced because it is commercially sensitive.
Pensions
The following information relates to the pension of Mr. P Slabbert under the defined benefit scheme:
Increase in accrued pension during 2014/15
Accrued pension at 30 September 2015
£
850
68,988
The age at which Mr. P Slabbert may take his pension unreduced was reduced by 5/8ths of a year over the year to 30 September 2015.
On retirement on 30 September 2015 the age at which Mr. P Slabbert may take his pension unreduced was crystalised at 56 years and 3
months having reduced by 5/8ths of a year over the year to 30 September 2015.
On closure of the defined benefit scheme Mr Slabbert joined the money purchase section of the plan. Company contributions in respect
of Mr Slabbert during the year were nil (2014: nil) because Mr Slabbert reached the standard lifetime allowance in January 2012. During the
year £50,000 (2014: £50,000) was paid to Mr Slabbert in monthly instalments as a salary supplement.
In respect of Mr. A Lewis, Company contributions to the money purchase section of the plan were £38,000 (2014: £38,000).
All transfer values have been calculated on the basis of actuarial advice in accordance with Actuarial Guidance Note GN11.
R
A
E
Y
E
H
T
F
O
W
E
I
V
R
E
V
O
S
S
E
N
I
S
U
B
R
U
O
N
U
R
E
W
W
O
H
D
E
M
R
O
F
R
E
P
E
W
W
O
H
N
O
I
T
A
M
R
O
F
N
I
R
E
D
L
O
H
E
R
A
H
S
A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 5 I N T E G R A T I N G T E C H N O L O G Y
73
R E M U N E R AT I O N R E P O R T
F O R T H E Y E A R E N D E D 3 0 S E P T E M B E R 2 0 15
The transfer values of the accrued entitlement represent the
value of assets that the pension scheme would need to transfer
to another pension provider on transferring the scheme's
liability in respect of Directors' pension benefits. They do not
represent sums payable to individual Directors and, therefore,
cannot be added meaningfully to annual remuneration.
The accrued entitlement shown is the amount that would be
paid each year at normal retirement age, based on service to
the end of the current year. The accrued lump sum, under the
defined benefit scheme, for Mr Slabbert at 30 September 2015
was £336,663 (2014: £328,157).
Directors' shareholdings and share interests
Beneficial interests of Directors, their families and trusts in
ordinary shares of the Company were:
SJ Pirie (resigned 29 January 2015)
DR Evans
RK Wood
PC Slabbert
AG Lewis
PRM Vervaat
At the end
of the year
At the beginning
of the year
n/a
40,000
-
145,357*
87,055**
-
73,000
40,000
-
202,645
121,110
-
* Includes 7,477 shares held under the annual bonus deferral scheme
** Includes 5,710 shares held under the annual bonus deferral scheme
Interests in jointly owned shares held by the Executive Directors
under the Performance Share Plan are excluded from the above
and detailed separately on page 75.
The only change in the interests set out above between 30
September 2015 and 17 November 2015 were the additional
shares bought by Mr. A Lewis under the Share Incentive Plan,
which increased his total shareholding to 87,083.
The register of Directors' interests contains details of Directors'
shareholdings and share options. The position under the
shareholding guidelines for the Executive Directors is set out
on page 75.
Performance Share Plan 2010 (the Plan)
For grants of joint ownership awards, options or conditional
awards made to date pursuant to the Plan, the performance
conditions have been based on the Company's TSR relative to
the TSR of a comparator group, comprising the FTSE Small Cap
companies (excluding investment trusts). For the Cycles granted
in 2012/13, 2013/14 and 2014/2015 a split performance condition
applied so that 50% of the award vests in accordance with the
TSR target and 50% in accordance with an EPS target based on
real growth in earnings over the performance period where real
growth is expressed as a percentage above inflation.
The twofold test based on TSR performance and EPS is in line
with market practice and encourages management to maintain
and increase earnings levels whilst at the same time ensuring
that it is not at the expense of longer term shareholder return.
The twofold test was used again for the 2014/15 awards. Back in
2011, the Committee set the EPS target as nil vesting at RPI +3%
and maximum vesting at RPI +8% with vesting on a pro rata basis
in between these two figures. This EPS target was used again for
the 2014/15 awards.
The Committee determined in December 2014 that the 2011/12
award vested in part on the basis that (i) the TSR over three years
from 1 October 2011 to 30 September 2014 was 92% of the upper
quartile of the comparator group and so 46% of the available
50% vested; (ii) the result of the EPS performance condition was
355% which equated to a 50% vesting out of the 50% available.
As a consequence, and as announced to shareholders in
December 2014, 84,000 shares were awarded to Mr. Slabbert
and 48,000 were awarded to Mr. Lewis.
The Directors' contingent interests in ordinary shares under
the Plan at 30 September 2015 were as follows:
Outstanding awards granted annually under the Plan were
as follows:
30 Sept
2014
Granted in Exercised in
the year**
the year*
Lapsed in
30 Sept
the year 2015***
PC Slabbert
226,489
AG Lewis
140,364
45,821
34,990
(84,000)
(48,000)
(53,024) 135,286
(2,000) 125,354
Other senior
employees**** 560,063
157,350
(195,130)
(13,300) 508,983
Total
926,916
238,161
(327,130)
(68,324) 769,623
*
**
The award price at the date of grant was 720.2 pence
The market price at the vesting date for the 2011/12 award was 715.0 pence
*** The weighted average remaining life of the awards outstanding at the
year-end is 1.1 years (2014: 1.6 years).
**** This figure includes 180,383 (2014: 201,755) in respect of key management
as defined in note 9 of the financial statements.
74
I N T E G R A T I N G T E C H N O L O G Y A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 5
Outstanding awards granted annually under the Plan were
as follows:
Position under shareholding guidelines
2012
2013
2014
Total at 30
Sept 2015*
82,063
46,893
37,950
43,471
15,273
34,990
135,286
125,354
204,487
147,146
157,350
508,983
PC Slabbert
AG Lewis
Other senior
employees
Shareholding as
Actual
Target Achievement****
Shares held
voluntarily in
at 30 Sept 2015* Value**
Value***
excess of guideline
Number of shares
£000
£000
%
Number of shares
PC Slabbert
137,880
1,260
AG Lewis
81,345
743
660
504
382
295
65,670
26,202
Total
333,443
228,567
207,613
769,623
*
Taken from the table on page 74.
In relation to the awards outstanding at 30 September 2015, deferred loan
*
payments for the awards granted in 2012/2013, 2013/2014 and
2014/2015 will become due to the Company as follows: PC Slabbert £10,000
(2014: £10,000); AG Lewis £10,000 (2014: £10,000).
The award price for the 2014/2015 was 720.2 pence, for the 2013/14 award it was
579.7 pence, for the 2012/13 award it was 349.5 pence and for the 2011/12 award
it was 300.0 pence.
PSP
performance
30 Sept
30 Sept
30 Sept
period years
2011
2012
2013
30 Sept
2014
30 Sept 30 Sept
20164
20153
30 Sept
20174
ending
(Cycle A)
(Cycle B)
(Cycle C)
(Cycle D)
(Cycle E)
(Cycle F) (Cycle G)
100%
100%
100%
50%
50%
50%
50%
-
-
-
50%
50%
50%
50%
TSR
element1
EPS
element2
Total
exercisable
rate
(% of grant)
100%5
100%6
100%7
96%8
-
-
-
1 Based on Avon Rubber p.l.c.'s Total Shareholder Return ranked relative
to companies in the FTSE Small Cap Index at the start of the period.
2 Based on the real growth in earnings over the performance period where
real growth is expressed as a % above inflation.
3 The three-year performance period in respect of these awards is complete
but vesting is not determined until the end of November following release
of the Group results. 100% of the awards are currently expected to vest.
4 The three year performance periods in respect of these awards is not yet complete.
5
These awards were reduced to 69% of entitlement to remain within the 5% dilution
limit previously contained in the Plan rules. They vested in full in December 2011
on the basis of a Company TSR of 905% compared to the upper quartile of the
comparator group at 131%.
6 These awards vested in full in December 2012 on the basis of a Company
TSR of 265% compared to the upper quartile of the comparator group at 63%.
7 These awards vested in full in December 2013 on the basis of a Company TSR
of 214% compared to the upper quartile of the comparator group at 122%
8 These awards vested at 96% in December 2014 on the basis of a Company
TSR of 131% compared to the upper quartile of the comparator group
at 138% and EPS growth of 81%.
** Using the closing share price on 30 September 2015 of 914 pence.
*** 200% of current salary for Executive Director's salaries used are those
effective 1 October 2015.
**** Actual value as a percentage of current salary.
Dilution
In respect of the 5% and 10% limits recommended by the
Association of British Insurers, the relevant percentages were
7.6% and 9.7% respectively based on the issued share capital
at 30 September 2015.
Under the Plan the 5% limit was increased to 10% and, in 2011,
the 10% limit was increased to 15% to preserve the 10% limit for
discretionary plans in connection with the introduction of the all
employee Share Incentive Plan.
At the time the Company committed to consult with certain
institutional shareholders before exceeding the 10% limit but has
never had cause to do this and has no plans to exceed 10% in future.
In practice there is therefore a 10% dilution limit on all schemes
which the company intends to operate within, including when
utilising the higher salary cap proposed under the Performance
Share Plan and the new CSOP and ISO plans.
As at 30 September 2015, the number of shares committed under
discretionary share-based incentive schemes since 30 September
2005, less the number of shares purchased in the market to satisfy
previous awards that had vested and the shares held in the Employee
Share Ownership Trust gives 2,356,600 shares. This represents 7.6%
dilution against the 10% discretionary plan dilution limit.
As at 30 September 2015, the number of shares committed under all
employee share-based incentive schemes since 30 September 2005,
less the number of shares purchased in the market to satisfy previous
awards that had vested and the shares held in the Employee Share
Ownership Trust gives 3,007,146 shares which represents 9.7%
dilution against the 15% all employee plan dilution limit.
It remains the Company's practice to use employee share
ownership trusts in order to meet its liability for shares awarded
under the Plan. Two trusts have been established, the second in
March 2010 in connection with the jointly owned equity awards.
At 30 September 2015 there were 887,315 shares held in the
Employee Share Ownership Trusts which will either be used to
satisfy awards granted under the Plan to date, or in connection
with future awards. Of these, 500,921 were held on a jointly owned
equity basis. A hedging committee ensures that the employee
share ownership trusts hold sufficient shares to satisfy existing
and future awards made under the Plan by buying shares in the
market or causing the Company to issue new shares.
R
A
E
Y
E
H
T
F
O
W
E
I
V
R
E
V
O
S
S
E
N
I
S
U
B
R
U
O
N
U
R
E
W
W
O
H
D
E
M
R
O
F
R
E
P
E
W
W
O
H
N
O
I
T
A
M
R
O
F
N
I
R
E
D
L
O
H
E
R
A
H
S
A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 5 I N T E G R A T I N G T E C H N O L O G Y
75
R E M U N E R AT I O N R E P O R T
F O R T H E Y E A R E N D E D 3 0 S E P T E M B E R 2 0 15
Total shareholder return performance graph
The following graph illustrates the total return, in terms of share price growth and dividends on a notional investment of £100 in the
Company over the last five years relative to the FTSE Small Cap Index (excluding investment trusts). This index was chosen by the
Remuneration Committee as a competitive indicator of general UK market performance for companies of a similar size.
A V O N R U B B E R P L C - T O TA L R E T U R N O N I N V E S T M E N T
700
600
500
400
300
200
100
0
r
e
k
n
a
B
e
n
O
n
o
s
m
o
h
T
-
l
a
i
c
n
a
n
F
n
o
s
i
m
o
h
T
:
e
c
r
u
o
S
1 October 2010
30 September 2015
AVON RUBBER PLC FTSE SMALL CAPITALISATION INDEX
Table of historic data
CEO
PC Slabbert
PC Slabbert
PC Slabbert
PC Slabbert
PC Slabbert
2015
2014
2013
2012
2011
CEO single figure of
total remuneration
£000
1,435
1,538
1,374
1,864
404
Annual bonus
pay out against
maximum opportunity
Long-term incentive
vesting rates against
maximum opportunity
91%
91%
86%
40%
74%
96%
100%
100%
100%
nil
76
I N T E G R A T I N G T E C H N O L O G Y A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 5
Share Incentive Plan
During the year to 30 September 2015 Mr. Slabbert and Mr. Lewis each purchased 235 shares pursuant to the Share Incentive Plan.
As at 30 September 2015, the market price of Avon Rubber p.l.c. shares was £9.14 (2014: £6.15). During the year the highest and lowest
market prices were £9.51 and £6.20 respectively.
Payments to past Directors and payments for loss of office
There have been no payments to past Executive Directors or payments for loss of office.
Statement of implementation of remuneration policy in the following year
Information required under this disclosure is contained in the table on pages 60 to 61 and associated commentary.
Details of the advisors to the Remuneration Committee and their fees
During the year to 30 September 2015 the Company incurred costs of £16,350 (2014: £11,750) in respect of fees for advisors to the
Remuneration Committee.
Statement of shareholder voting on the Remuneration Report
The shareholder vote on the Remuneration Report for the year ended 30 September 2014 at the AGM which took place on 29 January
2015 was as follows:
Resolution text
Votes for
% for
Votes against
% against
Total votes cast
Votes withheld
Approval of the remuneration report
20,647,982
99.03
200,738
0.96
20,848,630
34,562
The Remuneration Report has been approved by the Board of Directors and signed on its behalf by:
Richard Wood
Chairman of the Remuneration Committee
17 November 2015
R
A
E
Y
E
H
T
F
O
W
E
I
V
R
E
V
O
S
S
E
N
I
S
U
B
R
U
O
N
U
R
E
W
W
O
H
D
E
M
R
O
F
R
E
P
E
W
W
O
H
N
O
I
T
A
M
R
O
F
N
I
R
E
D
L
O
H
E
R
A
H
S
A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 5 I N T E G R A T I N G T E C H N O L O G Y
77
C O N S O L I D AT E D S TAT E M E N T O F C O M P R E H E N S I V E I N C O M E
F O R T H E Y E A R E N D E D 3 0 S E P T E M B E R 2 0 15
2015
Statutory
£’000
Note
2015
2015
Adjustments* Adjusted
£’000
£’000
2014
Statutory
£’000
2014
Adjustments*
£’000
2014
Adjusted
£’000
Continuing operations
Revenue
Cost of sales
Gross profit
Selling and distribution costs
General and administrative expenses
1
134,318
(88,618)
- 134,318
- (88,618)
124,779
(83,264)
- 124,779
(83,264)
-
45,700
(13,007)
(13,807)
-
45,700
- (13,007)
(12,478)
1,329
41,515
(11,505)
(15,685)
-
-
2,678
41,515
(11,505)
(13,007)
Operating profit
1
18,886
1,329 20,215
14,325
2,678
17,003
Operating profit is analysed as:
Before depreciation and amortisation
Depreciation and amortisation
Operating profit
Finance income
Finance costs
Other finance expense
Profit before taxation
Taxation
Profit for the year from continuing operations
Discontinued operations - loss for the year
11,12
26,981
(8,095)
286 27,267
(7,052)
1,043
20,486
(6,161)
2,417
261
22,903
(5,900)
18,886
1,329 20,215
14,325
2,678
17,003
4
4
4
5
6
3
45
(192)
(901)
17,838
(2,672)
15,166
(1,500)
-
-
654
45
(192)
(247)
1,983 19,821
(2,925)
(253)
1,730 16,896
-
1,500
1
(275)
(187)
13,864
(3,053)
10,811
-
-
-
12
1
(275)
(175)
2,690
(450)
16,554
(3,503)
2,240
-
13,051
-
Profit for the year
13,666
3,230
16,896
10,811
2,240
13,051
Other comprehensive income/(expense)
Items that are not subsequently reclassified to the income statement
Actuarial loss recognised on retirement benefit scheme
Deferred tax relating to retirement benefit scheme
Items that may be subsequently reclassified to the income statement
Net exchange differences offset in reserves
10
(1,040)
3,321
3,311
-
-
-
(1,040)
3,321
(4,851)
-
3,311
(306)
Other comprehensive income/(expense)
for the year, net of taxation
5,592
-
5,592
(5,157)
-
-
-
-
(4,851)
-
(306)
(5,157)
Total comprehensive income for the year
19,258
3,230 22,488
5,654
2,240
7,894
Earnings per share
Basic
Diluted
Earnings per share from continuing operations
Basic
Diluted
* See note 3 for further details of adjustments.
8
8
45.4p
44.2p
50.4p
49.0p
56.1p
54.6p
36.2p
35.0p
56.1p
54.6p
36.2p
35.0p
43.7p
42.3p
43.7p
42.3p
78
I N T E G R A T I N G T E C H N O L O G Y A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 5
C O N S O L I D AT E D B A L A N C E S H E E T
AT 3 0 S E P T E M B E R 2 0 15
Assets
Non-current assets
Intangible assets
Property, plant and equipment
Deferred tax assets
Current assets
Inventories
Trade and other receivables
Derivative financial instruments
Cash and cash equivalents
Liabilities
Current liabilities
Borrowings
Trade and other payables
Provisions for liabilities and charges
Current tax liabilities
Net current assets
Non-current liabilities
Borrowings
Deferred tax liabilities
Retirement benefit obligations
Provisions for liabilities and charges
Net assets
Shareholders’ equity
Ordinary shares
Share premium account
Capital redemption reserve
Translation reserve
Accumulated losses
Total equity
Note
2015
£’000
2014
£’000
11
12
6
13
14
19
15
17
16
18
17
6
10
18
20
20
41,309
28,212
4,574
74,095
17,123
17,023
3
332
34,481
2,350
17,150
855
6,823
27,178
7,303
11,143
9,734
16,605
1,712
39,194
17,240
19,575
-
36,815
12,887
19,157
2
2,925
34,971
-
17,755
1,846
6,852
26,453
8,518
-
2,315
16,029
1,973
20,317
42,204
25,016
31,023
34,708
500
2,379
(26,406)
42,204
31,023
34,708
500
(932)
(40,283)
25,016
These financial statements on pages 78 to 118 were approved by the Board of Directors on 17 November 2015 and signed on its behalf by:
David Evans
Andrew Lewis
A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 5 I N T E G R A T I N G T E C H N O L O G Y
79
R
A
E
Y
E
H
T
F
O
W
E
I
V
R
E
V
O
S
S
E
N
I
S
U
B
R
U
O
N
U
R
E
W
W
O
H
D
E
M
R
O
F
R
E
P
E
W
W
O
H
N
O
I
T
A
M
R
O
F
N
I
R
E
D
L
O
H
E
R
A
H
S
C O N S O L I D AT E D C A S H F L O W S TAT E M E N T
F O R T H E Y E A R E N D E D 3 0 S E P T E M B E R 2 0 15
Cash flows from operating activities
Cash generated from continuing operating activities before the impact of exceptional items
Cash impact of exceptional items
Cash generated from continuing operations
Cash used in discontinued operations
Cash generated from operations
Finance income received
Finance costs paid
Retirement benefit deficit recovery contributions
Tax paid
Net cash generated from operating activities
Cash flows from investing activities
Proceeds from sale of property, plant and equipment
Purchase of property, plant and equipment
Capitalised development costs and purchased software
Acquisition of subsidiaries
Net cash used in investing activities
Cash flows from financing activities
Net movements in loans
Dividends paid to shareholders
Purchase of own shares
Net cash generated from/(used in) financing activities
21
26
22
7
20
Net (decrease)/increase in cash, cash equivalents and bank overdrafts
Cash, cash equivalents and bank overdrafts at beginning of the year
Cash, cash equivalents and bank overdrafts acquired on acquisitions
Effects of exchange rate changes
Cash, cash equivalents and bank overdrafts at end of the year
22
80
I N T E G R A T I N G T E C H N O L O G Y A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 5
Note
2015
£’000
2014
£’000
24,053
(1,192)
22,861
(1,529)
21,332
45
(192)
(800)
(3,270)
17,115
21
(3,222)
(2,961)
(21,249)
26,500
(983)
25,517
-
25,517
1
(315)
(513)
(2,903)
21,787
19
(3,753)
(3,062)
(50)
(27,411)
(6,846)
10,605
(1,859)
(1,152)
(10,805)
(1,422)
-
7,594
(12,227)
(2,702)
2,925
12
97
332
2,714
184
-
27
2,925
C O N S O L I D AT E D S TAT E M E N T O F C H A N G E S I N E Q U I T Y
F O R T H E Y E A R E N D E D 3 0 S E P T E M B E R 2 0 15
At 1 October 2013
Profit for the year
Unrealised exchange differences on
overseas investments
Actuarial loss recognised on retirement
benefit scheme
Total comprehensive income/(expense) for the year
Dividends paid
Issue of shares
Purchase of shares by the employee benefit trust
Movement in respect of employee share scheme
At 30 September 2014
Profit for the year
Unrealised exchange differences on
overseas investments
Actuarial loss recognised on retirement
benefit scheme
Deferred tax relating to retirement benefit scheme
Total comprehensive income for the year
Dividends paid
Movement in shares held by the employee benefit trust
Movement in respect of employee share schemes
Deferred tax relating to employee share schemes
Share
capital
£’000
30,723
-
-
-
-
-
300
-
-
Share
premium
£’000
34,708
-
-
-
-
-
-
-
-
31,023
-
34,708
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Note
10
20
20
24
10
6
7
20
24
6
Other
reserves
£’000
Accumulated
losses
£’000
Total
equity
£’000
(126)
-
(306)
(44,609)
10,811
20,696
10,811
-
(306)
-
(4,851)
(4,851)
(306)
-
-
-
-
(432)
-
3,311
-
-
3,311
-
-
-
-
5,960
(1,422)
-
(300)
88
5,654
(1,422)
300
(300)
88
(40,283)
13,666
25,016
13,666
-
3,311
(1,040)
3,321
(1,040)
3,321
15,947
(1,859)
(971)
85
675
19,258
(1,859)
(971)
85
675
At 30 September 2015
31,023
34,708
2,879
(26,406)
42,204
Other reserves consist of the capital redemption reserve of £500,000 (2014: £500,000) and the translation reserve of £2,379,000 (2014: (£932,000)).
All movement in other reserves relates to the translation reserve.
R
A
E
Y
E
H
T
F
O
W
E
I
V
R
E
V
O
S
S
E
N
I
S
U
B
R
U
O
N
U
R
E
W
W
O
H
D
E
M
R
O
F
R
E
P
E
W
W
O
H
N
O
I
T
A
M
R
O
F
N
I
R
E
D
L
O
H
E
R
A
H
S
A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 5 I N T E G R A T I N G T E C H N O L O G Y
81
A C C O U N T I N G P O L I C I E S A N D C R I T I C A L A C C O U N T I N G J U D G E M E N T S
F O R T H E Y E A R E N D E D 3 0 S E P T E M B E R 2 0 15
Accounting policies
The principal accounting policies adopted in the preparation of these
financial statements are set out below. These policies have been
consistently applied to all the years presented, unless otherwise stated.
Basis of preparation
These financial statements have been prepared in accordance with
EU Endorsed International Financial Reporting Standards (IFRSs) and
International Financial Reporting Interpretations Committee (IFRIC)
interpretations and the Companies Act 2006 applicable to companies
reporting under IFRS. The financial statements have been prepared
on a going concern basis under the historical cost convention
except for financial assets and financial liabilities (including derivative
instruments) held at fair value through profit or loss.
The preparation of financial statements in conformity with IFRSs
requires the use of certain critical accounting estimates. It also requires
management to exercise its judgement in the process of applying the
Group’s accounting policies. The areas involving a higher degree of
judgement or complexity, or areas where assumptions and estimates
are significant to the financial statements are disclosed below.
Recent accounting developments
The following standards, amendments and interpretations have
been issued by the International Accounting Standards Board
(IASB) or by the IFRIC.
The Group’s approach to these is as follows:
a) Standards, amendments and interpretations effective in 2015
The following standards and amendments have been adopted for
the year ended 30 September 2015 but have no impact on the Group
financial statements:
-
IAS 32, ‘Offsetting Financial Assets and Financial Liabilities’
IAS 36, ‘Recoverable Amount Disclosures for
-
Non-Financial Assets’
-
IAS 39, ‘Novation of Derivatives and Continuation
of Hedge Accounting’
-
IFRIC 21, ‘Levies’
- Amendments to IFRS 10, IFRS 12 and IAS 27,
‘Investment Entities’
- Amendments to IAS 19, ‘Defined Benefit Plans:
Employee Contributions’
- Annual improvements cycle 2010-2012
- Annual improvements cycle 2011-2013
b) Standards, amendments and interpretations to existing standards
issued but not yet effective in 2015 and not early adopted
The following new standards, amendments to standards and
interpretations have been issued, but are not effective for the
financial year beginning 1 October 2014, have not been adopted
early and are not expected to have a material impact on the Group
financial statements:
-
IFRS 9, ‘Financial instruments’
-
IFRS 14, ‘Regulatory Deferral Accounts’
-
IFRS 15, ‘Revenue from Customer Contracts’
- Amendments to IAS 1, ‘Disclosure initiative’
- Amendment to IFRS 10 and IAS 28, ‘Sale or Contribution
of Assets between and Investor and its Associate or
Joint Venture’
- Amendments to IFRS 10, IFRS 12 and IAS 28, ‘Applying the
consolidation exemption’
- Amendments to IFRS 11, ‘Accounting for Acquisition Interests
in Joint Operations’
- Amendments to IAS 16 and IAS 38, ‘Clarification of Acceptable
Methods of Depreciation and Amortisation’
- Amendments to IAS 16 and IAS 41, ‘Agriculture – Bearer Plants’
- Amendments to IAS 27, ‘Equity Method in Separate
Financial Statements’
- Annual improvements cycle 2012-2014
Basis of consolidation
The consolidated financial statements incorporate the financial results
and position of the Group and its subsidiaries.
Subsidiaries are all entities over which the Group has power, exposure
or rights to variable returns from its involvement with the entity and
the ability to use its power to affect the amount of the Group’s returns.
Subsidiaries are fully consolidated from the date on which control is
transferred to the Group. They are de-consolidated from the date that
control ceases.
The purchase method of accounting is used to account for the
acquisition of subsidiaries by the Group. The cost of an acquisition
is measured as the fair value of the assets given, equity instruments
issued and liabilities incurred or assumed at the date of exchange.
Acquisition costs are expensed as incurred. Identifiable assets
acquired and liabilities and contingent liabilities assumed in a business
combination are measured initially at their fair values at the acquisition
date, irrespective of the extent of any non-controlling interest. Intra-
group transactions, balances and unrealised gains on transactions
between Group companies are eliminated; unrealised losses are
also eliminated unless costs cannot be recovered. Where necessary,
accounting policies of subsidiaries have been changed to ensure
consistency with the policies adopted by the Group.
82
I N T E G R A T I N G T E C H N O L O G Y A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 5
Foreign currencies
The Group’s presentation currency is sterling. The results and financial
position of all subsidiaries and associates that have a functional
currency different from sterling are translated into sterling as follows:
Exceptional items
Transactions are classified as exceptional where they relate to an
event that falls outside of the ordinary activities of the business and
where individually or in aggregate they have a material impact on the
financial statements.
- assets and liabilities are translated at the closing rate at
the balance sheet date; and
Employee benefits
- income and expenses are translated at average rates.
All resulting exchange differences are recognised as a separate
component of equity.
On consolidation, exchange differences arising from the translation
of the net investment in foreign entities, and of borrowings and other
currency instruments designated as hedges of such investments, are
taken to shareholders’ equity. When a foreign operation is sold, the
cumulative amount of such exchange difference is recognised in the
consolidated statement of comprehensive income as part of the gain
or loss on sale.
Foreign currency transactions are initially recorded at the exchange
rate ruling at the date of the transaction. Foreign exchange gains
and losses resulting from settlement of such transactions and from
the transaction at exchange rates ruling at the balance sheet date of
monetary assets or liabilities denominated in foreign currencies are
recognised in the consolidated statement of comprehensive income,
except when deferred in equity as qualifying hedges.
Revenue
Revenue comprises the fair value of the consideration received
for the sale of goods and services, net of trade discounts and
sales-related taxes. Revenue is recognised when the risks and rewards
of the underlying sale have been transferred to the customer, and
when collectability of the related receivables is reasonably assured.
Transfer of risks and rewards is determined with reference to
shipping terms or when a separately identifiable phase of a contract
or customer-funded development has been completed and accepted
by the customer.
Segment reporting
Segments are identified based on management information provided
to the chief operating decision-maker. The chief operating decision-
maker, who is responsible for allocating resources and assessing
performance of the operating segments, has been identified as
the Group Executive team. A business segment is a group of assets
and operations engaged in providing products or services that are
subject to risks and returns that are different from those of other
business segments. A geographical segment is engaged in providing
products or services within a particular economic environment
that are subject to risks and returns that are different from those of
segments operating in other economic environments. The chief
operating decision-maker assesses the performance of the operating
segments based on the measures of revenue, EBIT and EBITDA. Central
overheads, finance income and expense and taxation are not allocated
to the business segments.
Pension obligations and post-retirement benefits
The Group has both defined benefit and defined contribution plans.
The defined benefit plan’s asset or liability as recognised in the
balance sheet is the present value of the defined benefit obligation at
the balance sheet date less the fair value of plan assets.
The defined benefit obligation is calculated annually by independent
actuaries using the projected unit credit method. The present value
of the defined benefit obligation is determined by discounting the
estimated cash outflows using interest rates of high-quality corporate
bonds that are denominated in the currency in which the benefits
will be paid, and that have terms to maturity approximating to the
terms of the related pension liability. Actuarial gains and losses arising
from experience adjustments and changes in actuarial assumptions
are recognised in full in the period in which they occur, as part of
other comprehensive income. Costs associated with investment
management are deducted from the return on plan assets. Other
expenses are recognised in the income statement as incurred.
For the defined contribution plans, the Group pays contributions
to publicly or privately administered pension insurance plans on
a mandatory, contractual or voluntary basis. Contributions are
expensed as incurred.
Share based compensation
The Group operates a number of equity-settled, share-based
compensation plans, under which the entity receives service from
employees as consideration for equity instruments (options) of the
Group. The fair value of the employee service received in exchange
for the grant of the options is recognised as an expense. The total
amount to be expensed is determined by reference to the fair value
of the options granted:
-
including any market performance conditions;
- excluding the impact of any service and non-market
performance vesting conditions (for example, profitability,
sales growth targets and remaining an employee of the
entity over a specified time period); and
-
including the impact of any non-vesting conditions
(for example, the requirement for employees to save).
R
A
E
Y
E
H
T
F
O
W
E
I
V
R
E
V
O
S
S
E
N
I
S
U
B
R
U
O
N
U
R
E
W
W
O
H
D
E
M
R
O
F
R
E
P
E
W
W
O
H
N
O
I
T
A
M
R
O
F
N
I
R
E
D
L
O
H
E
R
A
H
S
A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 5 I N T E G R A T I N G T E C H N O L O G Y
83
A C C O U N T I N G P O L I C I E S A N D C R I T I C A L A C C O U N T I N G J U D G E M E N T S C O N T I N U E D
F O R T H E Y E A R E N D E D 3 0 S E P T E M B E R 2 0 15
Non-market vesting conditions are included in assumptions about
the number of options that are expected to vest. The total expense
is recognised over the vesting period, which is the period over which
all of the specified vesting conditions are to be satisfied. At the
end of each reporting period, the entity revises its estimates of the
number of options that are expected to vest based on the non-market
vesting conditions. It recognises the impact of the revision to original
estimates, if any, in the consolidated statement of comprehensive
income, with a corresponding adjustment to equity.
The proceeds received net of any directly attributable transaction costs
are credited to share capital (nominal value) and share premium when
the options are exercised.
Intangible assets
Goodwill
Goodwill represents the excess of the cost of an acquisition over the fair
value of the Group’s share of the identifiable net assets of the acquired
subsidiary at the date of acquisition. Identifiable net assets include
intangible assets other than goodwill. Any such intangible assets are
amortised over their expected future lives unless they are regarded
as having an indefinite life, in which case they are not amortised, but
subjected to annual impairment testing in a similar manner to goodwill.
Since the transition to IFRS, goodwill arising from acquisitions of
subsidiaries after 3 October 1998 is included in intangible assets,
is not amortised but is tested annually for impairment and carried
at cost less accumulated impairment losses. Gains and losses on the
disposal of an entity include the carrying amount of goodwill relating
to the entity sold.
Goodwill arising from acquisitions of subsidiaries before 3 October
1998, which was set against reserves in the year of acquisition under
UK GAAP, has not been reinstated and is not included in determining
any subsequent profit or loss on disposal of the related entity.
Goodwill is tested for impairment at least annually or whenever
there is an indication that the asset may be impaired. Goodwill is
allocated to cash-generating units for the purpose of impairment
testing. The allocation is made to those cash-generating units
or groups of cash-generating units that are expected to benefit
from the business combination in which the goodwill arose. Any
impairment is recognised immediately in the consolidated statement of
comprehensive income. Subsequent reversals of impairment losses
for goodwill are not recognised.
Development expenditure
Expenditure in respect of the development of new products where
the outcome is assessed as being reasonably certain as regards viability
and technical feasibility is capitalised and amortised over the expected
useful life of the development. Expenditure that does not meet these
criteria is expensed as incurred. The capitalised costs are amortised
over the estimated period of sale for each product, commencing in the
year sales of the product are first made. Development costs capitalised
are tested for impairment whenever there is an indication that the
asset may be impaired. Any impairment is recognised immediately in
the consolidated statement of comprehensive income. Subsequent
reversals of impairment losses for research and development are
not recognised.
Computer software
Computer software is included in intangible assets at cost and
amortised over its estimated life.
Other intangible assets
Other intangible assets that are acquired by the Group as part of
business combinations are stated at cost less accumulated amortisation
and impairment losses. The useful lives take account of the differing
natures of each of the assets acquired. The lives used are:
·
Brands and trademarks - 4 to 10 years
· Customer relationships - 7 to 10 years
· Order backlog - 3 months to 1 year
Amortisation is charged on a straight-line basis over the estimated
useful lives of the assets.
Property, plant and equipment
Property, plant and equipment is stated at historical cost or deemed
cost where IFRS 1 exemptions have been applied, less accumulated
depreciation and any recognised impairment losses.
Costs include the original purchase price of the asset and the costs
attributable to bringing the asset to its working condition for its
intended use including any qualifying finance expenses.
Land is not depreciated. Depreciation is provided on other assets
estimated to write off the depreciable amount of relevant assets by
equal annual instalments over their estimated useful lives.
In general, the lives used are:
·
·
·
Freehold – 40 years
Short leasehold property – over the period of the lease
Plant and machinery
· Computer hardware and motor vehicles – 3 years
· Presses – 15 years
· Other plant and machinery – 5 – 10 years.
The residual values and useful lives of the assets are reviewed, and
adjusted if appropriate, at each balance sheet date.
An asset’s carrying amount is written down immediately to its
recoverable amount if its carrying amount is greater than its estimated
net realisable value. Gains and losses on disposal are determined by
comparing proceeds with carrying amounts. These are included in the
consolidated statement of comprehensive income.
Leases
Leases in which a significant portion of the risks and rewards of
ownership are retained by the lessor are classified as operating
leases. Payments made under operating leases are charged to the
consolidated statement of comprehensive income on a straight-line
basis over the period of the lease.
The sale and lease back of property, where the sale price is at fair value
and substantially all the risks and rewards of ownership are transferred
84
I N T E G R A T I N G T E C H N O L O G Y A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 5
to the purchaser, is treated as an operating lease. The profit or loss
on the transaction is recognised immediately and lease payments
charged to the consolidated statement of comprehensive income on a
straight-line basis over the lease term.
Where fixed assets are financed by leasing agreements, which give
rights approximating to ownership, the assets are treated as if they had
been purchased and the capital element of the leasing commitments
are shown as obligations under finance leases. Assets acquired
under finance leases are initially recognised at the present value of
the minimum lease payments. The rentals payable are apportioned
between interest, which is charged to the consolidated statement
of comprehensive income, and the liability, which reduces the
outstanding obligation so as to give a constant rate of charge on the
outstanding lease obligations.
Inventories
Inventories are stated at the lower of cost and net realisable value. Cost
is determined using the first-in, first-out (FIFO) method. The cost of
finished goods and work in progress comprises raw materials, direct
labour, other direct costs and related production overheads (based on
normal operating capacity). It excludes borrowing costs. Net realisable
value is the estimated selling price in the ordinary course of business,
less applicable incremental selling expenses.
Trade and other receivables
Trade and other receivables are initially recognised at fair value and
subsequently held at amortised cost after deducting provisions for
impairment of receivables.
Cash and cash equivalents
Cash and cash equivalents include cash at bank and in hand, highly
liquid interest-bearing securities with maturities of three months
or less, and bank overdrafts. Bank overdrafts are shown within
borrowings in current liabilities on the balance sheet.
Trade payables
Trade payables are obligations to pay for goods or services that have
been acquired in the ordinary course of business from suppliers.
Accounts payable are classified as current liabilities if payment is
due within one year or less (or in the normal operating cycle of the
business if longer). If not, they are presented as non-current liabilities.
They are initially recognised at fair value and subsequently held at
amortised cost.
Provisions
Provisions are recognised when:
-
-
the Group has a legal or constructive obligation as a result
of a past event;
it is probable that an outflow of resources will be required
to settle the obligation and the amount has been
reliably estimated.
Where there are a number of similar obligations, for example
where a warranty has been given, the likelihood that an outflow
will be required in settlement is determined by considering the
class of obligations as a whole. A provision is recognised even if the
likelihood of an outflow with respect to any one item included in the
same class of obligation may be small.
Provisions are measured at the present value of the expenditures
expected to be required to settle the obligation.
Where a leasehold property, or part thereof, is vacant or sub-let
under terms such that the rental income is insufficient to meet all
outgoings, provision is made for the anticipated future shortfall up to
termination of the lease, or the termination payment, if smaller.
Borrowings
Borrowings are recognised initially at fair value, net of transaction
costs incurred and subsequently stated at amortised cost. Borrowing
costs are expensed using the effective interest method.
Taxation
Income tax on the profit or loss for the year comprises current and
deferred tax.
Current tax is the expected tax payable on the taxable income for
the year, using tax rates substantively enacted at the balance sheet
date, and any adjustments to tax payable in respect of prior years.
Deferred income tax is provided in full, using the liability method, on
temporary differences arising between the tax bases of assets and
liabilities and their carrying amounts in the consolidated financial
statements. However the deferred income tax is not accounted for if
it arises from initial recognition of an asset or liability in a transaction
other than a business combination that at the time of the transaction
affects neither accounting nor taxable profit or loss. Deferred income
tax is determined using tax rates (and laws) that have been enacted
or substantively enacted by the balance sheet date and are expected
to apply when the related deferred income tax asset is realised or the
deferred income tax liability is settled.
Deferred income tax assets are recognised to the extent that it is
probable that future taxable profit will be available against which the
temporary differences can be utilised.
Deferred income tax is provided on temporary differences arising on
investments in subsidiaries and associates, except where the timing
of the reversal of the temporary difference is controlled by the Group
and it is probable that the temporary difference will not reverse in
the foreseeable future.
Income tax is charged or credited in the consolidated statement of
comprehensive income, except where it relates to items recognised
in equity, in which case it is dealt with in equity.
Deferred income tax assets and liabilities are offset when there is a
legally enforceable right to offset current tax assets against current
tax liabilities and when the deferred income taxes assets and
liabilities relate to income taxes levied by the same taxation authority
on either the same taxable entity or different taxable entities where
there is an intention to settle the balances on a net basis.
R
A
E
Y
E
H
T
F
O
W
E
I
V
R
E
V
O
S
S
E
N
I
S
U
B
R
U
O
N
U
R
E
W
W
O
H
D
E
M
R
O
F
R
E
P
E
W
W
O
H
N
O
I
T
A
M
R
O
F
N
I
R
E
D
L
O
H
E
R
A
H
S
A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 5 I N T E G R A T I N G T E C H N O L O G Y
85
A C C O U N T I N G P O L I C I E S A N D C R I T I C A L A C C O U N T I N G J U D G E M E N T S C O N T I N U E D
F O R T H E Y E A R E N D E D 3 0 S E P T E M B E R 2 0 15
Dividends
Impairment of intangible assets
Final dividends are recognised as a liability in the Group’s financial
statements in the period in which the dividends are approved by
shareholders, while interim dividends are recognised in the period in
which the dividends are paid.
The Group records all assets and liabilities acquired in business
combinations, including goodwill, at fair value. Intangible assets
which have an indefinite useful life, principally goodwill, are assessed
annually for impairment.
Share capital
Ordinary shares are classified as equity.
Incremental costs directly attributable to the issue of new shares
or options are shown in equity as a deduction, net of tax, from the
proceeds.
Where any Group company purchases the Company equity share
capital (treasury shares), the consideration paid, including any directly
attributable incremental costs (net of income taxes), is deducted
from equity attributable to the Company’s equity holders until the
shares are cancelled, reissued or disposed of. Where such shares
are subsequently sold or reissued, any consideration received, net
of any directly attributable incremental transaction costs and the
related income tax effects, is included in equity attributable to the
Company’s equity holders.
Critical accounting judgements
The Group’s principal accounting policies are set out above.
Management is required to exercise significant judgement and make
use of estimates and assumptions in the application of these policies.
Areas which management believes require the most critical
accounting judgements are:
Retirement benefit obligations
The Group operates a defined benefit scheme. Actuarial valuations of
the schemes are carried out as determined by the trustees at intervals
of not more than three years.
The pension cost under IAS 19 (revised) is assessed in accordance with
the advice of an independent qualified actuary based on the latest
actuarial valuation and assumptions determined by the actuary.
The assumptions are based on information supplied to the actuary by
the Group, supplemented by discussions between the actuary and
management. The assumptions and sensitivities are disclosed in note
10 of the financial statements.
Inventory provisions
At each balance sheet date, each subsidiary evaluates the
recoverability of inventories and records provision against these
based on an assessment of net realisable values. The actual net
realisable value of inventory may differ from the estimated realisable
values, which could impact on operating results positively
or negatively.
The Group is engaged in the development of new products and
processes, the costs of which are capitalised as intangible assets or
property, plant and equipment if, in the opinion of management,
there is a reasonable expectation of economic benefits being
achieved. The factors considered in making these judgements
include the likelihood of future orders and the anticipated volumes,
margins and duration associated with these.
Impairment charges are made if there is significant doubt as to the
sufficiency of future economic benefits to justify the carrying values
of the assets based upon discounted cash flow projections using an
appropriate risk weighted discount factor. Rates used were between
8% and 12%.
Valuation of acquired intangible assets
Acquisitions may result in the recognition of customer relationships,
brands and trademarks, patents and order backlogs. These are
valued using discounted cash flow models or a relief from royalty
method. In applying these methodologies certain key judgements
and assumptions are made over discount rates, growth rates and
royalty rates.
Provisions
Provisions are made in respect of receivables, deferred income,
claims, onerous contractual obligations and warranties based on the
judgement of management taking into account the nature of the
claim or contractual obligation, the range of possible outcomes and
the defences open to the Group.
Taxation
Management periodically evaluates positions taken in tax returns
where the applicable tax regulation is subject to interpretation.
The Group establishes provisions on the basis of amounts expected
to be paid to tax authorities only where it is considered more likely
than not that an amount will be paid or received. The Group applies
this test to each individual uncertain position. The Group measures
the uncertain positions based on the single most likely outcome.
When determining whether to recognise deferred tax assets
management considers the likely availability of future taxable profits
in the relevant jurisdiction.
86
I N T E G R A T I N G T E C H N O L O G Y A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 5
N O T E S T O T H E G R O U P F I N A N C I A L S TAT E M E N T S
F O R T H E Y E A R E N D E D 3 0 S E P T E M B E R 2 0 15
1 S E G M E N T I N F O R M AT I O N
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker.
The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments,
has been identified as the Group Executive team.
The Group has two clearly defined business segments, Protection & Defence and Dairy, and operates out of Europe and the US.
Business segments
Year ended 30 September 2015
Protection &
Defence
£’000
Dairy
£’000
Unallocated
£’000
Group
£’000
Revenue
98,843
35,475
134,318
Segment result before depreciation, amortisation, exceptional items,
acquisition costs and defined benefit pension scheme credit
Depreciation of property, plant and equipment
Amortisation of development costs and software
Segment result before amortisation of acquired intangibles, exceptional items,
acquisition costs and defined benefit pension scheme credit
Amortisation of acquired intangibles
Exceptional items and acquisition costs
Defined benefit pension scheme credit
Segment result
Finance income
Finance costs
Other finance expense
Profit before taxation
Taxation
21,632
(3,513)
(2,206)
15,913
(384)
(209)
7,707
(1,121)
(153)
6,433
(659)
(180)
15,320
5,594
15,320
5,594
(2,072)
(50)
(9)
27,267
(4,684)
(2,368)
(2,131)
(215)
318
(2,028)
45
(192)
(901)
(3,076)
(2,672)
20,215
(1,043)
(604)
318
18,886
45
(192)
(901)
17,838
(2,672)
Profit for the year from continuing operations
15,320
5,594
(5,748)
15,166
Discontinued operations - loss for the year
(1,500)
(1,500)
Profit for the year
15,320
5,594
(7,248)
13,666
Segment assets
Segment liabilities
Other segment items
Capital expenditure
- intangible assets
- property, plant and equipment
59,487
42,645
6,444
108,576
8,378
10,336
47,658
66,372
2,800
1,320
146
1,902
15
-
2,961
3,222
The Protection & Defence segment includes £54.6m (2014: £43.4m) of revenues from the US DOD, the only customer which individually
contributes more than 10% to Group revenues.
R
A
E
Y
E
H
T
F
O
W
E
I
V
R
E
V
O
S
S
E
N
I
S
U
B
R
U
O
N
U
R
E
W
W
O
H
D
E
M
R
O
F
R
E
P
E
W
W
O
H
N
O
I
T
A
M
R
O
F
N
I
R
E
D
L
O
H
E
R
A
H
S
A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 5 I N T E G R A T I N G T E C H N O L O G Y
87
N O T E S T O T H E G R O U P F I N A N C I A L S TAT E M E N T S C O N T I N U E D
F O R T H E Y E A R E N D E D 3 0 S E P T E M B E R 2 0 15
1 S E G M E N T I N F O R M AT I O N ( C O N T I N U E D )
Year ended 30 September 2014
Protection &
Defence
£’000
Dairy
£’000
Unallocated
£’000
Revenue
92,818
31,961
Segment result before depreciation, amortisation, exceptional items
and defined benefit pension scheme costs
Depreciation of property, plant and equipment
Amortisation of development costs and software
Segment result before amortisation of acquired intangibles, exceptional items
and defined benefit pension scheme costs
Amortisation of acquired intangibles
Exceptional items
Defined benefit pension scheme costs
Segment result
Finance income
Finance costs
Other finance expense
Profit before taxation
Taxation
Profit for the year
Segment assets
Segment liabilities
Other segment items
Capital expenditure
- intangible assets
- property, plant and equipment
Geographical segments by origin
Year ended 30 September 2015
Revenue
Non-current assets
Year ended 30 September 2014
Revenue
Non-current assets
Group
£’000
124,779
22,903
(4,127)
(1,773)
17,003
(261)
(2,017)
(400)
14,325
1
(275)
(187)
13,864
(3,053)
6,600
(771)
(94)
(2,239)
(67)
(9)
5,735
(2,315)
18,542
(3,289)
(1,670)
13,583
(261)
(2,017)
11,305
5,735
11,305
5,735
(400)
(2,715)
1
(275)
(187)
(3,176)
(3,053)
11,305
5,735
(6,229)
10,811
52,128
13,501
6,157
71,786
12,011
1,946
32,813
46,770
2,725
1,898
337
1,825
-
8
3,062
3,731
Europe
£’000
US
£’000
Group
£’000
23,704
39,150
110,614
34,945
134,318
74,095
Europe
£’000
23,508
5,346
US
£’000
101,271
31,469
Group
£’000
124,779
36,815
88
I N T E G R A T I N G T E C H N O L O G Y A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 5
2 E X P E N S E S B Y N AT U R E
Changes in inventories of finished goods and work in progress
Raw materials and consumables used
Employee benefit expense (note 9)
Depreciation and amortisation charges (notes 11 and 12)
Transportation expenses
Operating lease payments
Travelling costs
Legal and professional fees
Other expenses
2015
£’000
1,384
55,467
34,344
8,095
1,712
1,989
2,511
1,474
8,456
2014
£’000
3,343
50,139
32,423
6,161
1,457
1,809
2,377
2,573
10,172
Total cost of sales, selling and distribution costs and general and administrative expenses
115,432
110,454
R
A
E
Y
E
H
T
F
O
W
E
I
V
R
E
V
O
S
S
E
N
I
S
U
B
R
U
O
N
U
R
E
W
W
O
H
D
E
M
R
O
F
R
E
P
E
W
W
O
H
N
O
I
T
A
M
R
O
F
N
I
R
E
D
L
O
H
E
R
A
H
S
A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 5 I N T E G R A T I N G T E C H N O L O G Y
89
N O T E S T O T H E G R O U P F I N A N C I A L S TAT E M E N T S C O N T I N U E D
F O R T H E Y E A R E N D E D 3 0 S E P T E M B E R 2 0 15
3 ADJUSTMENTS AND DISCONTINUED OPER ATIONS
Amortisation of acquired intangible assets (note 11)
Relocation of Lawrenceville facility
Recruitment costs
Acquisition costs
Defined benefit pension scheme administration costs
Defined benefit pension scheme settlement gain
2015
£’000
1,043
-
215
389
350
(668)
1,329
2014
£’000
261
2,017
-
-
400
-
2,678
The tax impact of the above is a nil reduction in overseas tax payable (2014: £450,000). The deferred tax impact in the current year gives rise to a
credit to the income statement of £253,000 (2014: nil).
The Lawrenceville relocation costs relate to the consolidation of our Protection & Defence operations from four US sites into three which took
place during 2014 ahead of the expiry of the lease on our Lawrenceville, Georgia facility in 2015.
The recruitment costs relate to the recruitment of main Board Directors.
The acquisition costs relate to legal and professional fees on the acquisition of Hudstar Systems Inc. and InterPuls S.p.A.
Defined benefit pension scheme costs relate to administrative expenses of the scheme which is closed to future accrual and the defined benefit
pension scheme settlement gain arose following a trivial commutation exercise, both of which impact operating profit. £654,000 of other
finance expense relating to the pension scheme is also treated as an adjustment.
The impact on the cash flow statement of the exceptional items was £1,192.000 (2014: £983,000).
Loss from discontinued operations
2015
£’000
1,500
2014
£’000
-
The loss for the year from discontinued operations relates to dilapidations costs of former leased premises of a business which was disposed
of in 2006. There was no tax impact of these costs.
The impact on the cash flow statement of the discontinued operations was £1,529,000 (2014: nil).
4 F I N A N C E I N CO M E A N D CO S T S
Interest payable on bank loans and overdrafts
Finance income
Other finance expense
Net interest cost: UK defined benefit pension scheme (note 10)
Provisions: Unwinding of discount (note 18)
2015
£’000
(192)
45
(147)
2015
£’000
(654)
(247)
(901)
2014
£’000
(275)
1
(274)
2014
£’000
(12)
(175)
(187)
90
I N T E G R A T I N G T E C H N O L O G Y A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 5
5 P R O F I T B E F O R E TA X AT I O N
Profit before taxation is shown after charging:
Loss on foreign exchange
Loss on disposal of property, plant and equipment
Loss on disposal of intangibles
Depreciation on property, plant and equipment
Repairs and maintenance of property, plant and equipment
Amortisation of development costs and software
Amortisation of acquired intangibles
Research and development
Impairment of inventories
Impairment of trade receivables
Operating leases
Services provided to the Group (including its overseas subsidiaries) by the Company’s auditors:
Audit fees in respect of the audit of the accounts of the Parent Company and consolidation
Audit fees in respect of the audit of the accounts of subsidiaries of the Company
Total fees
2015
£’000
196
7
-
4,684
565
2,368
1,043
648
329
35
1,989
30
98
128
2014
£’000
137
209
149
4,127
735
1,773
261
775
182
-
1,809
30
80
110
R
A
E
Y
E
H
T
F
O
W
E
I
V
R
E
V
O
S
S
E
N
I
S
U
B
R
U
O
N
U
R
E
W
W
O
H
D
E
M
R
O
F
R
E
P
E
W
W
O
H
N
O
I
T
A
M
R
O
F
N
I
R
E
D
L
O
H
E
R
A
H
S
A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 5 I N T E G R A T I N G T E C H N O L O G Y
91
N O T E S T O T H E G R O U P F I N A N C I A L S TAT E M E N T S C O N T I N U E D
F O R T H E Y E A R E N D E D 3 0 S E P T E M B E R 2 0 15
6 TA X AT I O N
Overseas current tax
Overseas adjustment in respect of previous periods
Total current tax
Deferred tax – current year
Deferred tax – adjustment in respect of previous periods
Total deferred tax
Total tax charge
2015
£’000
4,049
(1,337)
2,712
(259)
219
(40)
2,672
2014
£’000
4,605
(961)
3,644
(185)
(406)
(591)
3,053
The tax on the Group’s profit before taxation differs from the theoretical amount that would arise using the standard UK tax rate applicable to
profits of the consolidated entities as follows:
Profit before taxation
Profit before taxation at the average standard rate of 20.5% (2014: 22.0%)
Permanent differences
Losses for which no deferred taxation asset was recognised
Differences in overseas tax rates
Adjustment in respect of previous periods
Tax charge
The deferred tax credited directly to equity during the year was £3,996,000 (2014: nil).
2015
£’000
17,838
3,657
(822)
(577)
1,532
(1,118)
2,672
2014
£’000
13,864
3,050
179
397
794
(1,367)
3,053
92
I N T E G R A T I N G T E C H N O L O G Y A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 5
6 TA X AT I O N ( C O N T I N U E D )
Deferred tax liabilities
At 1 October 2013
(Credited to)/charged against profit for the year
Exchange differences
At 30 September 2014
Arising on acquisition of subsidiaries
Charged against profit for the year
Exchange differences
At 30 September 2015
Accelerated
capital
allowances
£’000
Other
temporary
differences
£’000
3,127
(1,003)
(121)
2,003
177
265
30
(150)
412
50
312
6,585
273
89
Total
£’000
2,977
(591)
(71)
2,315
6,762
538
119
2,475
7,259
9,734
Deferred tax assets have been recognised in respect of temporary differences giving rise to deferred tax assets where it is probable that these
assets will be recovered.
Deferred tax assets
At 30 September 2014
Credited to profit for the year
Credited to equity on recognition
At 30 September 2015
Retirement
benefit
obligation
£’000
Share
options
£’000
Accelerated
capital
allowances
£’000
Other
temporary
differences
£’000
-
-
3,321
3,321
-
-
675
675
-
481
-
481
-
97
-
97
Total
£’000
-
578
3,996
4,574
The standard rate of corporation tax in the UK changed from 21% to 20% with effect from 1 April 2015. Accordingly the average standard rate
for the year is 20.5%.
A number of changes to the UK corporation tax system were announced in the March 2015 Budget Statement proposing to reduce the main rate
of corporation tax to 19% by 1 April 2017, with a further reduction to 18% by 1 April 2020. These changes had not been substantively enacted at
the balance sheet date and therefore any impacts arising are not included in these financial statements. The overall effect of the change is not
expected to have any material impact on the Group's deferred tax liabilities as the Group's tax liabilities are held in the US. The impact on the
Group's deferred tax asset is expected to be a reduction of £0.5m.
The Group has not recognised deferred tax assets in respect of the following matters in the UK, as it is uncertain when the criteria for recognition
of these assets will be met.
Losses
Accelerated capital allowances
Retirement benefit obligations
Other
2015
£’000
(346)
-
-
(732)
(1,078)
2014
£’000
(1,355)
(733)
(3,206)
(1,529)
(6,823)
A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 5 I N T E G R A T I N G T E C H N O L O G Y
93
R
A
E
Y
E
H
T
F
O
W
E
I
V
R
E
V
O
S
S
E
N
I
S
U
B
R
U
O
N
U
R
E
W
W
O
H
D
E
M
R
O
F
R
E
P
E
W
W
O
H
N
O
I
T
A
M
R
O
F
N
I
R
E
D
L
O
H
E
R
A
H
S
N O T E S T O T H E G R O U P F I N A N C I A L S TAT E M E N T S C O N T I N U E D
F O R T H E Y E A R E N D E D 3 0 S E P T E M B E R 2 0 15
7 D I V I D E N D S
On 29 January 2015 the shareholders approved a final dividend of 3.74p per qualifying ordinary share in respect of the year ended 30 September
2014. This was paid on 20 March 2015 absorbing £1,127,000 of shareholders' funds.
On 29 April 2015, the Board of Directors declared an interim dividend of 2.43p (2014: 1.87p) per qualifying ordinary share in respect of the year
ended 30 September 2015. This was paid on 4 September 2015 absorbing £732,000 (2014: £560,000) of shareholders' funds.
After the balance sheet date the Board of Directors proposed a final dividend of 4.86p per qualifying ordinary share in respect of the year ended
30 September 2015, which will absorb an estimated £1,464,000 of shareholders' funds. Subject to shareholder approval, the dividend will be paid
on 18 March 2016 to shareholders on the register at the close of business on 19 February 2016. In accordance with accounting standards this
dividend has not been provided for and there are no corporation tax consequences.
8 E A R N I N G S P E R S H A R E
Basic earnings per share is calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number of
ordinary shares in issue during the year, excluding those held in the employee share ownership trust. The company has dilutive potential
ordinary shares in respect of the Performance Share Plan (see page 74). Adjusted earnings per share removes the effect of the amortisation of
acquired intangible assets, exceptional items, acquisition costs and defined benefit pension scheme costs.
Reconciliations of the earnings and weighted average number of shares used in the calculations are set out below.
2015
2014
Weighted average number of ordinary shares in issue used in basic calculations (thousands)
Potentially dilutive shares (weighted average) (thousands)
Fully diluted number of ordinary shares (weighted average) (thousands)
30,107
830
30,937
29,871
979
30,850
2014
Diluted
eps
pence
35.0
-
35.0
7.3
2015
£’000
2015
Basic
eps
pence
2015
Diluted
eps
pence
13,666
1,500
15,166
1,730
45.4
5.0
50.4
5.7
44.2
4.8
49.0
5.6
2014
£’000
10,811
-
10,811
2,240
2014
Basic
eps
pence
36.2
-
36.2
7.5
16,896
56.1
54.6
13,051
43.7
42.3
Profit attributable to equity shareholders of the Company
Loss from discontinued operations
Profit from continuing operations
Adjustments
Profit excluding loss from discontinued operations, amortisation of
acquired intangible assets, exceptional items, acquisition costs
and defined benefit pension scheme costs
94
I N T E G R A T I N G T E C H N O L O G Y A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 5
9 E M P L OY E E S
The total remuneration and associated costs during the year were:
Wages and salaries
Social security costs
Other pension costs
US healthcare costs
Share based payments (note 24)
2015
£’000
27,776
3,052
850
2,581
85
34,344
2014
£’000
26,944
2,263
1,023
2,105
88
32,423
Detailed disclosures of Directors' remuneration and share options, including disclosure of the highest paid director, are given on pages 71 to 77.
The average monthly number of employees (including Executive Directors) during the year was:
By business segment
Protection & Defence
Dairy
Other
At the end of the financial year the total number of employees in the Group was 852 (2014: 757).
Key management compensation
Salaries and other employee benefits
Post employment benefits
Share based payments
2015
Number
2014
Number
554
222
10
786
2015
£’000
2,508
121
53
2,682
541
200
9
750
2014
£’000
2,436
120
54
2,610
The key management compensation above includes the Directors plus three (2014: three) others who were members of the Group Executive
during the year.
R
A
E
Y
E
H
T
F
O
W
E
I
V
R
E
V
O
S
S
E
N
I
S
U
B
R
U
O
N
U
R
E
W
W
O
H
D
E
M
R
O
F
R
E
P
E
W
W
O
H
N
O
I
T
A
M
R
O
F
N
I
R
E
D
L
O
H
E
R
A
H
S
A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 5 I N T E G R A T I N G T E C H N O L O G Y
95
N O T E S T O T H E G R O U P F I N A N C I A L S TAT E M E N T S C O N T I N U E D
F O R T H E Y E A R E N D E D 3 0 S E P T E M B E R 2 0 15
10 P E N S I O N S A N D O T H E R R E T I R E M E N T B E N E F I T S
Retirement benefit assets and liabilities can be analysed as follows:
Pension liability
Defined benefit pension scheme
2015
£’000
2014
£’000
16,605
16,029
Full disclosures are provided in respect of the UK defined benefit pension scheme below.
The Group operated a contributory defined benefits plan to provide pension and death benefits for the employees of Avon Rubber p.l.c. and its
Group undertakings in the UK employed prior to 31 January 2003. The plan was closed to future accrual of benefit on 1 October 2009 and has a
weighted average maturity of approximately 16 years. The assets of the plan are held in separate trustee administered funds and are invested by
professional investment managers. The Trustee is Avon Rubber Pension Trust Limited, the Directors of which are members of the plan. Four of
the Directors are appointed by the Company and two are elected by the members.
Pension costs are assessed on the advice of an independent consulting actuary using the projected unit method. The funding of the plan
is based on regular actuarial valuations. The most recent finalised actuarial valuation of the plan was carried out at 31 March 2013 when the
market value of the plan's assets was £311.5m. The fair value of those assets represented 98.0% of the value of the benefits which had accrued to
members, after allowing for future increase in pensions.
During the year the Group made payments to the fund of £800,000, (2014: £513,000) in respect of scheme expenses and deficit recovery plan
payments. In accordance with the deficit recovery plan agreed following the 31 March 2013 actuarial valuation, the Group will make deficit
recovery payments in 2016 of £450,000 in addition to £250,000 towards scheme expenses.
The defined benefit plan exposes the Group to actuarial risks such as longevity risk, interest rate risk and investment risk.
An updated actuarial valuation for IAS 19 (revised) purposes was carried out by an independent actuary at 30 September 2015 using the
projected unit method.
96
I N T E G R A T I N G T E C H N O L O G Y A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 5
10 P E N S I O N S A N D O T H E R R E T I R E M E N T B E N E F I T S ( C O N T I N U E D )
Movement in net defined benefit liability
Defined benefit obligation
Defined benefit asset
Net defined benefit liability
2015
£’000
2014
£’000
2015
£’000
2014
£’000
2015
£’000
2014
£’000
(316,829)
(300,326)
300,800
289,047
(16,029)
At 1 October
Included in profit or loss
Administrative expenses
Settlements
Net interest cost
Included in other comprehensive income
Remeasurement (loss)/gain:
- Actuarial (loss)/gain arising from:
- demographic assumptions
- financial assumptions
- experience adjustment
- Return on plan assets excluding
(350)
668
(12,692)
(400)
-
(322)
(12,374)
(722)
(480)
(4,945)
1,515
-
(23,277)
(7,586)
-
-
12,038
12,038
-
-
-
-
-
310
310
-
-
-
(11,279)
-
(400)
-
(12)
(350)
668
(654)
(336)
(412)
(480)
(4,945)
1,515
-
(23,277)
(7,586)
interest income
-
-
2,870
26,012
2,870
26,012
(3,910)
(30,863)
2,870
26,012
(1,040)
(4,851)
Other
Contributions by the employer
Net benefits paid out
-
17,021
-
15,082
800
(17,021)
513
(15,082)
800
-
513
-
At 30 September
(316,092)
(316,829)
299,487
300,800
(16,605)
(16,029)
A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 5 I N T E G R A T I N G T E C H N O L O G Y
97
R
A
E
Y
E
H
T
F
O
W
E
I
V
R
E
V
O
S
S
E
N
I
S
U
B
R
U
O
N
U
R
E
W
W
O
H
D
E
M
R
O
F
R
E
P
E
W
W
O
H
N
O
I
T
A
M
R
O
F
N
I
R
E
D
L
O
H
E
R
A
H
S
N O T E S T O T H E G R O U P F I N A N C I A L S TAT E M E N T S C O N T I N U E D
F O R T H E Y E A R E N D E D 3 0 S E P T E M B E R 2 0 15
10 P E N S I O N S A N D O T H E R R E T I R E M E N T B E N E F I T S ( C O N T I N U E D )
Plan assets
Equities
Liability Driven Investment
Corporate bonds
Cash
Total fair value of assets
2015
£’000
151,782
62,022
28,485
57,198
299,487
2014
£’000
146,224
97,286
31,016
26,274
300,800
The Liability Driven Investment (LDI) comprises a series of LIBOR-earning cash deposits which are combined with contracts to hedge interest
rate and inflation rate risk over the expected life of the plan's liabilities.
All equity securities and corporate bonds have quoted prices in active markets.
The aim of the Trustee is to invest the assets of the plan to ensure that the benefits promised to members are provided. In setting the
investment strategy the Trustee first considered the lowest risk allocation that could be adopted in relation to the plan's liabilities. An asset
allocation strategy was then designed to achieve a higher return than this lowest risk strategy which at the same time still represented a
prudent approach to meeting the plan's liabilities. The target weightings are 40% allocation to liability driven investment funds and cash and
60% to return-seeking investments.
Actuarial assumptions
The main financial assumptions used by the independent qualified actuaries to calculate the liabilities under IAS 19 (revised) are set out below:
Inflation (RPI)
Inflation (CPI)
Pension increases post August 2005
Pension increases pre August 2005
Discount rate for scheme liabilities
2015
% p.a.
2.80
1.70
2.10
2.70
3.90
2014
% p.a.
3.00
1.90
2.00
2.80
4.10
98
I N T E G R A T I N G T E C H N O L O G Y A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 5
10 P E N S I O N S A N D O T H E R R E T I R E M E N T B E N E F I T S ( C O N T I N U E D )
Mortality rate
Assumptions regarding future mortality experience are set based on advice, published statistics and experience.
The average life expectancy in years of a pensioner retiring at age 65 on the balance sheet date is as follows:
Male
Female
2015
22.2
24.4
The average life expectancy in years of a pensioner retiring at age 65, 20 years after the balance sheet date is as follows:
Male
Female
Sensitivity analysis
Inflation (RPI) (0.25% increase)
Discount rate for scheme liabilities (0.25% increase)
Future mortality (1 year increase)
The above sensitivity analysis shows the impact on the defined benefit obligation only, not the net pension liability as it does not take into
account any impact on the asset valuation.
Each sensitivity analysis disclosed in this note is based on changing one assumption while holding all other assumptions constant. In practice,
this is unlikely to occur.
Defined contribution pension scheme
In addition commencing 1 February 2003, a defined contribution scheme was introduced for employees within the UK. The cost to the Group in
respect of this scheme for the year ended 30 September 2015 was £442,000 (2014: £415,000).
A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 5 I N T E G R A T I N G T E C H N O L O G Y
99
2014
22.1
24.3
2014
23.5
25.8
2015
23.5
25.9
Defined benefit obligation
Increase/(decrease)
£’000
10,012
(12,884)
11,380
R
A
E
Y
E
H
T
F
O
W
E
I
V
R
E
V
O
S
S
E
N
I
S
U
B
R
U
O
N
U
R
E
W
W
O
H
D
E
M
R
O
F
R
E
P
E
W
W
O
H
N
O
I
T
A
M
R
O
F
N
I
R
E
D
L
O
H
E
R
A
H
S
N O T E S T O T H E G R O U P F I N A N C I A L S TAT E M E N T S C O N T I N U E D
F O R T H E Y E A R E N D E D 3 0 S E P T E M B E R 2 0 15
11 I N TA N G I B L E A S S E T S
At 1 October 2013
Cost
Accumulated amortisation and impairment
Net book amount
Year ended 30 September 2014
Opening net book amount
Exchange differences
Additions
Disposals
Amortisation
Closing net book amount
At 30 September 2014
Cost
Accumulated amortisation and impairment
Net book amount
Year ended 30 September 2015
Opening net book amount
Exchange differences
Additions
Acquisitions (note 26)
Amortisation
Closing net book amount
At 30 September 2015
Cost
Accumulated amortisation and impairment
Net book amount
63
-
63
63
-
-
-
-
63
63
-
63
63
109
-
2,201
-
2,373
2,373
-
2,373
Goodwill
£’000
Acquired
intangibles
£’000
Development
expenditure
£’000
Computer
software
£’000
1,090
(417)
673
673
-
-
-
(261)
412
1,090
(678)
412
412
1,165
-
20,149
(1,043)
22,450
(8,322)
14,128
14,128
(168)
2,535
(123)
(1,497)
14,875
22,138
(7,263)
14,875
14,875
684
2,567
-
(1,947)
20,683
16,179
2,848
(1,171)
1,677
1,677
(12)
527
(26)
(276)
1,890
2,604
(714)
1,890
1,890
211
394
-
(421)
2,074
Total
£’000
26,451
(9,910)
16,541
16,541
(180)
3,062
(149)
(2,034)
17,240
25,895
(8,655)
17,240
17,240
2,169
2,961
22,350
(3,411)
41,309
22,304
(1,621)
25,481
(9,302)
3,800
(1,726)
53,958
(12,649)
20,683
16,179
2,074
41,309
Development expenditure is amortised over a period between 5 and 15 years.
Computer software is amortised over a period between 3 and 7 years.
The remaining useful economic life of the development expenditure is between 5 and 12 years.
Acquired intangibles include customer relationships, development costs, order book on acquisition and brands and are amortised over a period
between 3 and 10 years.
100
I N T E G R A T I N G T E C H N O L O G Y A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 5
12 P R O P E R T Y, P L A N T A N D E Q U I P M E N T
At 1 October 2013
Cost
Accumulated depreciation and impairment
Net book amount
Year ended 30 September 2014
Opening net book amount
Exchange differences
Additions
Disposals
Depreciation charge
Closing net book amount
At 30 September 2014
Cost
Accumulated depreciation and impairment
Net book amount
Year ended 30 September 2015
Opening net book amount
Exchange differences
Additions
Acquisitions (note 26)
Disposals
Depreciation charge
Freeholds
£’000
Short
leaseholds
£’000
Plant and
machinery
£’000
Total
£’000
3,402
(367)
3,035
3,035
(24)
-
-
(191)
2,820
3,179
(359)
2,820
2,820
484
29
4,511
-
(176)
261
(180)
42,080
(24,809)
45,743
(25,356)
81
17,271
20,387
81
(2)
-
(52)
(27)
-
-
-
-
17,271
(162)
3,731
(176)
(3,909)
20,387
(188)
3,731
(228)
(4,127)
16,755
19,575
42,469
(25,714)
45,648
(26,073)
16,755
19,575
-
131
-
2,404
-
(9)
16,755
981
3,193
1,616
(28)
(4,499)
19,575
1,596
3,222
8,531
(28)
(4,684)
Closing net book amount
7,668
2,526
18,018
28,212
At 30 September 2015
Cost
Accumulated depreciation and impairment
8,879
(1,211)
3,162
(636)
57,589
(39,571)
69,630
(41,418)
Net book amount
7,668
2,526
18,018
28,212
The net book amount of short leaseholds and £106,000 included within plant and machinery relates to assets held under finance leases.
A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 5 I N T E G R A T I N G T E C H N O L O G Y
101
R
A
E
Y
E
H
T
F
O
W
E
I
V
R
E
V
O
S
S
E
N
I
S
U
B
R
U
O
N
U
R
E
W
W
O
H
D
E
M
R
O
F
R
E
P
E
W
W
O
H
N
O
I
T
A
M
R
O
F
N
I
R
E
D
L
O
H
E
R
A
H
S
N O T E S T O T H E G R O U P F I N A N C I A L S TAT E M E N T S C O N T I N U E D
F O R T H E Y E A R E N D E D 3 0 S E P T E M B E R 2 0 15
13 I N V E N T O R I E S
Raw materials
Work in progress
Finished goods
2015
£’000
9,581
712
6,830
2014
£’000
8,876
2,151
1,860
17,123
12,887
Provisions for inventory write downs were £2,412,000 (2014: £1,554,000).
The cost of inventories recognised as an expense and included in cost of sales amounted to £56,851,000 (2014: £53,482,000).
14 T R A D E A N D O T H E R R E C E I VA B L E S
Trade receivables
Less: provision for impairment of receivables
Trade receivables – net
Prepayments
Other receivables
2015
£’000
14,904
(421)
14,483
1,344
1,196
17,023
2014
£’000
15,544
(249)
15,295
1,316
2,546
19,157
In 2014, other receivables included £956,000 in respect of a rent deposit relating to the Company's premises in Melksham, Wiltshire, UK, which
was refunded during the year. The remaining balance comprises sundry receivables.
Movements on the Group provision for impairment of receivables are as follows:
At 1 October
Provision for impairment of receivables
Acquisitions
Receivables written off during the year as uncollectable
At 30 September
2015
£’000
249
35
137
-
421
2014
£’000
269
-
-
(20)
249
The creation and release of provision for impaired receivables have been included in general and administrative expenses in the consolidated
statement of comprehensive income.
102
I N T E G R A T I N G T E C H N O L O G Y A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 5
15 C A S H A N D C A S H E Q U I VA L E N T S
Cash at bank and in hand
2015
£’000
332
2014
£’000
2,925
Cash at bank and in hand balances are denominated in a number of different currencies and earn interest based on national rates.
16 T R A D E A N D O T H E R PAYA B L E S
Trade payables
Other taxation and social security
Other payables
Accruals
Other payables comprise sundry items which are not individually significant for disclosure.
17 B O R R O W I N G S
Current
Bank loans
Finance lease liabilities
Non-current
Bank loans
Total borrowings
The maturity profile of the Group’s borrowings at the year end was as follows:
In one year or less, or on demand
Between two and five years
2015
£’000
1,505
408
1,093
14,144
17,150
2015
£’000
1,864
486
2,350
11,143
13,493
2,350
11,143
13,493
2014
£’000
440
629
152
16,534
17,755
2014
£’000
-
-
-
-
-
-
-
-
R
A
E
Y
E
H
T
F
O
W
E
I
V
R
E
V
O
S
S
E
N
I
S
U
B
R
U
O
N
U
R
E
W
W
O
H
D
E
M
R
O
F
R
E
P
E
W
W
O
H
N
O
I
T
A
M
R
O
F
N
I
R
E
D
L
O
H
E
R
A
H
S
A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 5 I N T E G R A T I N G T E C H N O L O G Y
103
N O T E S T O T H E G R O U P F I N A N C I A L S TAT E M E N T S C O N T I N U E D
F O R T H E Y E A R E N D E D 3 0 S E P T E M B E R 2 0 15
17 B O R R O W I N G S ( C O N T I N U E D )
The Group has the following undrawn committed facilities:
Expiring within one year
Expiring beyond one year
Total undrawn committed borrowing facilities
Bank loans and overdrafts utilised
Utilised in respect of guarantees
2015
£’000
-
15,194
15,194
13,007
362
2014
£’000
-
24,191
24,191
-
337
Total Group facilities
28,563
24,528
All facilities are at floating interest rates.
On 9 June 2014 the Group agreed new bank facilities with Barclays Bank and Comerica Bank. The combined facility comprises a revolving
credit facility of $40m and expires on 30 November 2018. This facility is priced on the dollar LIBOR plus margin of 1.25% and includes financial
covenants which are measured on a quarterly basis. The Group was in compliance with its financial covenants during 2015 and 2014.
InterPuls S.p.A. has a fixed term loan of €2.5m which expires on 31 December 2015. This facility is priced on EURIBOR plus margin of 0.9%.
The Group has provided the lenders with a negative pledge in respect of certain shares in Group companies.
The effective interest rates at the balance sheet dates were as follows:
Bank loans
Finance lease liabilities
2015
Sterling
%
1.8
-
2015
Dollar
%
1.4
-
2015
Euro
%
0.9
3.0
2014
Sterling
%
-
-
2014
Dollar
%
-
-
2014
Euro
%
-
-
104
I N T E G R A T I N G T E C H N O L O G Y A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 5
18 P R O V I S I O N S F O R L I A B I L I T I E S A N D C H A R G E S
Balance at 1 October 2013
Charged in the year
Unwinding of discount
Payments in the year
Exchange difference
Balance at 30 September 2014
Charged in the year
Unwinding of discount
Payments in the year
Exchange difference
Facility
relocation
£’000
Property
obligations
£’000
-
1,637
-
(1,191)
8
454
-
-
(485)
31
2,613
1,632
175
(1,056)
1
3,365
1,500
247
(2,545)
-
Total
£’000
2,613
3,269
175
(2,247)
9
3,819
1,500
247
(3,030)
31
Balance at 30 September 2015
-
2,567
2,567
Analysis of total provisions
Non-current
Current
2015
£’000
1,712
855
2,567
2014
£’000
1,973
1,846
3,819
Property obligations include an onerous lease provision of £1.8m in respect of unutilised space at the Group's leased Hampton Park West facility
in the UK. £0.3m of this provision is expected to be utilised in 2016, and the remaining £1.5m over the following fourteen years. Other property
obligations relate to former premises of the Group which are subject to dilapidation risks and are expected to be utilised within the next five
years. Property provisions are subject to uncertainty in respect of the utilisation, non-utilisation, or subletting of surplus leasehold property and
the final negotiated settlement of any dilapidation claims with landlords.
Facility relocation related to the cost of consolidating our Protection & Defence operations from four US sites into three ahead of the expiry of
the lease on the Lawrenceville, GA facility.
R
A
E
Y
E
H
T
F
O
W
E
I
V
R
E
V
O
S
S
E
N
I
S
U
B
R
U
O
N
U
R
E
W
W
O
H
D
E
M
R
O
F
R
E
P
E
W
W
O
H
N
O
I
T
A
M
R
O
F
N
I
R
E
D
L
O
H
E
R
A
H
S
A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 5 I N T E G R A T I N G T E C H N O L O G Y
105
N O T E S T O T H E G R O U P F I N A N C I A L S TAT E M E N T S C O N T I N U E D
F O R T H E Y E A R E N D E D 3 0 S E P T E M B E R 2 0 15
19 F I N A N C I A L I N S T R U M E N T S
Financial instruments by category
Trade and other receivables (excluding prepayments) and cash and cash equivalents are classified as 'loans and receivables'. Borrowings and
trade and other payables are classified as 'other financial liabilities at amortised cost'. Both categories are initially measured at fair value and
subsequently held at amortised cost.
Derivatives (forward exchange contracts) are classified as 'derivatives used for hedging' and accounted for at fair value with gains and
losses taken to reserves through the consolidated statement of comprehensive income.
Financial risk and treasury policies
The Group's treasury management team maintains liquidity, manages relations with the Group’s bankers, identifies and manages foreign
exchange risk and provides a treasury service to the Group’s businesses. Treasury dealings such as investments, borrowings and foreign
exchange are conducted only to support underlying business transactions.
The Group has clearly defined policies for the management of foreign exchange rate risk. The Group treasury management team is not a
profit centre and, therefore, does not undertake speculative foreign exchange dealings for which there is no underlying exposure. Exposures
resulting from sales and purchases in foreign currency are matched where possible and the net exposure may be hedged by the use of forward
exchange contracts.
(i) 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 and monies on deposit with financial institutions.
The US Government through the Department of Defense is a major customer of the Group. Credit evaluations are carried out on all non-
Government customers requiring credit above a certain threshold, with varying approval levels set above this depending on the value of the
sale. At the balance sheet date there were no significant concentrations of credit risk, except in respect of the US Government noted above.
Counterparty risk arises from the use of derivative financial instruments. This is managed through credit limits, counterparty approvals and
rigorous monitoring procedures.
Where possible, letters of credit or payments in advance are received for significant export sales.
The Group establishes an allowance for impairment in respect of receivables where recoverability is considered doubtful.
Exposure to credit risk
The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at the reporting date was:
Carrying amount
Trade receivables
Other receivables
Cash and cash equivalents
Forward exchange contracts used for hedging
The maximum exposure to credit risk for financial assets at the reporting date by currency was:
Carrying amount of financial assets
Sterling
US dollar
Euro
Other currencies
2015
£’000
14,483
1,196
332
3
16,014
2015
£’000
2,076
11,372
1,879
687
16,014
2014
£’000
15,295
2,546
2,925
2
20,768
2014
£’000
4,307
14,967
928
566
20,768
106
I N T E G R A T I N G T E C H N O L O G Y A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 5
19 F I N A N C I A L I N S T R U M E N T S ( C O N T I N U E D )
Provisions against trade receivables
The ageing of trade receivables and associated provision for impairment at the reporting date was:
Not past due
Past due 0-30 days
Past due 31-60 days
Past due 61-90 days
Past due more than 91 days
Gross
2015
£’000
Provision
2015
£’000
11,020
1,631
1,922
135
196
-
(85)
(87)
(82)
(167)
Net
2015
£’000
11,020
1,546
1,835
53
29
Gross
2014
£’000
Provision
2014
£’000
13,914
1,111
369
135
15
-
-
(131)
(103)
(15)
Net
2014
£’000
13,914
1,111
238
32
-
14,904
(421)
14,483
15,544
(249)
15,295
The total past due receivables, net of provisions is £3,463,000 (2014: £1,381,000).
The individually impaired receivables mainly relate to a number of independent customers. A portion of these receivables is expected to
be recovered.
(ii) 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.
The Group uses weekly cash flow forecasts to monitor cash requirements and to optimise its borrowing position. Typically the Group ensures
that it has sufficient borrowing facilities to meet foreseeable operational expenses and at the year end had facilities of £28.6m (2014: £24.5m).
The following shows the contractual maturities of financial liabilities, including interest payments, where applicable and excluding the impact
of netting agreements and on an undiscounted basis:
Analysis of contractual cash flow maturities
Carrying
amount
£’000
Contractual
cash flows
£’000
Less than
12 months
£’000
1 - 2
Years
£’000
2 - 5
Years
£’000
More than
5 Years
£’000
30 September 2015
Bank loans and overdrafts
Finance lease liabilities
Trade and other payables
Forward exchange contracts used for hedging
- Outflow
- Inflow
13,007
486
16,742
13,026
486
16,742
-
(3)
3,923
-
1,872
486
16,742
3,923
-
338
-
-
-
-
10,816
-
-
-
-
30,232
34,177
23,023
338
10,816
-
-
-
-
-
-
R
A
E
Y
E
H
T
F
O
W
E
I
V
R
E
V
O
S
S
E
N
I
S
U
B
R
U
O
N
U
R
E
W
W
O
H
D
E
M
R
O
F
R
E
P
E
W
W
O
H
N
O
I
T
A
M
R
O
F
N
I
R
E
D
L
O
H
E
R
A
H
S
A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 5 I N T E G R A T I N G T E C H N O L O G Y
107
N O T E S T O T H E G R O U P F I N A N C I A L S TAT E M E N T S C O N T I N U E D
F O R T H E Y E A R E N D E D 3 0 S E P T E M B E R 2 0 15
19 F I N A N C I A L I N S T R U M E N T S ( C O N T I N U E D )
Analysis of contractual cash flow maturities
30 September 2014
Trade and other payables
Forward exchange contracts used for hedging
- Outflow
- Inflow
Carrying Contractual
Cash flows
Amount
£’000
£’000
Less than
12 months
£’000
1 - 2
Years
£’000
2 - 5
Years
£’000
More than
5 Years
£’000
17,126
17,126
17,126
-
(2)
922
-
922
-
17,124
18,048
18,048
-
-
-
-
-
-
-
-
-
-
-
-
(iii) Market risks
Market risk is the risk that changes in market prices, such as currency rates and interest rates, will affect the Group’s results. The objective of
market risk management is to manage and control risk within suitable parameters.
(a) Currency risk
The Group is exposed to foreign currency risk on sales and purchases that are denominated in a currency other than sterling. The currencies
giving rise to this risk are primarily the US dollar and related currencies and the euro. The Group hedges material forecast US dollar or euro
foreign currency transactional exposures using forward exchange contracts. In respect of other monetary assets and liabilities held in currencies
other than sterling, the Group ensures that the net exposure is kept to an acceptable level, by buying or selling foreign currencies at spot rates
where necessary to address short-term imbalances.
The Group classifies its forward exchange contracts hedging forecasted transactions as cash flow hedges and states them at fair value through
the consolidated statement of comprehensive income. Fair value is assessed by reference to year-end spot exchange rates, adjusted for forward
points associated with contracts of similar duration. The fair value of forward exchange contracts used as hedges at 30 September 2015 was a
£3,000 asset (2014: £2,000 asset) comprising an asset of £3,000 (2014: £2,000) and a liability of nil (2014: nil).
All forward exchange contracts in place at 30 September 2015 mature within one year.
108
I N T E G R A T I N G T E C H N O L O G Y A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 5
19 F I N A N C I A L I N S T R U M E N T S ( C O N T I N U E D )
Sensitivity analysis
It is estimated that, with all other variables held equal (in particular other exchange rates), a general change of five cents in the value of the US
dollar against sterling would have had a £700,000 (2014: £415,000) impact on the Group’s current year profit before interest and tax, a £609,000
(2014: £317,000) impact on the Group's profit after tax and a £1,300,000 (2014: £1,400,000) impact on shareholders' funds. The method of
estimation, which has been applied consistently, involves assessing the translation impact of the US dollar.
A general change of five cents in the value of the euro against sterling would have had a £800,000 (2014: nil) impact on shareholders' funds.
Due to the timing of the acquisition of InterPuls, the impact on profit would not have been material.
The following significant exchange rates applied during year:
US dollar
Euro
(b) Interest rate risk
Average rate
2015
Closing rate
2015
Average rate
2014
Closing rate
2014
1.542
1.351
1.517
1.359
1.654
1.221
1.631
1.281
The Group does not undertake any hedging activity in this area. All foreign currency cash deposits are made at prevailing interest rates and
where rates are fixed the period of the fix is generally not more than one month. The main element of interest rate risk concerns borrowings
which are made on a floating LIBOR-based rate and short-term overdrafts in foreign currencies which are also on a floating rate.
The Group is exposed to interest rate fluctuations with net debt of £13.2m (2014: £2.9m net cash) a 1% increase in interest rates would increase
interest costs by £0.1m (2014: no impact on interest costs).
The floating rate financial liabilities comprised bank loans bearing floating interest rates fixed by reference to the relevant LIBOR or
equivalent rate.
All cash deposits are on floating rates or overnight rates based on the relevant LIBOR or equivalent rate.
R
A
E
Y
E
H
T
F
O
W
E
I
V
R
E
V
O
S
S
E
N
I
S
U
B
R
U
O
N
U
R
E
W
W
O
H
D
E
M
R
O
F
R
E
P
E
W
W
O
H
N
O
I
T
A
M
R
O
F
N
I
R
E
D
L
O
H
E
R
A
H
S
A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 5 I N T E G R A T I N G T E C H N O L O G Y
109
N O T E S T O T H E G R O U P F I N A N C I A L S TAT E M E N T S C O N T I N U E D
F O R T H E Y E A R E N D E D 3 0 S E P T E M B E R 2 0 15
19 F I N A N C I A L I N S T R U M E N T S ( C O N T I N U E D )
(iv) Capital risk management
The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide returns
for shareholders and benefits for other stakeholders and to maintain an optimal capital structure.
In order to maintain or adjust the capital structure the Group may adjust the amount of dividends paid to shareholders, return capital to
shareholders or issue new shares.
The Group monitors capital on the basis of the gearing ratio, calculated as net debt divided by capital. Net debt is calculated as total borrowings
less cash and cash equivalents. Total capital is measured by the current market capitalisation of the Group, plus net debt.
The Group’s net (debt)/cash at the balance sheet date was:
Total borrowings
Cash and cash equivalents
Group net (debt)/cash
Market capitalisation of the Group at 30 September
Gearing ratio
2015
£’000
(13,493)
332
(13,161)
2014
£’000
-
2,925
2,925
283,550
190,947
4.4%
N/A
At 30 September 2014 the Group had net cash, therefore calculation of the gearing ratio is not applicable.
110
I N T E G R A T I N G T E C H N O L O G Y A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 5
19 F I N A N C I A L I N S T R U M E N T S ( C O N T I N U E D )
(v) Fair values
The fair values of financial assets and liabilities, together with the carrying amounts shown in the balance sheet, are as follows:
Trade receivables
Other receivables
Cash and cash equivalents
Forward exchange contracts
Secured loans
Trade and other payables
Carrying
amount
2015
£’000
14,483
1,196
332
3
(13,493)
(16,742)
Fair
value
2015
£’000
14,483
1,196
332
3
(13,493)
(16,742)
Carrying
amount
2014
£’000
15,295
2,546
2,925
2
-
(17,126)
Fair
value
2014
£’000
15,295
2,546
2,925
2
-
(17,126)
(14,221)
(14,221)
3,642
3,642
Basis for determining fair value
The following summarises the significant methods and assumptions used in estimating the fair values of financial instruments reflected in the
table above.
Derivatives
The fair value of forward exchange contracts is determined by using valuation techniques using year-end spot rates, adjusted for the forward
points to the contract’s value date. No contract's value date is greater than one year from the year end. These instruments are included in level 2
in the fair value hierarchy as the valuation is based on inputs that are either directly or indirectly observable.
Secured loans
As the loans are floating rate borrowings, amortised cost is deemed to reflect fair value.
Trade and other receivables/payables
As the majority of receivables/payables have a remaining life of less than one year, the notional amount is deemed to reflect the fair value.
R
A
E
Y
E
H
T
F
O
W
E
I
V
R
E
V
O
S
S
E
N
I
S
U
B
R
U
O
N
U
R
E
W
W
O
H
D
E
M
R
O
F
R
E
P
E
W
W
O
H
N
O
I
T
A
M
R
O
F
N
I
R
E
D
L
O
H
E
R
A
H
S
A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 5 I N T E G R A T I N G T E C H N O L O G Y
111
N O T E S T O T H E G R O U P F I N A N C I A L S TAT E M E N T S C O N T I N U E D
F O R T H E Y E A R E N D E D 3 0 S E P T E M B E R 2 0 15
2 0 S H A R E C A P I TA L
Called up, allotted and fully
paid ordinary shares of £1 each
At the beginning of the year
Issued during the year
2015
No. of
shares
2015
Ordinary
shares
£’000
2015
Share
premium
£’000
2014
No. of
shares
2014
Ordinary
shares
£’000
2014
Share
premium
£’000
31,023,292
-
31,023
-
34,708
-
30,723,292
300,000
30,723
300
34,708
-
At the end of the year
31,023,292
31,023
34,708
31,023,292
31,023
34,708
During 2014, 300,000 ordinary shares with a nominal value of £1 per share were issued at par to the Avon Rubber p.l.c. Employee Share
Ownership Trust No. 1.
Details of outstanding share options and movements in share options during the year are given in the Remuneration Report on pages 58-77.
Ordinary shareholders are entitled to receive dividends and are entitled to vote at meetings of the Company.
At 30 September 2015 887,315 (2014: 1,081,810) ordinary shares were held by a trust in respect of obligations under the 2010 Performance Share
Plan. Dividends on these shares have been waived. The market value of the shares held in the trust at 30 September 2015 was £8,110,000
(2014: £6,659,000). These shares are held at cost as treasury shares and deducted from shareholders' equity.
During 2015 the trust acquired 162,095 (2014: nil) shares at a cost of £1,152,000 (2014: nil).
327,130 (2014: 460,301) shares were used to satisfy awards following the vesting of shares relating to the 2010 Performance Share Plan.
29,460 ordinary shares of £1 each were awarded in relation to the 2014 annual incentive plan.
112
I N T E G R A T I N G T E C H N O L O G Y A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 5
21 C A S H G E N E R AT E D F R O M O P E R AT I O N S
Continuing operations
Profit for the year
Adjustments for:
Taxation
Depreciation
Amortisation of intangible assets
Defined benefit pension scheme (credit)/cost
Finance income
Finance costs
Other finance expense
Loss on disposal of intangibles
Loss on disposal of property, plant and equipment
Movement in respect of employee share scheme
(Increase)/decrease in inventories
Decrease in receivables
(Decrease)/increase in payables and provisions
Cash generated from continuing operations
Analysed as:
Cash generated from continuing operations prior to the effect of exceptional operating items
Cash effect of exceptional operating items
Discontinued operations
Loss for the year
Decrease in payables and provisions
Cash used in discontinued operations
Cash generated from operations
Cash flows relating to the discontinued operations are as follows:
Cash flows from operating activities
Cash used in discontinued operations
2 2 A N A LY S I S O F N E T ( D E B T ) / C A S H
2015
£’000
15,166
2,672
4,684
3,411
(318)
(45)
192
901
-
7
85
(1,264)
4,225
(6,855)
22,861
24,053
(1,192)
(1,500)
(29)
(1,529)
21,332
(1,529)
(1,529)
2014
£’000
10,811
3,053
4,127
2,034
400
(1)
275
187
149
209
88
370
1,479
2,336
25,517
26,500
(983)
-
-
-
25,517
-
-
This note sets out the calculation of net (debt)/cash, a measure considered important in explaining our financial position.
Cash at bank and in hand
Overdrafts
Net cash and cash equivalents
Debt due in less than 1 year
Debt due in more than 1 year
At 1 Oct
2014
£’000
2,925
-
2,925
-
-
2,925
Cash flow
£’000
(2,710)
8
(2,702)
100
(10,705)
(13,307)
Acquisitions
£’000
Exchange
movements
£’000
At 30 Sept
2015
£’000
20
(8)
12
(2,324)
(277)
(2,589)
97
-
97
(126)
(161)
332
-
332
(2,350)
(11,143)
(190)
(13,161)
A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 5 I N T E G R A T I N G T E C H N O L O G Y
113
R
A
E
Y
E
H
T
F
O
W
E
I
V
R
E
V
O
S
S
E
N
I
S
U
B
R
U
O
N
U
R
E
W
W
O
H
D
E
M
R
O
F
R
E
P
E
W
W
O
H
N
O
I
T
A
M
R
O
F
N
I
R
E
D
L
O
H
E
R
A
H
S
N O T E S T O T H E G R O U P F I N A N C I A L S TAT E M E N T S C O N T I N U E D
F O R T H E Y E A R E N D E D 3 0 S E P T E M B E R 2 0 15
2 3 O T H E R F I N A N C I A L CO M M I T M E N T S
Capital expenditure committed
2015
£’000
560
2014
£’000
738
Capital expenditure committed represents the amount contracted in respect of property, plant and equipment at the end of the financial year
for which no provision has been made in the financial statements.
The future aggregate minimum lease payments under non-cancellable operating leases are:
Within one year
Between 1 and 5 years
Later than 5 years
The majority of leases of land and buildings are subject to rent reviews.
24 S H A R E B A S E D PAY M E N T S
2015
£’000
1,372
5,900
15,419
22,691
2014
£’000
1,983
4,024
5,755
11,762
The Group operates an equity-settled share-based performance share plan (PSP). Details of the Plan, awards granted and options outstanding
are set out in the Remuneration Report on pages 74 and 75 and are incorporated by reference into these financial statements. The charge
against profit of £85,000 (2014: £88,000) in respect of PSP options granted after 7 November 2002 has been calculated using the Monte Carlo
pricing model and the following principal assumptions:
Weighted average fair value (£)
Key assumptions used:
Weighted average share price (£)
Volatility (%)
Risk-free interest rate (%)
Expected option term (yrs)
Divided yield (%)
Volatility is estimated based on actual experience over the last three years.
2015
0.48
7.28
36
0.8
3.0
0.9
2014
0.38
5.75
31
0.9
3.0
1.1
114
I N T E G R A T I N G T E C H N O L O G Y A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 5
2 5 R E L AT E D PA R T Y T R A N S AC T I O N S
There were no related party transactions during the year or outstanding at the end of the year (2014: nil). Key management compensation is
disclosed in note 9.
2 6 ACQ U I S I T I O N S
Hudstar Systems Inc.
On 19 June 2015, Avon Protection Systems, Inc. acquired 100% of the share capital of Hudstar Systems Inc. (Hudstar), a leading US based designer
and manufacturer of electronic control systems used in powered air respiratory systems, for consideration of $5,576,000.
Book value
£’000
Accounting
policy alignment
£’000
Fair value
adjustment
£’000
Provisional
Fair value
£’000
Intangible assets
Property, plant and equipment
Inventories
Trade and other receivables
Cash and cash equivalents
Trade and other payables
Deferred tax liabilities
Net assets acquired
Goodwill
Total consideration
Satisfied by:
Cash at completion
Deferred/contingent consideration due in future years
-
313
454
242
20
(582)
-
447
1,536
-
-
(186)
-
-
(538)
812
1,787
-
-
-
-
-
(625)
1,162
3,323
313
454
56
20
(582)
(1,163)
2,421
1,100
3,521
3,205
316
3,521
The goodwill is attributable to the acquired workforce and control over key technology providing barriers to entry to competitors.
The Directors have reviewed the goodwill for impairment and concluded that the carrying value is recoverable as the fair value less costs to sell
exceeds the carrying amount of the net assets and goodwill recognised.
Intangible assets comprise development costs (£2.8m), customer relationships (£0.2m) and brands and patents (£0.3m).
The contingent consideration becomes payable over the next ten years, providing certain performance conditions are met, based on both
qualitative and quantitative factors. The range of outcomes is expected to be between nil and $500,000.
Hudstar has not had a material impact on the Group's results in 2015.
R
A
E
Y
E
H
T
F
O
W
E
I
V
R
E
V
O
S
S
E
N
I
S
U
B
R
U
O
N
U
R
E
W
W
O
H
D
E
M
R
O
F
R
E
P
E
W
W
O
H
N
O
I
T
A
M
R
O
F
N
I
R
E
D
L
O
H
E
R
A
H
S
A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 5 I N T E G R A T I N G T E C H N O L O G Y
115
N O T E S T O T H E G R O U P F I N A N C I A L S TAT E M E N T S C O N T I N U E D
F O R T H E Y E A R E N D E D 3 0 S E P T E M B E R 2 0 15
2 6 ACQ U I S I T I O N S ( C O N T I N U E D )
InterPuls S.p.A.
On 5 August 2015, Avon Rubber Italia S.r.l. acquired 100% of the share capital and shareholder loan notes of InterPuls S.p.A. (InterPuls),
an Italian supplier of specialist milking components, for consideration of €25,750,000.
Intangible assets
Property, plant and equipment
Inventories
Trade and other receivables
Trade and other payables
Bank loans and other borrowings
Deferred tax liabilities
Net assets acquired
Goodwill
Total consideration
Satisfied by:
Cash at completion
Book value
£’000
Accounting
policy alignment
£’000
Fair value
adjustment
£’000
Provisional
Fair value
£’000
319
8,218
1,569
1,395
(2,541)
(2,609)
(318)
6,033
2,243
-
-
(70)
(321)
-
(718)
1,134
14,264
-
-
-
-
-
(4,563)
16,826
8,218
1,569
1,325
(2,862)
(2,609)
(5,599)
9,701
16,868
1,101
17,969
17,969
17,969
The goodwill is attributable to sales synergies from integration of distributions channels, access to new markets and the workforce of the
acquired businesses.
The Directors have reviewed the goodwill for impairment and concluded that the carrying value is recoverable as the fair value less costs
to sell exceeds the carrying amount of the net assets and goodwill recognised.
Intangible assets comprise customer relationships (£12.1m), development costs (£2.2m), brand (£1.7m), order book (£0.4m) and software
and other (£0.4m).
The results of the acquired entity have been included in the Group's consolidated statement of comprehensive income from 6 August 2015 and
contributed revenue of £1.0m and profit of nil to the profit for the year.
Had InterPuls been consolidated from 1 October 2014, the consolidated statement of comprehensive income would show revenue of £144.8m
and profit for the year of £12.9m.
116
I N T E G R A T I N G T E C H N O L O G Y A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 5
27 G R O U P U N D E R TA K I N G S
Held by Parent Company
Avon Polymer Products Limited
Avon Rubber Overseas Limited
Avon Rubber Pension Trust Limited
Avon Dairy Solutions (Shanghai) International Trading Company Limited
Avon Rubber Italia S.r.l.
Held by Group undertakings
Avon Engineered Fabrications, Inc.
Avon Hi-Life, Inc.
Avon Protection Systems, Inc.
Avon Rubber & Plastics, Inc.
Avon Group Limited
Avon Protection Systems UK Limited
Avon International Safety Instruments, Inc.
Avon-Dairy America do sul Solucoes Para Ordentia LTDA
Interpuls S.p.A.
Hudstar Systems Inc.
Country in which
incorporated
UK
UK
UK
China
Italy
US
US
US
US
UK
UK
US
Brazil
Italy
US
Shareholdings are ordinary shares and all undertakings are wholly owned by the Group and operate primarily in their country of incorporation.
All companies have a year ending in September, except Avon Dairy Solutions (Shanghai) and InterPuls S.p.A. which have a year ending in December.
For the purpose of the Group accounts the results are consolidated to 30 September.
Avon Rubber Pension Trust Limited is a pension fund trustee.
Avon Rubber Overseas Limited, Avon Rubber Italia S.r.l. and Avon Rubber & Plastics, Inc. are investment holding companies.
Hudstar Systems Inc. designs and manufactures electronic control systems used in powered air respiratory systems.
InterPuls S.p.A. designs and manufactures specialist milking components for use in the dairy industry.
The activities of all of the other companies listed above are the manufacture and/or distribution of rubber and other polymer based products.
Avon Polymer Products Limited and Avon Rubber Overseas Limited are exempt from the requirement to file audited accounts by virtue of Section
479A of the Companies Act 2006 ('the Act'). All remaining UK subsidiaries are exempt from the requirement to file audited accounts by virtue of
section 480 of the Act.
R
A
E
Y
E
H
T
F
O
W
E
I
V
R
E
V
O
S
S
E
N
I
S
U
B
R
U
O
N
U
R
E
W
W
O
H
D
E
M
R
O
F
R
E
P
E
W
W
O
H
N
O
I
T
A
M
R
O
F
N
I
R
E
D
L
O
H
E
R
A
H
S
A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 5 I N T E G R A T I N G T E C H N O L O G Y
117
N O T E S T O T H E G R O U P F I N A N C I A L S TAT E M E N T S C O N T I N U E D
F O R T H E Y E A R E N D E D 3 0 S E P T E M B E R 2 0 15
2 8 P O S T B A L A N C E S H E E T E V E N T
On 8 October 2015 the Group acquired the trade and assets of the Argus thermal imaging camera business from e2v technologies plc for
consideration of £3.5m.
Based in Chelmsford UK, Argus is a leading designer and manufacturer of thermal imaging cameras for the first responder and fire markets and
will further strengthen the Group's product range in these markets.
Fair value information on the assets acquired is not yet available.
118
I N T E G R A T I N G T E C H N O L O G Y A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 5
I N D E P E N D E N T A U D I T O R S ' R E P O R T
T O T H E M E M B E R S O F A V O N R U B B E R p . l . c .
Report on the Group financial statements
Our opinion
In our opinion, Avon Rubber p.l.c.’s Group financial statements (the “financial statements”):
give a true and fair view of the state of the Group’s affairs as at 30 September 2015 and of its profit and cash flows for the year then ended;
have been properly prepared in accordance with International Financial Reporting Standards (“IFRSs”) as adopted by the European Union; and
have been prepared in accordance with the requirements of the Companies Act 2006 and Article 4 of the IAS Regulation.
What we have audited
The financial statements, included within the Annual Report, comprise:
the Consolidated Balance Sheet as at 30 September 2015;
the Consolidated Statement of Comprehensive Income for the year then ended;
the Consolidated Cash Flow Statement for the year then ended;
the Consolidated Statement of Changes in Equity for the year then ended;
the Accounting Policies and Critical Accounting Judgements; and
the notes to the financial statements, which include other explanatory information.
Certain required disclosures have been presented elsewhere in the Annual Report, rather than in the notes to the financial statements.
These are cross-referenced from the financial statements and are identified as audited.
The financial reporting framework that has been applied in the preparation of the financial statements is applicable law and IFRSs as adopted
by the European Union.
Our audit approach
Context
The context for our audit was set by Avon Rubber p.l.c.’s major activities in 2015. The principal change which affected our audit was the
completion by the Group of the acquisitions of InterPuls S.p.A in Italy and Hudstar Systems Inc. in the USA. As a result our Group audit involved
the work of a new component auditor in Parma, Italy and we focussed on the acquisition accounting for these business combinations.
Overview
MATERIALIT Y
Overall Group materiality: £900,000 which represents 5% of Group profit before taxation.
AUDIT SCOPE
The UK audit team performed an audit of the complete financial information of the two main operating units
in the USA (Avon Protection NA and Avon Dairy Solutions NA) and the two main operating units in the UK
(Avon Polymer Products Ltd (comprising of Avon Protection UK and Avon Dairy Solutions) and Avon Rubber p.l.c).
Taken together, these four reporting units account for 90.0% of Group revenue and £17.2m of the
total Group profit before tax.
An audit of the balance sheet of InterPuls S.p.A., acquired in the year, was performed by
our component auditor in Italy.
Specific audit procedures were also performed by the UK audit team on certain other balances
and transactions at the remaining six reporting units, including Hudstar Systems Inc.
AREAS OF FOCUS
Provisions for uncertain taxation positions.
Valuation of the Group's net pension deficit.
Intangible assets (development expenditure) impairment assessment.
Adequacy of provisions.
Valuation of intangibles acquired through business combinations.
Risk of fraud in revenue recognition.
R
A
E
Y
E
H
T
F
O
W
E
I
V
R
E
V
O
S
S
E
N
I
S
U
B
R
U
O
N
U
R
E
W
W
O
H
D
E
M
R
O
F
R
E
P
E
W
W
O
H
N
O
I
T
A
M
R
O
F
N
I
R
E
D
L
O
H
E
R
A
H
S
A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 5 I N T E G R A T I N G T E C H N O L O G Y
119
I N D E P E N D E N T A U D I T O R S ' R E P O R T C O N T I N U E D
T O T H E M E M B E R S O F A V O N R U B B E R p . l . c .
The scope of our audit and our areas of focus
We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) (“ISAs (UK & Ireland)”).
We designed our audit by determining materiality and assessing the risks of material misstatement in the financial statements. In particular, we
looked at where the directors made subjective judgements, for example in respect of significant accounting estimates that involved making
assumptions and considering future events that are inherently uncertain. As in all of our audits we also addressed the risk of management
override of internal controls, including evaluating whether there was evidence of bias by the directors that represented a risk of material
misstatement due to fraud.
The risks of material misstatement that had the greatest effect on our audit, including the allocation of our resources and effort, are identified as
“areas of focus” in the table below. We have also set out how we tailored our audit to address these specific areas in order to provide an opinion
on the financial statements as a whole, and any comments we make on the results of our procedures should be read in this context. This is not a
complete list of all risks identified by our audit.
Area of focus
How our audit addressed the area of focus
Provisions for uncertain tax positions and deferred tax
As noted in the critical accounting judgements section on page 86,
and included within note 6, there are a number of significant
judgements involved in the determination of taxation balances,
particularly in relation to the recognition of deferred taxation assets
in the UK which totalled £4.6m at 30 September 2015.
The Group also has a number of material uncertain taxation positions
resulting from the interpretation of the impact of the application of
tax regulations in certain jurisdictions. Management have applied
judgement in estimating the likelihood of the future outcome in each
case, with the provision based on the single most likely outcome.
Given the number of judgements involved and the complexities of
dealing with taxation rules and regulations in different countries and
states within the US, this was an area of focus for us.
We evaluated the directors' assessment of the availability of future taxable profits in the UK to
determine whether a deferred taxation asset should be recognised, by considering the forecasts
of future profits. We determined that the director’s assessment was reasonable in identifying
and recognising deferred taxation assets in relation to the retirement benefit obligation, share
options, capital allowances and temporary timing differences.
We assessed the adequacy of the level of provision established in relation to a number of
uncertain taxation positions primarily in respect of risks in the US. The judgements made by
management took account of the level and nature of the risks giving rise to the uncertain
tax positions, together with their assessment of the likely outcome. We considered the
judgements made by management to be reasonable based on our understanding of the
relevant tax regulations.
We also obtained the filing positions for each jurisdiction which we read, considered in light of
our understanding of the business and reconciled to the underlying taxation calculations used to
prepare the taxation balances in the financial statements, noting no material differences.
Valuation of the Group’s net pension deficit
We focussed on this area because of the magnitude of the defined
benefit pension deficit of £16.6m and the material judgements involved
in determining the actuarial assumptions which are set out in note 10.
The net pension deficit is subject to the directors’ judgements
regarding the selection of appropriate actuarial assumptions based
on the nature of the scheme, including the discount rate, inflation
rate and mortality rate, being the assumptions to which the deficit is
most sensitive.
A change in each of these assumptions by 0.25% can cause a material
change in the value of the underlying pension deficit (as highlighted
on page 99).
The directors employed an independent actuary to assist them with
the valuation of the deficit.
Intangible assets (development expenditure)
impairment assessment
We focussed on this area because of the magnitude of capitalised
development expenditure of £16.2m and the risk that amounts may not
be recoverable if estimated future sales orders cannot be delivered or
regulatory approvals are not obtained. This risk is set out in the critical
accounting judgments on page 86 and the amounts capitalised are
included in note 11.
In particular we focussed on the capitalised development costs relating
to the PAPR and EEBD Protection & Defence products, given the
amounts held in the balance sheet and the stage of their development.
These products are described on page 15.
We used our actuarial experts to assess the methodology adopted by the directors and
their actuary to determine the net pension deficit. We concluded that the requirements of IAS 19
‘Employee benefits’ had been applied.
We also used our actuarial experts to assess the reasonableness of the key actuarial assumptions
selected, by comparing these to our own independent benchmark ranges based on our
assessment of current market conditions and available actuarial data. We noted that the discount
rate, inflation rate and mortality rate were within our acceptable range.
We considered the competence and objectivity of the directors’ independent actuary including
the experience and reputation of the firm together with the length of service. We were satisfied
that the actuary was competent and objective.
We evaluated whether the directors' judgements and assumptions had been made on a
consistent basis including in comparison to prior financial years.
We also assessed the actuary’s valuation by obtaining supporting evidence for the each of the
key inputs into the overall pension deficit calculation including independently agreeing changes
in membership census data to pension scheme records and agreeing the scheme asset values to
independent sources, such as fund manager confirmations and/or quoted market prices where
available, noting no exceptions.
We tested a sample of capitalised development costs against the criteria set out in IAS38
‘Intangible assets’ including the technical feasibility and the viability of the completion of the
projects and the ability for the projects to generate future economic benefits and gain necessary
regulatory approvals.
We met with key operational personnel to update our understanding of the status of major
projects and assessed the process and governance which have been put in place around project
approval, authorisation and ongoing monitoring. We considered that these processes were
appropriate.
We assessed individually each of the major projects for indicators of impairment, such as an
inability to obtain regulatory approval or not achieving forecast sales orders. In respect of PAPR,
CE (European) approval was obtained during the year, whilst NIOSH approval was obtained for
EEBD in the prior year. As a result of our work we determined that the judgement by management
that no impairment was required for these and other major development projects was
reasonable.
120
I N T E G R A T I N G T E C H N O L O G Y A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 5
Area of focus
How our audit addressed the area of focus
Adequacy of working capital and other provisions
The directors review year-end working capital balances, specifically inventory,
trade receivables and accruals for product returns, in each of the operating
units and apply judgement in making provisions to adjust the carrying value
of those assets to the directors’ view of their recoverable amount.
In addition, provisions are made for contractual obligations such as onerous
lease arrangements and dilapidation provisions, where the directors believe
that the likelihood of settlement is probable.
We focused on the above due to the degree of judgement the directors
have to apply in determining the amount of provision required and taking
into consideration the aggregation of provisions across the individual
operating locations.
We evaluated whether provisions were made on a consistent basis and in line
with the Group’s accounting policies.
We obtained evidence over the recoverability of material trade receivables,
including assessing the ageing analysis and the extent of cash collected post-
year end, and assessed the directors’ assumptions over the need to provide for
potentially irrecoverable amounts.
We attended physical inventory counts at a variety of locations where material
levels of inventory were held to assess the physical condition of inventory held.
We performed testing of the net realisable value of inventory by comparing
carrying amounts to sales values. We also considered the adequacy of inventory
provisioning by reviewing the ageing of inventory held at 30 September 2015.
We also assessed the adequacy of property related provisions, by confirming the
dilapidation obligations for each of the leasehold properties within the Group
to the relevant lease documentation together with evaluating the directors’
assessment of the dilapidation expenditure to be incurred. In addition we assessed
the onerous lease obligations in relation to certain vacant properties in the UK by
considering the lease cost over the onerous commitment period of the lease.
We concluded from our work that provisions had been determined on a consistent
basis and that the judgements made by the directors were reasonable.
Valuation of intangibles acquired
through business combinations
The Group acquired two new subsidiaries in the year; the larger of which was
InterPuls S.p.A. with consideration of £18.0m, and Hudstar Systems Inc., with
consideration of £3.5m as set out in note 26.
We evaluated whether the acquired companies met the definition of a business
combination in line with IFRS 3 and concluded that they did as the entire share
capital was acquired in each case.
The acquisitions were accounted for as business combinations which required
a number of judgements to be made by the directors in the determination
of the fair value of the intangible assets as set out in the critical accounting
estimates on page 86.
The intangible assets identified comprised customer relationships,
development costs, brands and order book. The valuation of each of these
assets was judgemental as valuation techniques were used to measure them.
The allocation also considered the fair values of property, plant and
equipment, inventory, trade and other receivables, liabilities and taxation.
We assessed the methodology adopted by the directors in calculating the fair
value of each of the assets acquired. We used our valuations experts to assist us in
making this assessment and concluded that the methods used were acceptable.
The two most significant intangible assets were customer relationships and
development costs.
In respect of customer relationships, we considered the directors’ cash flow
forecasts attributable to the customers of the acquired companies, together with
the assumed life of the relationships and the discount rate applied.
In respect of development costs we evaluated the calculations prepared by the
directors of the historical development expenditure incurred and expensed by
the acquired companies that would have been capitalised had the Group’s
accounting policy of capitalisation been applied. We considered that the approach
taken was reasonable.
We obtained evidence of the purchase consideration and recalculated the
goodwill resulting from both of the business combinations.
Risk of fraud in revenue recognition
We focused on this area as judgements are made by the directors in
determining whether provisions should be made against revenue on certain
contractual arrangements in the US Protection and Defence business.
We obtained the calculations of contractual revenue provisions and evaluated the
directors’ assessment of the risk of claw back based on our independent reading of
the relevant contractual terms and the revenue recognised.
The directors made an estimate of amounts which could be due back
to customers reflecting the risks inherent within the performance of the
contracts over a number of years.
In doing so, we concluded that the Group recognised revenue in line with their
contractual obligations and their revenue recognition accounting policy.
R
A
E
Y
E
H
T
F
O
W
E
I
V
R
E
V
O
S
S
E
N
I
S
U
B
R
U
O
N
U
R
E
W
W
O
H
D
E
M
R
O
F
R
E
P
E
W
W
O
H
N
O
I
T
A
M
R
O
F
N
I
R
E
D
L
O
H
E
R
A
H
S
A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 5 I N T E G R A T I N G T E C H N O L O G Y
121
I N D E P E N D E N T A U D I T O R S ' R E P O R T C O N T I N U E D
T O T H E M E M B E R S O F A V O N R U B B E R p . l . c .
Rationale for
benchmark
applied
We believe that profit before tax
is the primary measure used by
the shareholders in assessing the
performance of the Group.
We agreed with the Audit Committee that we would report to them
misstatements identified during our audit above £45,000 (2014:
£50,000) as well as misstatements below that amount that, in our
view, warranted reporting for qualitative reasons.
Going concern and longer term viability statements reporting
Under the Listing Rules we are required to review the directors’
statement, set out on page 52, in relation to going concern. We have
nothing to report having performed our review.
Under ISAs (UK & Ireland) we are also required to report to you if we
have anything material to add or to draw attention to in relation to the
directors’ statement about whether they considered it appropriate to
adopt the going concern basis in preparing the financial statements.
We have nothing material to add or to draw attention to.
As noted in the directors’ statement, the directors have concluded
that it is appropriate to adopt the going concern basis in preparing
the financial statements. The going concern basis presumes that
the Group has adequate resources to remain in operation, and that
the directors intend it to do so, for at least one year from the date
the financial statements were signed. As part of our audit we have
concluded that the directors’ use of the going concern basis is
appropriate.
However, because not all future events or conditions can be
predicted, these statements are not a guarantee as to the Group’s
ability to continue as a going concern.
Other required reporting
Consistency of other information
Companies Act 2006 opinion
In our opinion the information given in the Strategic Report and
the Directors’ Report for the financial year for which the financial
statements are prepared is consistent with the financial statements.
How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed
enough work to be able to give an opinion on the financial statements
as a whole, taking into account the geographic structure of the Group,
the accounting processes and controls, and the industry in which the
Group operates.
The Group comprises two divisions, being Protection & Defence and
Dairy and we focused our audit work on the Group’s largest operating
units, within these divisions, in the USA and UK. The UK audit team
conducted an audit of the complete financial information of four
operating units (the two largest in the USA, and two largest in the UK)
due to their size and risk characteristics.
Taken together, these four operating units where we performed audit
work accounted for approximately 90% of Group revenues and £17.2m
of Group profit before taxation.
Specific audit procedures were also performed by the UK team
on certain balances and transactions material to the Group
financial statements at the remaining reporting units. The Parent
Company’s complete financial information was also subject to audit.
PwC Italy acted as component auditors for the audit of the balance
sheet of InterPuls S.p.A., acquired in the year and located in Italy.
We formally instructed the component auditors and determined
the scope of the work performed by them including the materiality
applied in their testing. We also considered the output of their audit
work and held a clearance meeting with them to discuss the audit
findings from the procedures that they performed.
The procedures set out above, together with additional procedures
performed at the Group level over centralised processes and
functions, including the audit of consolidation journals, gave us
the evidence we needed for our opinion on the Group financial
statements as a whole.
Materiality
The scope of our audit was influenced by our application of materiality.
We set certain quantitative thresholds for materiality. These, together
with qualitative considerations, helped us to determine the scope of
our audit and the nature, timing and extent of our audit procedures
on the individual financial statement line items and disclosures and in
evaluating the effect of misstatements, both individually and on the
financial statements as a whole.
Based on our professional judgement, we determined materiality for
the financial statements as a whole as follows:
Overall Group
materiality
£900,000 (2014: £815,000).
How we
determined it
5% of Group profit before tax.
122
I N T E G R A T I N G T E C H N O L O G Y A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 5
ISAs (UK & Ireland) reporting
Under ISAs (UK & Ireland) we are required to report to you if, in our opinion:
information in the Annual Report is:
− materially inconsistent with the information in the audited financial statements; or
− apparently materially incorrect based on, or materially inconsistent with, our knowledge of the Group
acquired in the course of performing our audit; or
− otherwise misleading.
We have no
exceptions to report.
the statement given by the directors on page 47, in accordance with provision C.1.1 of the UK Corporate
Governance Code (the “Code”), that they consider the Annual Report taken as a whole to be fair, balanced
We have no
exceptions to report.
and understandable and provides the information necessary for members to assess the Group’s performance,
business model and strategy is materially inconsistent with our knowledge of the Group acquired in the
course of performing our audit.
the section of the Annual Report on page 52, as required by provision C.3.8 of the Code, describing the work
of the Audit Committee does not appropriately address matters communicated by us to the Audit Committee.
We have no
exceptions to report.
The directors’ assessment of the prospects of the Group and the principal risks that would threaten
the solvency or liquidity of the Group
Under ISAs (UK & Ireland) we are required to report to you if we have anything material to add or to draw attention to in relation to:
the directors’ confirmation in the Annual Report that they have carried out a robust assessment of the
principal risks facing the Group, including those that would threaten its business model, future performance,
solvency or liquidity.
the disclosures in the Annual Report that describe those risks and explain how they are being managed
or mitigated.
We have nothing
material to add or to
draw attention to.
We have nothing
material to add or to
draw attention to.
the directors’ explanation in the Annual Report as to how they have assessed the prospects of the Group, over
what period they have done so and why they consider that period to be appropriate, and their statement as to
whether they have a reasonable expectation that the Group will be able to continue in operation and meet its
We have nothing
material to add or to
draw attention to.
liabilities as they fall due over the period of their assessment, including any related disclosures drawing attention
to any necessary qualifications or assumptions.
Under the Listing Rules we are required to review the directors’ statement that they have carried out a robust
assessment of the principal risks facing the Group and the directors’ statement in relation to the longer-term
viability of the Group, set out on page 52. Our review was substantially less in scope than an audit and only
consisted of making inquiries and considering the directors’ process supporting their statements; checking that
the statements are in alignment with the relevant provisions of the Code; and considering whether the statements
are consistent with the knowledge acquired by us in the course of performing our audit.
We have nothing
to report
having performed
our review
R
A
E
Y
E
H
T
F
O
W
E
I
V
R
E
V
O
S
S
E
N
I
S
U
B
R
U
O
N
U
R
E
W
W
O
H
D
E
M
R
O
F
R
E
P
E
W
W
O
H
N
O
I
T
A
M
R
O
F
N
I
R
E
D
L
O
H
E
R
A
H
S
A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 5 I N T E G R A T I N G T E C H N O L O G Y
123
I N D E P E N D E N T A U D I T O R S ' R E P O R T C O N T I N U E D
T O T H E M E M B E R S O F A V O N R U B B E R p . l . c .
We primarily focus our work in these areas by assessing the
directors’ judgements against available evidence, forming
our own judgements, and evaluating the disclosures in the
financial statements.
We test and examine information, using sampling and other
auditing techniques, to the extent we consider necessary to provide
a reasonable basis for us to draw conclusions. We obtain audit
evidence through testing the effectiveness of controls, substantive
procedures or a combination of both.
In addition, we read all the financial and non-financial information
in the Annual Report to identify material inconsistencies with the
audited financial statements and to identify any information that is
apparently materially incorrect based on, or materially inconsistent
with, the knowledge acquired by us in the course of performing the
audit. If we become aware of any apparent material misstatements or
inconsistencies we consider the implications for our report.
Other matter
We have reported separately on the parent company financial
statements of Avon Rubber p.l.c. for the year ended 30 September
2015 and on the information in the Directors’ Remuneration Report
that is described as having been audited.
Colin Bates
Senior Statutory Auditor
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
Bristol
17 November 2015
Adequacy of information and explanations received
Under the Companies Act 2006 we are required to report to you
if, in our opinion, we have not received all the information and
explanations we require for our audit. We have no exceptions to
report arising from this responsibility.
Directors’ remuneration
Under the Companies Act 2006 we are required to report to you if, in
our opinion, certain disclosures of directors’ remuneration specified
by law are not made. We have no exceptions to report arising from
this responsibility.
Corporate governance statement
Under the Listing Rules we are required to review the part of the
Corporate Governance Statement relating to ten further provisions
of the UK Corporate Governance Code. We have nothing to report
having performed our review.
Responsibilities for the financial
statements and the audit
Our responsibilities and those of the directors
As explained more fully in the Statement of Directors’
Responsibilities set out on page 46, the directors are responsible for
the preparation of the financial statements and for being satisfied
that they give a true and fair view.
Our responsibility is to audit and express an opinion on the financial
statements in accordance with applicable law and ISAs (UK & Ireland).
Those standards require us to comply with the Auditing Practices
Board’s Ethical Standards for Auditors.
This report, including the opinions, has been prepared for and only
for the company’s members as a body in accordance with Chapter
3 of Part 16 of the Companies Act 2006 and for no other purpose.
We do not, in giving these opinions, accept or assume responsibility
for any other purpose or to any other person to whom this report
is shown or into whose hands it may come save where expressly
agreed by our prior consent in writing.
What an audit of financial statements involves
An audit involves obtaining evidence about the amounts and
disclosures in the financial statements sufficient to give reasonable
assurance that the financial statements are free from material
misstatement, whether caused by fraud or error. This includes an
assessment of:
whether the accounting policies are appropriate to the
Group’s circumstances and have been consistently applied
and adequately disclosed;
the reasonableness of significant accounting estimates made
by the directors; and
the overall presentation of the financial statements.
124
I N T E G R A T I N G T E C H N O L O G Y A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 5
I N D E P E N D E N T A U D I T O R S ' R E P O R T
T O T H E M E M B E R S O F A V O N R U B B E R p . l . c .
Report on the Parent Company
financial statements
Our opinion
In our opinion, Avon Rubber p.l.c.’s parent company financial
statements (the “financial statements”):
give a true and fair view of the state of the parent company’s
affairs as at 30 September 2015;
have been properly prepared in accordance with United
Kingdom Generally Accepted Accounting Practice; and
have been prepared in accordance with the requirements of
the Companies Act 2006.
What we have audited
Adequacy of accounting records and information
and explanations received
Under the Companies Act 2006 we are required to report to
you if, in our opinion:
we have not received all the information and explanations
we require for our audit; or
adequate accounting records have not been kept by the parent
company, or returns adequate for our audit have not been
received from branches not visited by us; or
the financial statements and the part of the Directors’
Remuneration Report to be audited are not in agreement
with the accounting records and returns.
We have no exceptions to report arising from this responsibility.
The financial statements, included within the Annual Report, comprise:
Directors’ remuneration
the Parent Company Balance Sheet as at 30 September 2015;
Directors’ remuneration report - Companies Act 2006 opinion
the Parent Company accounting policies; and
the notes to the Parent Company financial statements, which
include other explanatory information.
Certain required disclosures have been presented elsewhere in the
Annual Report, rather than in the notes to the financial statements.
These are cross-referenced from the financial statements and are
identified as audited.
The financial reporting framework that has been applied in the
preparation of the financial statements is applicable law and United
Kingdom Accounting Standards (United Kingdom Generally Accepted
Accounting Practice).
Other required reporting
Consistency of other information
Companies Act 2006 opinion
In our opinion, the information given in the Strategic Report and
the Directors’ Report for the financial year for which the financial
statements are prepared is consistent with the financial statements.
ISAs (UK & Ireland) reporting
Under International Standards on Auditing (UK and Ireland)
(“ISAs (UK & Ireland)”) we are required to report to you if, in our opinion,
information in the Annual Report is:
materially inconsistent with the information in the audited
financial statements; or
apparently materially incorrect based on, or materially
inconsistent with, our knowledge of the company acquired in
the course of performing our audit; or
otherwise misleading.
We have no exceptions to report arising from this responsibility.
In our opinion, the part of the Directors’ Remuneration Report to
be audited has been properly prepared in accordance with the
Companies Act 2006.
Other Companies Act 2006 reporting
Under the Companies Act 2006 we are required to report to you
if, in our opinion, certain disclosures of directors’ remuneration
specified by law are not made. We have no exceptions to report
arising from this responsibility.
Responsibilities for the financial statements
and the audit
Our responsibilities and those of the directors
As explained more fully in the Statement of Directors’
Responsibilities set out on page 46, the directors are responsible
for the preparation of the financial statements and for being
satisfied that they give a true and fair view.
Our responsibility is to audit and express an opinion on the
financial statements in accordance with applicable law and ISAs (UK
& Ireland). Those standards require us to comply with the Auditing
Practices Board’s Ethical Standards for Auditors.
This report, including the opinions, has been prepared for and
only for the company’s members as a body in accordance with
Chapter 3 of Part 16 of the Companies Act 2006 and for no other
purpose. We do not, in giving these opinions, accept or assume
responsibility for any other purpose or to any other person to
whom this report is shown or into whose hands it may come save
where expressly agreed by our prior consent in writing.
R
A
E
Y
E
H
T
F
O
W
E
I
V
R
E
V
O
S
S
E
N
I
S
U
B
R
U
O
N
U
R
E
W
W
O
H
D
E
M
R
O
F
R
E
P
E
W
W
O
H
N
O
I
T
A
M
R
O
F
N
I
R
E
D
L
O
H
E
R
A
H
S
A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 5 I N T E G R A T I N G T E C H N O L O G Y
125
I N D E P E N D E N T A U D I T O R S ' R E P O R T C O N T I N U E D
T O T H E M E M B E R S O F A V O N R U B B E R p . l . c .
What an audit of financial statements involves
Other matter
We have reported separately on the Group financial statements of
Avon Rubber p.l.c. for the year ended 30 September 2015.
Colin Bates
Senior Statutory Auditor
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
Bristol
17 November 2015
We conducted our audit in accordance with ISAs (UK & Ireland).
An audit involves obtaining evidence about the amounts and
disclosures in the financial statements sufficient to give reasonable
assurance that the financial statements are free from material
misstatement, whether caused by fraud or error. This includes an
assessment of:
whether the accounting policies are appropriate to the parent
company’s circumstances and have been consistently applied
and adequately disclosed;
the reasonableness of significant accounting estimates made
by the directors; and
the overall presentation of the financial statements.
We primarily focus our work in these areas by assessing the
directors’ judgements against available evidence, forming
our own judgements, and evaluating the disclosures in the
financial statements.
We test and examine information, using sampling and other
auditing techniques, to the extent we consider necessary to provide
a reasonable basis for us to draw conclusions. We obtain audit
evidence through testing the effectiveness of controls, substantive
procedures or a combination of both.
In addition, we read all the financial and non-financial information
in the Annual Report to identify material inconsistencies with the
audited financial statements and to identify any information that is
apparently materially incorrect based on, or materially inconsistent
with, the knowledge acquired by us in the course of performing the
audit. If we become aware of any apparent material misstatements
or inconsistencies we consider the implications for our report.
126
I N T E G R A T I N G T E C H N O L O G Y A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 5
PA R E N T C O M PA N Y B A L A N C E S H E E T
AT 3 0 S E P T E M B E R 2 0 15
Note
2015
£’000
2015
£’000
2014
£’000
2014
£’000
Fixed Assets
Tangible assets
Investments
Current assets - debtors
Creditors - amounts falling due within one year
Net current assets
Total assets less current liabilities
4
5
7
8
77,138
2,616
Creditors - amounts falling due after more than one year
Bank loans and overdrafts
Provisions for liabilities
9
10
8,748
1,722
Net assets
Capital and reserves
Share capital
Share premium account
Capital redemption reserve
Profit and loss account
Total shareholders’ funds
11
12
12
12
13
51
64,219
64,270
74,522
138,792
10,470
128,322
31,023
34,708
500
62,091
128,322
56,600
6,573
-
2,211
346
75,540
75,886
50,027
125,913
2,211
123,702
31,023
34,708
500
57,471
123,702
These financial statements on pages 127 to 136 were approved by the Board of Directors on 17 November 2015 and were signed on its behalf by:
David Evans
Andrew Lewis
R
A
E
Y
E
H
T
F
O
W
E
I
V
R
E
V
O
S
S
E
N
I
S
U
B
R
U
O
N
U
R
E
W
W
O
H
D
E
M
R
O
F
R
E
P
E
W
W
O
H
N
O
I
T
A
M
R
O
F
N
I
R
E
D
L
O
H
E
R
A
H
S
A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 5 I N T E G R A T I N G T E C H N O L O G Y
127
PA R E N T C O M PA N Y A C C O U N T I N G P O L I C I E S
F O R T H E Y E A R E N D E D 3 0 S E P T E M B E R 2 0 15
Accounting policies
The principal accounting policies adopted in the preparation of these
financial statements are set out below. These policies have been
consistently applied to all the years presented, unless otherwise stated.
Basis of preparation
The accounts have been prepared on a going concern basis and in
accordance with the Companies Act 2006 and with all applicable
accounting standards in the United Kingdom (UK GAAP) on the going
concern basis and under the historical cost convention except for financial
assets and liabilities (including derivative instruments) held at fair value
through profit and loss.
The Company does not publish its own cash flow statement, as its cash
flows are included within the consolidated cash flow statement of
the Group.
Foreign currencies
The Company’s functional currency is sterling. Foreign currency
transactions are recorded at the exchange rate ruling on the date of
transaction. Foreign exchange gains and losses resulting from the
settlement of such transactions, and from the retranslation at year end
exchange rates of monetary assets and liabilities denominated in foreign
currencies are recognised in the profit and loss account.
Deferred taxation
Deferred tax is recognised in respect of all timing differences that have
originated but not reversed at the balance sheet date, where transactions
or events that result in an obligation to pay more tax in the future or a right
to pay less tax in the future have occurred at the balance sheet date.
A net deferred tax asset is considered as recoverable and therefore
recognised only when, on the basis of all available evidence, it can be
regarded as more likely than not that there will be suitable taxable profits
against which to recover carried forward tax losses and from which the
future reversal of underlying timing differences can be deducted.
Deferred tax is measured at the average tax rates that are expected to apply
in the periods in which the timing differences are expected to reverse,
based on tax rates and laws that have been enacted or substantively
enacted by the balance sheet date. Deferred tax is measured on an
undiscounted basis.
Impairment of fixed assets
Impairment reviews are undertaken if events or changes in circumstances
indicate that the carrying amount of the tangible fixed assets may not be
recoverable. If the carrying amount exceeds its recoverable amount (being
the higher of the value in use and the net realisable value) then the fixed
asset is written down accordingly. Where recoverable amounts are based
on value in use, discount rates of typically between 8% and 12% are used
depending on the risk attached to the underlying asset.
Investments in subsidiary undertakings
Investments in subsidiary undertakings are recorded at cost plus
incidental expenses less any provision for impairment. Impairment
reviews are performed by the Directors when there has been an
indication of potential impairment.
Leased assets
Operating lease rentals are charged against profit over the term of the
lease on a straight line basis.
Pensions
The Company operated a contributory defined benefits plan to provide
pension and death benefits for the employees of Avon Rubber p.l.c.
and its Group undertakings in the UK employed prior to 31 January
2003. The scheme is closed to new entrants and was closed to future
accrual of benefits from 1 October 2009. Scheme assets are measured
using market values while liabilities are measured using the projected
unit method. The multi-employer exemption has been taken as the
Company is unable to identify its share of the underlying assets and
liabilities and no asset or provision has been reflected in the parent
company’s balance sheet for any surplus or deficit arising in respect of
pension obligations.
The Company also provides pensions by contributing to defined
contribution schemes. The charge in the profit and loss account
reflects the contributions paid and payable to these schemes during
the period. Full disclosures of the UK pension schemes have been
provided in the Group financial statements.
Provisions for liabilities
Provisions are recognised when a liability exists at the year end that can
be measured reliably, there is an obligation to one or more third parties
as a result of past transactions or events and there is an obligation to
transfer economic benefits in settlement.
Provisions are calculated based on management’s best estimate of the
expenditure required to settle the present obligation at the balance
sheet date, after due consideration of the risks and uncertainties that
surround the underlying event. Provision for reorganisation costs are
made where a detailed plan has been approved and an expectation
has been raised in those affected by the plan that the Company will
carry out the reorganisation.
Where a leasehold property, or part thereof, is vacant, or sub-let under
terms such that the rental income is insufficient to meet all outgoings,
provision is made for the anticipated future shortfall up to termination
of the lease, or the termination payment, if smaller.
128
I N T E G R A T I N G T E C H N O L O G Y A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 5
Tangible fixed assets
Tangible fixed assets are stated at cost, less amounts provided for
Dividends
Final dividends are recognised as a liability in the Company’s financial
depreciation and any provision for impairment. Cost includes the original
statements in the period in which the dividends are approved by
purchase price of the asset and the costs attributable to bringing the
shareholders, while interim dividends are recognised in the period in
asset to its working condition for its intended use. Plant and machinery is
which the dividends are paid.
Share Capital
Ordinary shares are classified as equity. Incremental costs directly
attributable to the issue of new shares or options are shown in equity
as a deduction, net of tax, from the proceeds.
Where the Company purchases its own share capital (treasury shares)
through Employee Share Ownership Trusts, the consideration paid,
including any directly attributable incremental costs (net of income
taxes), is deducted from shareholders’ funds until the shares are
cancelled, reissued or disposed of. Where such shares are subsequently
sold or reissued, any consideration received, net of any directly
attributable incremental transaction costs and the related income tax
effects, is included in shareholders’ funds.
depreciated using the straight line method at lives varying between 5 to
10 years.
Related parties
The Company has taken advantage of the dispensation under FRS 8,
‘Related Party Disclosures’, not to disclose transactions or balances with
other Group companies.
Share based payment
The Company operates a number of equity-settled, share-based
compensation plans. The fair value of the employee services received in
exchange for the grant of the options is recognised as an expense. The total
amount to be expensed over the vesting period is determined by reference
to the fair value of the options granted, excluding the impact of any non-
market vesting conditions (for example, profitability and sales growth
targets). Non-market vesting conditions are included in assumptions
about the number of options that are expected to vest. At each balance
sheet date, the entity revises its estimates of the number of options that
are expected to vest. It recognises the impact of the revision to original
estimates, if any, in the profit and loss account. The proceeds received net
of any directly attributable transaction costs are credited to share capital
(nominal value) and share premium when the options are exercised.
Debtors
Debtors are initially recognised at fair value and subsequently measured at
amortised cost after deduction of provisions for impairment of receivables.
Trade creditors
Trade creditors are obligations to pay for goods or services that have been
acquired in the ordinary course of business from suppliers. Trade creditors
are classified as current liabilities if payment is due within one year or less
(or in the normal operating cycle of the business if longer). If not, they are
presented as amounts falling due after more than one year. They are initially
recognised at fair value and subsequently measured at amortised cost.
Borrowings
Borrowings are recognised initially at fair value, net of transaction costs
incurred and subsequently stated at amortised cost. Costs are expensed
using the effective interest method.
Financial instruments
As permitted by FRS 29, ‘Financial Instruments: Disclosures’ the Company
has elected not to present the disclosures required by FRS 29 in the notes
to its individual financial statements as full equivalent disclosures are
presented in the consolidated financial statements.
R
A
E
Y
E
H
T
F
O
W
E
I
V
R
E
V
O
S
S
E
N
I
S
U
B
R
U
O
N
U
R
E
W
W
O
H
D
E
M
R
O
F
R
E
P
E
W
W
O
H
N
O
I
T
A
M
R
O
F
N
I
R
E
D
L
O
H
E
R
A
H
S
A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 5 I N T E G R A T I N G T E C H N O L O G Y
129
N O T E S T O T H E PA R E N T C O M PA N Y F I N A N C I A L S TAT E M E N T S
F O R T H E Y E A R E N D E D 3 0 S E P T E M B E R 2 0 15
1 PA R E N T CO M PA N Y
As a consolidated statement of comprehensive income is published, a separate profit and loss account for the parent company is omitted
from the accounts by virtue of section 408 of the Companies Act 2006. The parent company's profit for the financial year was £6,690,000
(2014: £6,637,000).
The audit fee in respect of the parent company was £30,000 (2014: £30,000).
2 D I V I D E N D S
On 29 January 2015, the shareholders approved a final dividend of 3.74p per qualifying ordinary share in respect of the year ended 30
September 2014. This was paid on 20 March 2015 absorbing £1,127,000 of shareholders' funds.
On 29 April 2015, the Board of Directors declared an interim dividend of 2.43p (2014: 1.87p) per qualifying ordinary share in respect of the year
ended 30 September 2015. This was paid on 4 September 2015 absorbing £732,000 (2014: £560,000) of shareholders' funds.
After the balance sheet date the Board of Directors proposed a final dividend of 4.86p per qualifying ordinary share in respect of the year ended
30 September 2015, which will absorb an estimated £1,464,000 of shareholders' funds. Subject to shareholder approval, the dividend will be paid
on 18 March 2016 to shareholders on the register at the close of business on 19 February 2016. In accordance with accounting standards this
dividend has not been provided for and there are no corporation tax consequences.
3 E M P L OY E E S
The total remuneration and associated costs during the year were:
Wages and salaries
Social security costs
Other pension costs
Share based payments
2015
£’000
2,408
279
388
85
3,160
2014
£’000
2,441
300
145
88
2,974
Detailed disclosures of Directors’ remuneration and share options are given on pages 71 to 77 of the Annual Report and Accounts.
The average monthly number of employees (including Executive Directors) during the year was 7 (2014: 7), all of whom were classified as
administrative staff.
130
I N T E G R A T I N G T E C H N O L O G Y A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 5
4 TA N G I B L E A S S E T S
Cost
At 1 October 2014
Additions at cost
Disposals
Transfers to other Group companies
At 30 September 2015
Accumulated depreciation
At 1 October 2014
Charge for the year
At 30 September 2015
Net book amount at 30 September 2015
Net book amount at 30 September 2014
5 I N V E S T M E N T S
Cost and net book value
At 1 October 2014
Investment in Avon Rubber Italia srl
Reduction in investment in Avon Rubber Overseas Limited
Investment in Avon-Dairy America do sul Solucoes Para Ordentia LTDA
At 30 September 2015
The Directors believe that the carrying value of the investments is supported by their underlying net assets.
The investments consist of a 100% (unless indicated as otherwise) interest in the following subsidiaries:
Plant and machinery
£’000
672
123
(7)
(377)
411
326
34
360
51
346
Investment in subsidiaries
£’000
75,540
7
(11,345)
17
64,219
Principal
activity
Country in which
incorporated
Avon Polymer Products Limited
Avon Rubber Overseas Limited
Avon Rubber Pension Trust Limited
Avon Dairy Solutions (Shanghai) International Trading Company Limited
Avon Rubber Italia srl
Avon-Dairy America do sul Solucoes Para Ordentia LTDA (1%)
The manufacture and distribution of rubber and polymer based products
Investment company
Pension Fund Trustee
Trading company
Investment company
Trading company
UK
UK
UK
China
Italy
Brazil
Details of investments held by these subsidiaries are given in note 27 to the Group accounts on page 117.
A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 5 I N T E G R A T I N G T E C H N O L O G Y
131
R
A
E
Y
E
H
T
F
O
W
E
I
V
R
E
V
O
S
S
E
N
I
S
U
B
R
U
O
N
U
R
E
W
W
O
H
D
E
M
R
O
F
R
E
P
E
W
W
O
H
N
O
I
T
A
M
R
O
F
N
I
R
E
D
L
O
H
E
R
A
H
S
N O T E S T O T H E PA R E N T C O M PA N Y F I N A N C I A L S TAT E M E N T S C O N T I N U E D
F O R T H E Y E A R E N D E D 3 0 S E P T E M B E R 2 0 15
6 O T H E R F I N A N C I A L CO M M I T M E N T S
Capital expenditure committed
2015
£’000
-
2014
£’000
-
Capital expenditure committed represents the amount contracted at the end of the financial year for which no provision has been made in the
financial statements.
The annual commitments of the Company for non-cancellable operating leases are:
For leases expiring
Within 1 year
In 2-5 years
Over 5 years
The majority of leases of land and buildings are subject to rent reviews.
2015
Land and
buildings
£’000
2014
Land and
buildings
£’000
-
-
967
967
-
814
153
967
132
I N T E G R A T I N G T E C H N O L O G Y A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 5
7 D E B T O R S
Amounts owed by Group undertakings
Trade debtors
Other debtors
Prepayments
Deferred tax asset
2015
£’000
75,402
37
577
316
806
77,138
In 2014, other debtors included £956,000 in respect of a rent deposit relating to the Company's premises in Melksham, Wiltshire, UK,
which has since been repaid. The remaining balance comprises sundry receivables.
8 C R E D I T O R S – A M O U N T S FA L L I N G D U E W I T H I N O N E Y E A R
Bank overdrafts
Amounts due to Group undertakings
Other creditors
Accruals
2015
£’000
-
-
40
2,576
2,616
2014
£’000
54,317
-
1,948
335
-
56,600
2014
£’000
38
4,040
43
2,452
6,573
R
A
E
Y
E
H
T
F
O
W
E
I
V
R
E
V
O
S
S
E
N
I
S
U
B
R
U
O
N
U
R
E
W
W
O
H
D
E
M
R
O
F
R
E
P
E
W
W
O
H
N
O
I
T
A
M
R
O
F
N
I
R
E
D
L
O
H
E
R
A
H
S
A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 5 I N T E G R A T I N G T E C H N O L O G Y
133
N O T E S T O T H E PA R E N T C O M PA N Y F I N A N C I A L S TAT E M E N T S C O N T I N U E D
F O R T H E Y E A R E N D E D 3 0 S E P T E M B E R 2 0 15
9 B A N K L O A N S A N D O V E R D R A F T S
Current
Bank overdrafts
Non-current
Bank loans
Total bank loans and overdrafts
The maturity profile of the Company's borrowings at the year end was as follows:
In one year or less or on demand
Between two and five years
The carrying amounts of the Company's borrowings are denominated in the following currencies:
Sterling
US dollars
2015
£’000
-
8,748
8,748
2015
£’000
-
8,748
8,748
2015
£’000
2,155
6,593
8,748
2014
£’000
38
-
38
2014
£’000
38
-
38
2014
£’000
38
-
38
On 9 June 2014 the Company agreed new bank facilities with Barclays Bank and Comerica Bank. The combined facility comprises a revolving
credit facility of $40m and expires on 30 November 2018. This facility is priced on the dollar LIBOR plus a margin of 1.25% and includes financial
covenants which are measured on a quarterly basis. The Company was in compliance with its financial covenants during 2015 and 2014.
The Company has provided the lenders with a negative pledge in respect of certain shares in Group companies.
134
I N T E G R A T I N G T E C H N O L O G Y A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 5
10 P R O V I S I O N S F O R L I A B I L I T I E S
Balance at 1 October 2013
Charged in the year
Unwinding of discount
Payments in the year
Balance at 30 September 2014
Charged in the year
Unwinding of discount
Payments in the year
Balance at 30 September 2015
Analysis of provisions
Non-current
Current
Property
obligations
£’000
2,613
408
175
(985)
2,211
1,500
247
(2,236)
1,722
2014
£’000
1,129
1,082
2,211
2015
£’000
867
855
1,722
Property obligations relate to an onerous lease provision in respect of unutilised space at the Company's leased Hampton Park West facility in
the UK and former premises of the Company which are subject to dilapidation risks. All are expected to be utilised within the next fifteen years.
Property provisions are subject to uncertainty in respect of the utilisation, non-utilisation, or subletting of surplus leasehold property and the
final negotiated settlement of any dilapidation claims with landlords.
11 C A L L E D U P S H A R E C A P I TA L
Called up, allotted and fully paid ordinary shares of £1 each
31,023,292 (2014: 31,023,292) ordinary shares of £1 each
2015
£’000
2014
£’000
31,023
31,023
During 2014, 300,000 ordinary shares with a nominal value of £1 per share were issued at par to the Avon Rubber p.l.c. Employee Share
Ownership Trust No. 1.
A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 5 I N T E G R A T I N G T E C H N O L O G Y
135
R
A
E
Y
E
H
T
F
O
W
E
I
V
R
E
V
O
S
S
E
N
I
S
U
B
R
U
O
N
U
R
E
W
W
O
H
D
E
M
R
O
F
R
E
P
E
W
W
O
H
N
O
I
T
A
M
R
O
F
N
I
R
E
D
L
O
H
E
R
A
H
S
N O T E S T O T H E PA R E N T C O M PA N Y F I N A N C I A L S TAT E M E N T S C O N T I N U E D
F O R T H E Y E A R E N D E D 3 0 S E P T E M B E R 2 0 15
12 S H A R E P R E M I U M ACCO U N T A N D R E S E R V E S
At 1 October 2013
Retained profit for the year
Purchase of shares by the employee benefit trust
Movement in respect of employee share scheme
At 30 September 2014
Retained profit for the year
Deferred tax recognised in respect of employee share schemes
Movement in shares held by the employee benefit trust
Movement in respect of employee share scheme
Share
premium
account
£’000
34,708
-
-
-
34,708
-
-
-
-
Capital
redemption
reserve
£’000
Profit and
loss account
£’000
500
-
-
-
500
-
-
-
-
52,468
5,215
(300)
88
57,471
4,831
675
(971)
85
Total
£’000
87,676
5,215
(300)
88
92,679
4,831
675
(971)
85
At 30 September 2015
34,708
500
62,091
97,299
13 R E CO N C I L I AT I O N O F M O V E M E N T S I N S H A R E H O L D E R S’ F U N D S
At the beginning of the year
Profit for the financial year attributable to equity shareholders
Deferred tax recognised in respect of employee share schemes
Dividends paid
Movement in shares held by the employee benefit trust
Movement in respect of employee share scheme
2015
£’000
123,702
6,690
675
(1,859)
(971)
85
2014
£’000
118,399
6,637
-
(1,422)
-
88
At 30 September
128,322
123,702
During 2014, 300,000 ordinary shares with a nominal value of £1 per share were issued at par to the Avon Rubber p.l.c. Employee Share
Ownership Trust No. 1.
At 30 September 2015 887,315 (2014: 1,081,810) ordinary shares were held by a trust in respect of obligations under the 2010 Performance Share
Plan. Dividends on these shares have been waived. The market value of the shares held in the trust at 30 September 2015 was £8,110,000
(2014: £6,659,000). These shares are held at cost as treasury shares and deducted from shareholders' equity.
During 2015 the trust acquired 162,095 (2014: nil) shares at a cost of £1,152,000 (2014: nil).
327,130 (2014: 460,301) shares were used to satisfy awards following the vesting of shares relating to the 2010 Performance Share Plan.
29,460 ordinary shares of £1 each were awarded in relation to the 2014 annual incentive plan.
14 S H A R E B A S E D PAY M E N T S
The Company operates an equity-settled share-based performance share plan (PSP). Details of the Plan, awards granted and options outstanding
are set out in the remuneration report on pages 74 and 75 and are incorporated by reference into these financial statements. The charge against
profit of £85,000 (2014: £88,000) in respect of PSP options granted after 7 November 2002 has been calculated using the Monte Carlo pricing
model and the following principal assumptions:
Weighted average fair value (£)
Key assumptions used:
Weighted average share price (£)
Volatility (%)
Risk-free interest rate (%)
Expected option term (yrs)
Dividend yield (%)
Volatility is estimated based on actual experience over the last three years.
136
I N T E G R A T I N G T E C H N O L O G Y A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 5
2015
0.48
7.28
36
0.8
3.0
0.9
2014
0.38
5.75
31
0.9
3.0
1.1
F I V E Y E A R R E C O R D
F O R T H E Y E A R E N D E D 3 0 S E P T E M B E R 2 0 15
2015
£’000
2014
£’000
2013
£’000
2012
£’000
2011
£’000
Revenue
134,318
124,779
124,851
106,636
107,600
Operating profit before amortisation of acquired intangibles,
exceptional items, acquisition costs and defined benefit pension costs
20,215
17,003
14,223
11,621
11,136
Amortisation of acquired intangibles, exceptional items, acquisition costs
and defined benefit pension scheme costs
(1,329)
(2,678)
(1,220)
-
-
Operating profit
Net finance costs and other finance expense
Profit before taxation
Taxation
Profit for the year from continuing operations
Discontinued operations - loss for the year
Profit attributable to equity shareholders
Ordinary dividends
18,886
(1,048)
17,838
(2,672)
15,166
(1,500)
13,666
(1,859)
14,325
(461)
13,864
(3,053)
10,811
-
10,811
(1,422)
13,003
(600)
12,403
(3,566)
8,837
-
8,837
(1,132)
11,621
(616)
11,005
(3,176)
7,829
-
7,829
(941)
11,136
(924)
10,212
(3,094)
7,118
-
7,118
(706)
Retained profit
11,807
9,389
7,705
6,888
6,412
Intangible assets and property, plant and equipment
Working capital
Provisions
Pension (liability)/asset
Net deferred tax liability
Net (borrowings)/cash
69,521
10,176
(2,567)
(16,605)
(5,160)
(13,161)
36,815
7,439
(3,819)
(16,029)
(2,315)
2,925
36,928
11,512
(2,613)
(11,279)
(2,977)
(10,875)
31,159
9,278
(2,993)
(2,238)
(2,584)
(8,725)
27,187
11,714
(3,208)
280
(2,985)
(11,816)
Net assets employed
42,204
25,016
20,696
23,897
21,172
Financed by:
Ordinary share capital
Reserves attributable to equity shareholders
31,023
11,181
31,023
(6,007)
30,723
(10,027)
30,723
(6,826)
30,723
(9,551)
Total equity
42,204
25,016
20,696
23,897
21,172
Basic earnings per share
Adjusted basic earnings per share
Dividends per share paid in cash
45.4p
56.1p
6.17p
36.2p
43.7p
4.75p
30.0p
33.8p
3.84p
26.9p
26.9p
3.2p
25.2p
25.2p
2.5p
2011 and 2012 are as presented in the consolidated financial statements for those years.
R
A
E
Y
E
H
T
F
O
W
E
I
V
R
E
V
O
S
S
E
N
I
S
U
B
R
U
O
N
U
R
E
W
W
O
H
D
E
M
R
O
F
R
E
P
E
W
W
O
H
N
O
I
T
A
M
R
O
F
N
I
R
E
D
L
O
H
E
R
A
H
S
A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 5 I N T E G R A T I N G T E C H N O L O G Y
137
N O T I C E O F A N N U A L G E N E R A L M E E T I N G
F O R T H E Y E A R E N D E D 3 0 S E P T E M B E R 2 0 15
THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION
If you are in any doubt as to what action you should take, you are recommended to
seek your own financial advice from your stockbroker or other independent adviser
authorised under the Financial Services and Markets Act 2000.
If you have sold or transferred all of your shares in Avon Rubber p.l.c., please forward
this document, together with the accompanying documents, as soon as possible
either to the purchaser or transferee or to the person who arranged the sale or transfer
so they can pass these documents to the person who now holds the shares.
Notice of Annual General Meeting for the year ended
30 September 2015
Notice is hereby given that the annual general meeting (‘AGM’) of
shareholders of Avon Rubber p.l.c. (the 'Company') will be held at Hampton
Park West, Semington Road, Melksham, Wiltshire on 26 January 2016 at
10.30 a.m. for the following purposes:-
Ordinary Business
To consider and, if thought fit, pass resolutions 1- 8 (inclusive) as Ordinary
Resolutions:
Resolution 1
To receive the Company's accounts and the reports of the Directors and
the Auditors for the year ended 30 September 2015.
Resolution 2
To approve the Remuneration Policy set out in the Directors’ Remuneration
Report for the year ended 30 September 2015.
Resolution 3
To approve the Directors’ Remuneration Report (other than the part
containing the Remuneration Policy referred to in Resolution 2 above) for
the year ended 30 September 2015.
Resolution 4
To declare a final dividend of 4.86p per ordinary share as recommended by
the Directors.
Resolution 5
To re-appoint David Evans as Director who retires by rotation.
Resolution 6
To re-appoint Pim Vervaat as Director who has been appointed since the
last AGM.
Resolution 7
To re-appoint PricewaterhouseCoopers LLP as auditors of the Company, to
hold office from the conclusion of this meeting until the conclusion of the
next general meeting at which accounts are laid before the Company.
Resolution 8
To authorise the Directors to determine the auditors’ remuneration.
Special Business
To consider and if thought fit, pass resolutions 9-12 (inclusive) as Ordinary
Resolutions and resolutions 13-15 (inclusive), as Special
Resolutions:
Resolution 9
That the proposed amendments to the Avon Rubber p.l.c. 2010
Performance Share Plan be and are hereby approved and the Directors be
authorised to do all acts and things necessary or appropriate to give effect
to the proposed amendments.
Resolution 10
That the Avon Rubber p.l.c. 2015 Share Option Plan (the 'Plan'), the principal
features of which are summarised in Appendix 1 to this Notice, to be
constituted in the form of the rules produced in draft to the meeting and
signed by the Chairman for the purposes of identification, be and the same
is hereby approved, and the Directors be and they are hereby authorised:
(a) to do all acts and things as may be necessary to carry the same
into effect, including the making of any amendments to the rules
of the Plan as may be necessary or appropriate to (a) take account
of the UK Listing Authority and best practice or (b) ensure
compliance of the Plan with the provisions of Schedule 4,
Income Tax (Earnings and Pensions) Act 2003; and
(b) at their discretion to adopt equivalent plans for employees of
the Company and its subsidiaries located in overseas jurisdictions
subject to such modifications to take into account, local tax,
exchange control, securities laws or other regulatory issues as
they consider appropriate.
Resolution 11
That the Avon Rubber p.l.c. 2015 US Stock Option Plan (the 'US Stock Option
Plan'), the principal terms of which are summarised in Appendix 2 to this
Notice, to be constituted in the form of the rules produced in draft to the
meeting and signed by the Chairman for the purposes of identification,
be and the same are hereby approved, and the Directors be and they are
hereby authorised to do all acts and things as may be necessary to carry
the same into effect, including the making of any amendments to the
rules of the US Stock Option Plan as may be necessary or appropriate to (a)
obtain approval to the US Stock Option Plan or to ensure compliance with
Section 422 of the US Internal Revenue Code 1986, as amended or (b) meet
any relevant local securities law, tax and exchange control requirements.
Resolution 12
That in accordance with section 551 of the Companies Act 2006 (the
‘Act’) the Directors be generally and unconditionally authorised to allot
Relevant Securities (as defined in the notes to this resolution) comprising
equity securities (as defined by section 560 of the Act) up to an aggregate
nominal amount of £10,341,097 but subject to such exclusions or other
arrangements as the Directors may deem necessary or expedient in
138
I N T E G R A T I N G T E C H N O L O G Y A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 5
higher of the price quoted for the last independent trade
of and the highest current independent bid for any number of
the Company’s ordinary shares on the London Stock Exchange
Official List at the time the purchase is agreed; and
(d) this authority shall expire on the date 15 months after the date of
this Resolution or, if earlier, the date of the next annual general
meeting of the Company (except in relation to the purchase of
shares the contract for which was concluded before the expiry of
such authority and which might be executed wholly or partly after
such expiry) unless such authority is renewed prior to such time.
Resolution 15
That a general meeting of the Company (other than an annual general
meeting), may be called on not less than 14 clear days' notice.
By order of the Board
Miles Ingrey-Counter
Company Secretary
17 November 2015
relation to treasury shares, fractional entitlements, record dates, legal or
practical problems in or under the laws of any territory or the requirements
of any regulatory body or stock exchange, provided that this authority
shall, unless renewed, varied or revoked by the Company, expire on
the date 15 months after the date of this Resolution or, if earlier, the
date of the next annual general meeting of the Company save that the
Company may, before such expiry, make offers or agreements which
would or might require Relevant Securities to be allotted and the Directors
may allot Relevant Securities in pursuance of such offer or agreement
notwithstanding that the authority conferred by this resolution has
expired.
This resolution revokes and replaces all unexercised authorities previously
granted to the Directors to allot Relevant Securities but without prejudice
to any allotment of shares or grant of rights already made, offered or
agreed to be made pursuant to such authorities.
Resolution 13
That, subject to the passing of Resolution 12, the Directors be given the
general power to allot equity securities (as defined by section 560 of the
Act) for cash, either pursuant to the authority conferred by Resolution 12
or by way of a sale of treasury shares, as if section 561(1) of the Act did not
apply to any such allotment, provided that this power shall:
(a) be limited to the allotment of equity securities up to an aggregate
nominal amount of £1,551,164; and
(b) expire on the date 15 months after the date of this Resolution
or, if earlier, the date of the next annual general meeting of the
Company (unless renewed, varied or revoked by the Company
prior to or on that date) save that the Company may, before such
expiry make an offer or agreement which would or might require
equity securities to be allotted after such expiry and the Directors
may allot equity securities in pursuance of any such offer or
agreement notwithstanding that the power conferred by this
resolution has expired.
Resolution 14
That the Company be and is hereby unconditionally and generally
authorised for the purpose of section 701 of the Act to make market
purchases (within the meaning of 693(4) of the Act) of ordinary shares of £1
each in the capital of the Company provided that:
(a) the maximum number of shares which may be purchased
is 4,653,492;
(b) the minimum price which may be paid for each share is 1p;
(c) the maximum price (excluding expenses) which may be paid for
each ordinary share is an amount equal to the higher of:
(i) 105% (one hundred and five percent) of the average of the
middle market quotations of the Company's ordinary shares
as derived from the Official List of the London Stock Exchange
for the 5 (five) business days immediately preceding the day
on which such share is contracted to be purchased; and
(ii) the value of an ordinary share calculated on the basis of the
R
A
E
Y
E
H
T
F
O
W
E
I
V
R
E
V
O
S
S
E
N
I
S
U
B
R
U
O
N
U
R
E
W
W
O
H
D
E
M
R
O
F
R
E
P
E
W
W
O
H
N
O
I
T
A
M
R
O
F
N
I
R
E
D
L
O
H
E
R
A
H
S
A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 5 I N T E G R A T I N G T E C H N O L O G Y
139
N O T I C E O F A N N U A L G E N E R A L M E E T I N G C O N T I N U E D
F O R T H E Y E A R E N D E D 3 0 S E P T E M B E R 2 0 15
Notes
(1) Information regarding the annual general meeting (the 'AGM')
including the information required by section 311A of the Act,
is available at www.avon-rubber.com.
(2) A form of proxy is enclosed for use by shareholders and,
if appropriate, must be deposited with the Company’s registrars,
Capita Asset Services, PXS, 34 Beckenham Road, Beckenham,
Kent BR3 4TU not less than 48 hours before the time of the
AGM. Appointment of a proxy does not preclude a shareholder
from attending the AGM and voting in person.
(3) A member entitled to attend and vote at the AGM may appoint
one or more proxies (who need not be a member of the
Company) to attend and to speak and to vote on his or her
behalf whether by show of hands or on a poll. A member
can appoint more than one proxy in relation to the AGM,
provided that each proxy is appointed to exercise the rights
attaching to different shares held by him. In order to be valid an
appointment of proxy (together with any authority under which
it is executed or a copy of the authority certified notarially) must
be returned by one of the following methods:
(i)
in hard copy form by post, by courier or by hand to the
Company’s registrars, Capita Asset Services,
PXS, 34 Beckenham Road, Beckenham, Kent BR3 4TU;
(ii) via www.capitashareportal.com; or
(iii) in the case of CREST members, by utilising the CREST
electronic proxy appointment service in accordance with
the procedures set out below
and in each case must be received by the Company not less than
48 hours before the time of the AGM.
CREST members who wish to appoint a proxy or proxies through the
CREST electronic proxy appointment service may do so for the AGM and
any adjournment thereof by using the procedures described in the CREST
Manual (available from https://euroclear.com). CREST personal members or
other CREST sponsored members, and those CREST members who have
appointed a voting service provider(s) should refer to their CREST sponsor
or voting service provider(s), who will be able to take the appropriate
action on their behalf.
In order for a proxy appointment, or instruction, made by means of CREST
to be valid, the appropriate CREST message (a ‘CREST Proxy Instruction’)
must be properly authenticated in accordance with Euroclear UK & Ireland
Limited’s (‘EUI’) specifications and must contain the information required
for such instructions, as described in the CREST Manual. Regardless of
whether it relates to the appointment of a proxy or to an amendment to
the instruction given to a previously appointed proxy the message must,
in order to be valid, be transmitted so as to be received by the issuer’s
agent (ID RA 10) by the latest time(s) for receipt of proxy appointments
specified in this Notice. For this purpose, the time of receipt will be taken
to be the time (as determined by the timestamp applied to the message
by the CREST Applications Host) from which the issuer’s agent is able
to retrieve the message by enquiry to CREST in the manner prescribed
by CREST. The Company may treat as invalid a CREST Proxy Instruction
in the circumstances set out in Regulation 35(5) of the Uncertificated
Securities Regulations 2001. CREST members and where applicable, their
CREST sponsors or voting service providers should note that EUI does not
make available special procedures in CREST for any particular messages.
Normal system timings and limitations will therefore apply in relation to
the input of CREST Proxy instructions. It is therefore the responsibility
of the CREST member concerned to take (or, if the CREST member is a
CREST personal member or sponsored member or has appointed a voting
service provider(s), to procure that his or her CREST sponsor or voting
service provider(s) take(s)) such action as shall be necessary to ensure that
a message is transmitted by means of the CREST system by any particular
time. In this connection, CREST members and, where applicable, their
CREST sponsors or voting service providers are referred, in particular, to
those sections of the CREST Manual concerning practical limitations of the
CREST system and timings.
(4) The right to appoint a proxy does not apply to persons whose
shares are held on their behalf by another person and who have
been nominated to receive communication from the Company
in accordance with section 146 of the Act (‘nominated persons’).
Nominated persons may have a right under an agreement
with the registered shareholder who holds shares on their behalf
to be appointed (or to have someone else appointed) as a proxy.
Alternatively, if nominated persons do not have such a right,
or do not wish to exercise it, they may have a right under such an
agreement to give instructions to the person holding the shares
as to the exercise of voting rights.
(5) In order to be able to attend and vote at the AGM or any
adjourned meeting (and also for the purpose of calculating how
many votes a person may cast), a person must have his/her
name entered on the register of members of the Company by
6.00 pm on 22 January 2016 (or 6.00 pm on the date two
days before any adjourned meeting, ignoring non-working days).
Changes to entries on the register of members after this time
shall be disregarded in determining the rights of any person to
attend or vote at the AGM.
(6) To change your proxy instructions simply submit a new proxy
appointment using the methods set out above. Note that the
cut-off time for receipt of proxy appointments (see above) also
applies in relation to amended instructions; any amended
proxy appointment received after the relevant cut-off time will
be disregarded.
(7) A corporation which is a member can appoint one or more
corporate representatives who may exercise, on its behalf, all
its powers as a member provided that no more than one
corporate representative exercises powers over the same share.
(8) Under section 319A of the Act, the Company must answer any
question you ask relating to the business being dealt with at the
AGM unless:
(i) answering the question would interfere unduly with
the preparation for the AGM or involve the disclosure of
confidential information;
(ii) the answer has already been given on a website in the form
of an answer to a question; or
(iii) it is undesirable in the interests of the Company or the
good order of the AGM that the question be answered.
140
I N T E G R A T I N G T E C H N O L O G Y A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 5
(9) Appointment of proxy by joint members
In the case of joint holders, where more than one of the joint
holders purports to appoint a proxy, only the appointment
submitted by the most senior holder will be accepted. Seniority
is determined by the order in which the names of the joint
holders appear in the Company's register of members in respect
of the joint holding (the first-named being the most senior).
(10) Termination of proxy appointments
In order to revoke a proxy instruction you will need to inform
the Company by sending a signed hard copy notice clearly
stating your intention to revoke your proxy appointment to the
Company’s registrars, Capita Asset Services, PXS, 34 Beckenham
Road, Beckenham, Kent BR3 4TU. In the case of a member which
is a company, the revocation notice must be executed under its
common seal or signed on its behalf by an officer of the company
or an attorney for the company. Any power of attorney or any
other authority under which the revocation notice is signed (or a
duly certified copy of such power or authority) must be included
with the revocation notice.
In either case, the revocation notice must be received by the
Company’s registrars, Capita Asset Services Registrars, PXS, 34
Beckenham Road, Beckenham, Kent BR3 4TU no later than 22
January 2016 at 10.30 am.
If you attempt to revoke your proxy appointment but the
revocation is received after the time specified then, subject to
the paragraph directly below, your proxy appointment will
remain valid.
Appointment of a proxy does not preclude you from attending
the AGM and voting in person. If you have appointed a proxy and
attend the AGM in person, your proxy appointment will
automatically be terminated.
(11) Biographical details of the Directors are shown on page 43 of
the Annual Report.
(12) The issued share capital of the Company as at 17 November
2015 was 31,023,292 ordinary shares, carrying one vote each and
representing the total number of voting rights in the Company.
(13) The following documents are available for inspection at the
registered office of the Company and, where required, the office
of TLT LLP at 20 Gresham Street, London, EC2V 7JE during normal
business hours on any weekday until the close of the AGM and
will be available at the place of the AGM from 15 minutes before
the AGM until it ends:
(i)
the Register of Directors’ interests showing any transactions
of Directors and their family interests in the share capital of
the Company; and
(ii) copies of all contracts of service under which the executive
Directors of the Company are employed by the Company or
any of its subsidiaries;
(iii) copies of the letters of appointment of the non-executive
Directors of the Company;
(iv) the full text of the rules of the Avon Rubber p.l.c. 2010
Performance Share Plan as amended; and
(v) the full text of the Avon Rubber p.l.c. 2015 Share Option Plan
and the Avon Rubber p.l.c. 2015 US Stock Option Plan.
(14) Please note that the Company takes all reasonable precautions
to ensure no viruses are present in any electronic communication
it sends out but the Company cannot accept responsibility
for loss or damage arising from the opening or use of any email or
attachments from the Company and recommends that the
members subject all messages to virus checking procedures prior
to use. Any electronic communication received by the Company,
including the lodgement of an electronic proxy form, that is
found to contain any virus will not be accepted.
(15) Pursuant to Chapter 5 of Part 16 of the Act (sections 527 to
531), where requested by a member or members meeting the
qualification criteria set out below, the Company must publish on
its website, a statement setting out any matter that such members
propose to raise at the AGM relating to the audit of the Company's
accounts (including the auditor's report and the conduct of the
audit) that are to be laid before the AGM. Where the Company is
required to publish such a statement on its website:
(i)
it may not require the members making the request
to pay any expenses incurred by the Company in complying
with the request;
it must forward the statement to the Company's auditors
no later than the time the statement is made available on the
Company's website; and
(ii)
(iii) the statement may be dealt with as part of the business
of the AGM.
The request:
(i) may be in hard copy form or in electronic form (see below);
(ii) either set out the statement in full or, if supporting a
statement sent by another member, clearly identify the
statement which is being supported;
(iii) must be authenticated by the person or persons making it
(see below); and
(iv) must be received by the Company at least one week before
the AGM.
In order to be able to exercise the members' right to require
the Company to publish audit concerns the relevant request must
be made by:
(i) a member or members having a right to vote at the AGM and
holding at least 5% of total voting rights of the Company; or
(ii) at least 100 members having a right to vote at the AGM and
holding, on average, at least £100 of paid up share capital
each and may be made by:
- a hard copy request which is signed by the member or
members concerned, stating their full names and addresses
and is sent to Hampton Park West, Semington Road,
Melksham, Wiltshire, SN12 6NB.
- a request which is signed by the member or members
concerned, stating their full names and addresses and is
sent by fax to 01225 896898 marked for the attention of the
Company Secretary.
- a request which states the full names and addresses of the
member or members concerned, sent by email to
miles.ingrey-counter@avon-rubber.com.
R
A
E
Y
E
H
T
F
O
W
E
I
V
R
E
V
O
S
S
E
N
I
S
U
B
R
U
O
N
U
R
E
W
W
O
H
D
E
M
R
O
F
R
E
P
E
W
W
O
H
N
O
I
T
A
M
R
O
F
N
I
R
E
D
L
O
H
E
R
A
H
S
A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 5 I N T E G R A T I N G T E C H N O L O G Y
141
N O T I C E O F A N N U A L G E N E R A L M E E T I N G C O N T I N U E D
F O R T H E Y E A R E N D E D 3 0 S E P T E M B E R 2 0 15
(16) Pursuant to sections 338 and 338A of the Act, a members or
members meeting the qualification criteria set out below, may,
subject to conditions, require the Company to give to members
notice of a resolution which may properly be moved and is
intended to be moved at the AGM or require the Company to
include in the business to be dealt with at the AGM a matter
(other than a proposed resolution) which may properly be
included in the business.
The conditions are that:
(i) The resolution must not, if passed, be ineffective (whether
by reason of inconsistency with any enactment or the
Company's constitution or otherwise).
(ii) The resolution or the matter of business must not be
defamatory of any person, frivolous or vexatious.
The Company is required to give notice of a resolution or the matter of
business once it has received requests that it do so from:
(i) a member or members having a right to vote at the AGM and
holding at least 5% of total voting rights of the Company; or
(ii) at least 100 members having a right to vote at the AGM and
holding, on average, at least £100 of paid up share capital
each and may be made by:
-
a hard copy request which is signed by the member or
members concerned, stating their full names and addresses
and is sent to Hampton Park West, Semington Road,
Melksham, Wiltshire, SN12 6NB.
-
a request which is signed by the member or members
concerned, stating their full names and addresses and is
sent by fax to 01225 896898 marked for the attention of the
Company Secretary.
a request which states the full names and addresses of
the member or members concerned, sent by email to
miles.ingrey-counter@avon-rubber.com.
The request:
(i)
-
(ii)
for a resolution, must identify the resolution of which
notice is to be given by either setting out the resolution in
full or, if supporting a resolution sent by another member,
clearly identifying the resolution which is being supported;
for a matter of business, must identify the matter of business
by either setting out the matter for business in full or, if
supporting a statement sent by another member, clearly
identify the matter of business which is being supported; and
(iii) must be received by the Company not later than 6 weeks
before the date of the AGM.
Explanatory notes
The Board believes that the adoption of resolutions 1 to 15 will promote
the success of the Company and is in the best interests of the Company
and its shareholders as a whole. The Board unanimously recommends that
all shareholders should vote in favour of all the resolutions to be proposed
at the AGM. Each of the Directors of the Company intends to vote in
favour of all resolutions in respect of their own beneficial holdings.
Resolution 1 – Report and Accounts
The Directors are required by law to present to the AGM the
accounts, and the reports of the Directors and Auditors, for the year
ended 30 September 2015. These are contained in the Company’s
2015 Annual Report.
Resolution 2&3 - Directors’ Remuneration Report
Resolution 2, in accordance with the Companies Act 2006, requests
approval of the Company’s forward looking revised Remuneration Policy.
The proposed revised policy is set out on pages 56 to 77 of the Annual
Report. The Company is required to ensure that a vote on its remuneration
policy takes place annually unless the approved policy remains unchanged,
in which case the Company will propose a similar resolution at least every
three years. The Company’s previous Remuneration Policy was approved
by shareholders at the 2014 AGM. Subject to shareholder approval, the
revised Directors’ Remuneration Policy Report will take effect from 26
January 2016 (the date of the AGM).
Resolution 3 seeks approval for the Directors Remuneration Report for
the year ended 30 September 2015. This is contained on pages 56 to 77
of the Annual Report. The vote on this resolution is advisory only and the
Directors’ entitlement to remuneration is not conditional on it being passed.
Resolution 4 – Declaration of a dividend
A final dividend can only be paid after the shareholders have approved it at a
general meeting. If the meeting approves this Resolution, a final dividend in
respect of the financial year ended 30 September 2015 of 4.86p will be paid.
Resolutions 5&6 – Election and re-election of Directors
David Evans retires by rotation and, being eligible, offers himself
for re-election.
Pim Vervaat was appointed as a Director with effect from 1 March 2015 and
in accordance with the Company’s Articles, retires at this year’s AGM and
Resolution 6 proposes his re-appointment.
Resolution 7&8 – Re-appointment and remuneration of Auditors
Resolutions 7&8 propose the re-appointment of PricewaterhouseCoopers
LLP as Auditor of the Company and authorise the Directors to set their
remuneration.
Resolution 9 – Approval of amendments to the Avon Rubber p.l.c. 2010
Performance Share Plan
Resolution 9 proposes certain amendments to the Performance
Share Plan.
As noted in the Company's revised Remuneration Policy, it is proposed that
the ‘normal’ award level under the Plan Rules should remain capped at 100%
of annual salary per year but that the overall cap should be increased to
200% of salary so that ‘special’ awards may be made in excess of the normal
level in exceptional circumstances. Awards above normal levels will only
be made if an appropriate business challenge warrants such treatment (e.g.
a major acquisition or strategic initiative) and will be subject to stretching
performance conditions and made within existing dilution limits. These are
likely to be a more challenging version of the existing TSR/EPS conditions,
but the Committee may decide to use a different financial performance
condition if appropriate in the circumstances. An additional 2 year holding
period will be introduced following the 3 year performance period for any
special awards made in excess of 100% of salary. The current shareholding
guidelines will remain in place for awards of up to 100% of salary.
It is also proposed that an amendment be made to the provisions in the
Performance Share Plan dealing with departing executives, by introducing
a ‘clean break’ option. The Committee already has discretion to allow ‘good
142
I N T E G R A T I N G T E C H N O L O G Y A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 5
leaver’ status on a case by case basis (where it deems it appropriate and in
the best interests of the Company) but for added flexibility, it is proposed
that the rules of the Performance Share Plan are amended to allow early
vesting to be triggered at the point of leaving by reference to performance
at that date, rather than vesting being determined as at the end of the
performance period. This, in turn, will introduce flexibility around the
Committee’s strategy for managing an exit, for example to offset cash
compensation by allowing earlier vesting.
Resolution 10 – Approval of the Avon Rubber p.l.c.
Company Share Option Plan
Resolution 10 proposes that a new share option plan, the Avon Rubber p.l.c
2015 Share Option Plan (the 'UK Share Option Plan'), be introduced. The UK
Share Option Plan is intended to benefit junior management within the
Company. Directors and senior management of the Company will not be
eligible to participate.
The basis of the UK Share Option Plan, the principal features of which are
summarised in Appendix 1, takes the form of a tax approved plan with a
non-approved schedule. This allows each participant to receive an option
on a tax approved basis over shares in the Company worth up to a market
value of £30,000 (with the balance of any award being made under the
non-approved schedule). The Share Option Plan reflects current best
practice by allowing for the phased annual granting of options subject, in
normal circumstances, to an annual individual participation limit of one
times salary in respect of all options and other equity based awards (other
than deferred bonus) granted to a participant in that year.
Resolution 11 - Approval of the Avon Rubber p.l.c.
2015 US Stock Option Plan
Resolution 11 proposes that the Company adopt the Avon Rubber p.l.c
2015 US Stock Option Plan (the 'US Stock Option Plan') under which
Incentive Stock Options ('US ISO') and Non Qualified Options ('US NSO')
can be granted, as a Schedule to Part B of the UK Share Option Plan.
The US Stock Option Plan allows the Company to extend the participation
in the UK Share Option Plan to US employees within the Company's group.
The US ISO allows the Company to grant tax efficient options to employees
on a basis approved by the US Internal Revenue Service. The basis of the
US Stock Option Plan, the principal features of which are summarised in
Appendix 2, is to provide options to US junior management employees,
taking into account differences between UK and US standard market
practice, on similar terms to those under the UK Share Option Plan.
Resolution 12 – Directors’ authority to allot
This Resolution deals with the Directors’ authority to allot Relevant
Securities in accordance with section 551 of the Act. The authority granted
at the last annual general meeting is due to expire at the conclusion of
this year’s AGM and accordingly it is proposed to renew this authority.
This Resolution will, if passed, authorise the Directors to allot Relevant
Securities up to a maximum nominal amount of £10,341,097, which is equal
to approximately one-third of the issued share capital of the Company as at
17 November 2015.
The Directors have no present intention of exercising this authority except
in connection with the Company’s employee share schemes.
In this resolution, Relevant Securities means:
(i) shares in the Company other than shares allotted
pursuant to:
- an employee share scheme (as defined by section 1166
of the Act);
- a right to subscribe for shares in the Company where the
grant of the right itself constituted a Relevant Security; or
- a right to convert securities into shares in the Company
where the grant of the right itself constituted a Relevant
Security; and
(ii) any right to subscribe for or to convert any security into
shares in the Company other than rights to subscribe for
or convert any security into shares allotted pursuant to
an employee share scheme (as defined by section 1166
of the Act). References to the allotment of Relevant Securities
in this resolution include the grant of such rights
Resolution 13 – Disapplication of pre-emption rights
This Resolution will, if passed give the Directors power, pursuant to
the authority to allot granted by Resolution 12, to allot equity securities
(as defined by section 560 of the Companies Act 2006) or sell treasury
shares for cash without first offering them to existing shareholders in
proportion to their existing holdings up to a maximum nominal amount
of £1,551,164 which represents approximately 5% of the Company's issued
share capital as at 17 November 2015 and renews the authority given at
the AGM in 2015.
In compliance with the guidelines issued by the Pre-Emption Group, the
Directors, will ensure that, other than in relation to a rights issue, no more
than 7.5% of the issued ordinary shares (excluding treasury shares) will
be allotted for cash on a non pre-emptive basis over a rolling three year
period unless shareholders have been notified and consulted in advance.
The power granted by this Resolution will expire on the date 15 months
after the date of this Resolution or, if earlier, the date of the next annual
general meeting of the Company.
Resolution 14 – Authority to purchase own shares
This Resolution seeks authority for the Company to make market
purchases of its own shares and is proposed as a special resolution.
If passed, the resolution gives authority for the Company to purchase up
to 4,653,492 ordinary shares of £1 each, representing just under 15% of the
Company's issued ordinary share capital as at 17 November 2015.
The Resolution specifies the minimum and maximum prices which may
be paid for any ordinary shares purchased under this authority. The
authority will expire on the earlier of the date 15 months after the date of
this Resolution and the company's next AGM.
As of 17 November 2015 there were options to subscribe outstanding over
754,478 ordinary shares, representing 2.43% of the Company’s ordinary
issued share capital. If the authority given by Resolution 14 were to be
fully exercised, these options would represent 2.86% of the Company’s
ordinary issued share capital after cancellation of the re-purchased
shares. As of 17 November 2015 there were no warrants outstanding over
ordinary shares.
The authority granted by this resolution will expire on the date 15 months
after the date of this Resolution or, if earlier, the date of the next annual
general meeting of the Company.
The Directors intend to exercise the power given by Resolution 14 only
when, in the light of market conditions prevailing at the time, they believe
that the effect of such purchases will be to increase the earnings per
R
A
E
Y
E
H
T
F
O
W
E
I
V
R
E
V
O
S
S
E
N
I
S
U
B
R
U
O
N
U
R
E
W
W
O
H
D
E
M
R
O
F
R
E
P
E
W
W
O
H
N
O
I
T
A
M
R
O
F
N
I
R
E
D
L
O
H
E
R
A
H
S
A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 5 I N T E G R A T I N G T E C H N O L O G Y
143
N O T I C E O F A N N U A L G E N E R A L M E E T I N G C O N T I N U E D
F O R T H E Y E A R E N D E D 3 0 S E P T E M B E R 2 0 15
ordinary share having regard to the intent of the guidelines of institutional
investors and that such purchases are in the best interests of shareholders
generally. Other investment opportunities, appropriate gearing levels and
the overall position of the Company will be taken into account before
deciding upon this course of action. Any shares purchased in
this way will be cancelled and the number of shares in issue will be
reduced accordingly.
Bonus and incentive scheme targets for executive Directors would
not be affected by any enhancement of earnings per share following a
share re-purchase.
In the opinion of the Directors, Resolution No. 14 is in the best interests
of the shareholders as a whole and the Directors intend to seek renewal
of these powers at subsequent annual general meetings.
Resolution 15- Notice of Meeting
Resolution 15 is a resolution to allow the Company to hold general
meetings (other than annual general meetings) on 14 days' notice.
Before the introduction of the Companies (Shareholders' Rights)
Regulations in August 2009, the Company was able to call general
meetings (other than annual general meetings) on 14 clear days’ notice.
One of the amendments that the Companies (Shareholders' Rights)
Regulations 2009 made to the Act was to increase the minimum notice
period for listed company general meetings to 21 days, but with an
ability for companies to reduce this period back to 14 days (other than for
annual general meetings) provided that: (i) the Company offers facilities
for shareholders to vote by electronic means; and (ii) there is an annual
resolution of shareholders approving the reduction in the minimum
notice period from 21 days to 14 days.
Resolution 15 is therefore proposed as a special resolution to approve
14 days as the minimum period of notice for all general meetings of the
Company other than annual general meetings. The approval will be
effective until the Company's next annual general meeting, when it is
intended that the approval be renewed. The Company will use this notice
period when permitted to do so in accordance with the Companies Act
2006 and when the Directors consider it appropriate to do so.
Appendix 1: Summary of the main features of the Avon Rubber plc
2015 Share Option Plan (the UK Share Option Plan)
Structure
The UK Share Option Plan takes the form of an approved share option
part (the ‘Approved Part’), which has appended to it an unapproved part
(the ‘Unapproved Part’): the Approved Part is designed to be approved
by HM Revenue & Customs for tax purposes, and is therefore subject to
the requirements of the relevant legislation. In particular, the value of
options granted under it to a participant may not exceed a specified limit,
currently £30,000. The Unapproved Part is designed to grant options
on similar terms, but not subject to the specified limit and certain other
requirements for tax approval.
Eligibility
Employees (excluding Directors) of the Company and such of its
subsidiaries as are designated participating companies by the
Remuneration Committee, will be eligible to participate under the UK
Share Option Plan. Participation is at the discretion of the Remuneration
Committee but is intended to benefit junior management who do not
currently participate in the Avon Rubber plc Performance Share Plan (‘PSP’).
The PSP is being retained for Directors and senior management of the
Company.
Grant of options
Options may be granted initially in the 42 day period after adoption of
the UK Share Option Plan and thereafter each year in the 42 day period
following the announcement of the Company's interim or final results. In
circumstances deemed exceptional by the Remuneration Committee,
options may be granted outside this normal period.
No consideration shall be payable for the grant of an option.
Options will be personal to a participant and, except on the death of a
participant, may not be transferred.
Exercise price
The price at which participants may acquire ordinary shares on exercise of
their options shall be the higher of the nominal value of a share and the
average middle market price quoted on the Official List of the London
Stock Exchange at close of dealings on the 5 business days preceding the
Date of Grant.
Individual limits
No option may be granted to a participant which would result in the
aggregate market value of shares comprised in options granted to him
in any 12 month period under the UK Share Option Plan and any other
discretionary share option scheme adopted by the Company exceeding a
one times annual salary limit.
Options granted under the Approved Part will be subject to an additional
limit so that the market value of options granted under the Approved Part
and any other HM Revenue & Customs approved share option scheme of
the Company or any associated company may not exceed £30,000.
Share capital limit
No option which is to be satisfied on its exercise by the issue of new shares
(or re-issue of treasury shares) may be granted on any date if the number
of shares to which it relates, when aggregated with the number of shares
issued (or re-issued) or remaining issuable (or re-issuable) by virtue of
options or other rights granted or made in the preceding 10 years under
the UK Share Option Plan and any other employee share scheme adopted
by the Company, would exceed 10 per cent of the issued share capital at
that time.
Exercise, lapse and exchange of options
Options will normally vest and become exercisable in whole or in part
between the third and tenth anniversaries of the date of grant. Options
may be satisfied by the issue of new shares (or re-issue of treasury shares)
or the transfer of existing shares. The Remuneration Committee also retain
the discretion under the Unapproved Part to settle option exercise through
the use of equity settled stock appreciation rights whereby a number of
shares equal to an option holder's gain is transferred or issued at nil cost to
the option holder on exercise of the option. Any unexercised options shall
lapse on the tenth anniversary of the date of grant.
144
I N T E G R A T I N G T E C H N O L O G Y A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 5
Options normally lapse on cessation of employment of a participant.
However, following cessation of employment for specified 'good leaver'
reasons, including ill-health, injury, disability, redundancy or retirement,
exercise will be permitted on a pro rated basis during the period of 6
months from the date of cessation. Exercise is also permitted on a pro rated
basis at the discretion of the Remuneration Committee if a participant
ceases employment for any other reason. In calculating the pro rated
entitlement, the Remuneration Committee will take into account the time
elapsed since grant to the date of termination.
On death, an Option may be exercised on a pro rated basis by the personal
representatives of the deceased option holder within 12 months of the
date of death on the same terms as if the Option Holder had been alive. In
calculating the pro rated entitlement, the Remuneration Committee will
take into account the time elapsed since grant to the date of termination.
In the event of a change of control or winding-up of the Company early
exercise of an option granted will be subject to the discretion of the
Remuneration Committee, who will take into account the time elapsed
since grant and any other factors the Remuneration Committee considers
relevant. The UK Share Option Plan contains provisions for the exchange
of options as an alternative to exercise where there is a change of control.
For options granted under the Approved Part such provisions comply with
the requirements of the relevant tax legislation. In either case, this will be
subject to the approval of the bidding company.
On a demerger, dividend-in-specie or other such transaction which the
Committee determines will materially affect the value of options granted
under the UK Share Option Plan, the Remuneration Committee may again
permit the early exercise of such options.
Variations in share capital
The number of shares comprised in an option and/or the exercise price
may be adjusted if any capitalisation issue, offer by way of rights (including
an open offer) or any sub-division, reduction, consolidation or other
variation of the Company's share capital occurs.
Rights attaching to shares
If shares are to be allotted and issued to a participant pursuant to the
exercise of any option, the Company shall apply for such shares to be
admitted to the Official List of the London Stock Exchange. Such shares
will rank pari passu with all other issued shares of the Company except for
any rights determined by reference to a date preceding the date on which
the option is exercised.
Amendments
The UK Share Option Plan may be amended at any time by the
Remuneration Committee, provided that, without the prior approval of
the Company in general meeting, no amendments may be made to the
material advantage of participants in respect of provisions relating to
eligibility, share capital limits, maximum entitlements and the basis for
determining and adjusting a participant's entitlement in the event of a
variation of the Company's share capital. The requirement to obtain the
prior approval of the Company in general meeting will not apply in relation
to any amendment which is of a minor administrative nature, is made to
maintain HMRC approval or to comply with the provisions of any existing
or proposed legislation, or to obtain or maintain favourable taxation,
exchange control or regulatory treatment.
The Directors reserve the right up to the forthcoming Annual General
Meeting to make such amendments and additions to the UK Share Option
Plan as it considers appropriate, provided it does not conflict in any
material respect with this summary.
Administration and general
To ensure compliance with the requirements for making deductions
under the PAYE system, any income tax and employee's national insurance
contributions (or the equivalent in any foreign jurisdiction) payable on gains
made on the exercise of an option granted under the UK Share Option Plan
(including options granted under the Approved Part) must either be paid
to the relevant employing company by the participant (including by way
of deduction from salary) or, in default of such payment being made, the
Company may make the necessary deduction out of the net proceeds of
sale of the shares acquired on exercise of the options.
The UK Share Option Plan also allows the Remuneration Committee
to determine that a proportion of the employer's national insurance
contributions arising on exercise of Options under the UK Share Option
Plan should be paid by the participant and collected in the manner
described above.
The Company may terminate the UK Share Option Plan at any time.
Subject to such termination, the UK Share Option Plan shall terminate
10 years from the date of its adoption by shareholders.
Benefits received under the UK Share Option Plan will not
be pensionable.
At the discretion of the Directors, the UK Share Option Plan may be
extended to or equivalent plans may be adopted for overseas employees
of the Company and its subsidiaries subject to such modifications as the
Directors shall consider appropriate to take into account local tax, exchange
control, securities laws or other regulatory requirements. In all cases, shares
issued (or re-issued) pursuant to such schemes shall be treated as counting
against the individual and overall limits of the UK Share Option Plan.
Appendix 2: Summary of the main features of the US Stock
Option Plan
Structure
It is proposed that the Company adopt the Avon Rubber p.l.c. 2015 US
Stock Option Plan ('the US Stock Option Plan') under which Incentive Stock
Options ('US ISO') and Non-Qualified Options ('US NSO') can be granted,
as a schedule to Part B of the UK Share Option Plan. The US ISO is designed
to be approved by the US Internal Revenue Service (IRS) in the US for tax
purposes, and is therefore subject to the requirements of the relevant US
tax legislation. Unless otherwise stated, the main features of the US Stock
Option Plan mirror those of the UK Share Option Plan.
Eligibility
Employees (excluding Directors) of the Company and such of its subsidiaries
as are designated participating companies by the Remuneration
Committee, will be eligible to participate under the US Stock Option Plan.
Participation is at the discretion of the Remuneration Committee but is
intended to benefit junior management who currently do not participate
in the Avon Rubber plc Performance Share Plan (PSP). The PSP is being
retained for Directors and senior management of the Company.
R
A
E
Y
E
H
T
F
O
W
E
I
V
R
E
V
O
S
S
E
N
I
S
U
B
R
U
O
N
U
R
E
W
W
O
H
D
E
M
R
O
F
R
E
P
E
W
W
O
H
N
O
I
T
A
M
R
O
F
N
I
R
E
D
L
O
H
E
R
A
H
S
A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 5 I N T E G R A T I N G T E C H N O L O G Y
145
N O T I C E O F A N N U A L G E N E R A L M E E T I N G C O N T I N U E D
F O R T H E Y E A R E N D E D 3 0 S E P T E M B E R 2 0 15
Exercise price
Amendments
The US Stock Option Plan may be amended at any time by the
Remuneration Committee, provided that, without the prior approval
of the Company in general meeting, no amendments may be made to
the material advantage of participants in respect of provisions relating
to eligibility, share capital limits, maximum entitlements, the definitions
of "Market Value" and "Share Price" and the basis for determining and
adjusting a participant's entitlement in the event of a variation of the
Company's share capital.
The requirement to obtain the prior approval of the Company in
general meeting will not apply in relation to any amendment which is
of a minor administrative nature, is made to obtain or maintain IRS
approval or to comply with the provisions of any existing or proposed
legislation, or to obtain or maintain favourable taxation, exchange control
or regulatory treatment.
The Directors reserve the right up to the forthcoming AGM to make such
amendments and additions to the US Stock Option Plan as it considers
appropriate, provided it does not conflict in any material respect with this
summary of the US Stock Option Plan and to make such amendments
and additions to the US Stock Option Plan up to and after the AGM to the
extent required to secure the approval of the IRS.
Miscellaneous
To ensure compliance with the withholding tax requirements in the US,
any federal, state, local or other tax or social security (or the equivalent
in any foreign jurisdiction) payable on gains made on the exercise of an
option granted under the US Stock Option Plan must either be paid to
the relevant employing company by the participant (including by way of
deduction from salary) or, in default of such payment being made, the
Company may make the necessary deduction out of the net proceeds of
sale of the shares acquired on exercise of the options.
The Company may terminate the US Stock Option Plan at any time.
Subject to such termination, the US Stock Option Plan shall terminate 10
years from the date of its adoption by shareholders.
Benefits under the US Stock Option Plan will not be pensionable.
The price at which participants may acquire ordinary shares on exercise of
their options shall be the higher of the nominal value of a share and the
average middle market price quoted on the Official List of the London
Stock Exchange at close of dealings on the 5 business days preceding the
Date of Grant (the 'Market Value').
Individual limits
The US Stock Option Plan will be subject to the same individual limits as
the UK Share Option Plan save that the aggregate Market Value of the
shares for which one or more options granted to any participant under the
US ISO may, for the first time become exercisable during any one calendar
year, shall not exceed $100,000.
Share capital limit
The US Stock Option Plan will be subject to the same share capital limit as
the UK Share Option Plan save that the aggregate number of shares which
may be issued under the US ISO is limited to two million shares.
Exercise and lapse of options
Options will normally vest and become exercisable in whole or in part
between the third and tenth anniversaries of the date of grant. Options
may be satisfied by the issue of new shares (or re-issue of treasury shares) or
the transfer of existing shares. Any unexercised options shall lapse on the
tenth anniversary of the date of grant.
Options normally lapse on cessation of employment of a participant.
However, following cessation of employment where employment ceases
on account of injury, ill health, disability or retirement , or the disposal of
the participating subsidiary or the business in which the Participant is
employed, exercise will be permitted on a pro rated basis during the 6
month period following cessation (unless the reasons for cessation are
disability, within the meaning of Internal Revenue Code section 22(e)(3),
in which case the options may be exercised on a pro rated basis within
one year from the date of cessation). Exercise of options is also permitted
on a pro-rata basis at the discretion of the Remuneration Committee if a
participant ceases employment for any other reason. In calculating the pro
rated entitlement, the Remuneration Committee will take into account the
time elapsed since grant to the date of termination.
On death, an Option may be exercised on a pro rata basis by the personal
representatives of the deceased option holder within 12 months of the
date of death on the same terms as if the Option Holder had been alive.
In the event of a change of control or winding-up of the Company early
exercise of an option granted will be subject to the discretion of the
Remuneration Committee, who will take into account the time elapsed
since grant, and any other factors the Remuneration Committee considers
relevant. The US Stock Option Plan also contains provisions for the
exchange of options as an alternative to exercise where there is a change
of control, which in all cases will be subject to the approval of the bidding
company.
On a demerger, dividend-in-specie or other such transaction which the
Committee determines will materially affect the value of options granted
under the US Stock Option Plan, the Remuneration Committee may again
permit the early exercise of such options.
146
I N T E G R A T I N G T E C H N O L O G Y A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 5
S H A R E H O L D E R I N F O R M AT I O N
Shareholding
On 9 November 2015 the Company had 1,630 shareholders, of which
964 (59%) had 1,000 shares or fewer.
Financial calendar
Interim results announced in May and final results in November.
In respect of the year ended 30 September 2015 the annual general
meeting will be held on 26 January 2016 at Hampton Park West,
Semington Road, Melksham, Wiltshire, SN12 6NB, England.
Corporate information
Registered office
Hampton Park West, Semington Road, Melksham, Wiltshire,
SN12 6NB, England.
Registered
In England and Wales No 32965
VAT No. GB 137 575 643
Board of Directors
David Evans (Chairman)
Andrew Lewis (Interim Group Chief Executive)
Richard Wood (Non-Executive Director)
Pim Vervaat (Non-Executive Director)
Company secretary
Miles Ingrey-Counter
Independent auditors
PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
Registrars & transfer office
Capita Asset Services, The Registry, 34 Beckenham Road,
Beckenham, BR3 4TU.
Tel: 0871 664 0300
(calls cost 10p per minute plus network extras,
lines are open 8.30am–5.30pm Mon-Fri)
Brokers
Arden Partners plc
Solicitors
TLT LLP
Principal bankers
Barclays Bank PLC
Comerica Inc.
Corporate financial advisor
Arden Partners plc
Corporate website
www.avon-rubber.com
R
A
E
Y
E
H
T
F
O
W
E
I
V
R
E
V
O
S
S
E
N
I
S
U
B
R
U
O
N
U
R
E
W
W
O
H
D
E
M
R
O
F
R
E
P
E
W
W
O
H
N
O
I
T
A
M
R
O
F
N
I
R
E
D
L
O
H
E
R
A
H
S
A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 5 I N T E G R A T I N G T E C H N O L O G Y
IBC
C O R P O R A T E H E A D Q U A R T E R S
H A M P T O N P A R K W E S T • S E M I N G T O N R O A D
M E L K S H A M • W I L T S H I R E • S N 1 2 6 N B • E N G L A N D
T : + 4 4 ( 0 ) 1 2 2 5 8 9 6 8 0 0
F : + 4 4 ( 0 ) 1 2 2 5 8 9 6 8 9 8
E : e n q u i r i e s @ a v o n - r u b b e r . c o m
w w w . a v o n - r u b b e r . c o m