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2023 ReportREPORT & ACCOUNTS 2015 T.F. & J.H. BRAIME (HOLDINGS) P.L.C. T. F. & J. H . BR A IM E (H OLDIN GS ) P.L. C. Contents Company information Notice of meeting Chairman’s statement Group strategic report Directors’ report Directors’ remuneration report Independent auditors’ report Consolidated income statement Consolidated statement of comprehensive income Consolidated balance sheet Consolidated cash flow statement Consolidated statement of changes in equity 3 4-5 6-7 8-10 11-14 15-16 17-18 19 19 20 21 22 Notes to the accounts 23-50 Company balance sheet Company statement of changes in equity 51 52 Company notes to the accounts 53-58 Five year record Explanatory notes of resolutions 59 60 1 T. F. & J.H. BRAIME (HO LDINGS) P.L.C. 2 T. F. & J. H . BR A IM E (HO LDIN G S) P. L.C . Directors O. N. A. Braime, MA, (Oxon.), M.B.I.M. (Chairman) P. J. O. Alcock, B. Eng. (Non-executive director) A. W. Walker MA, (Cantab.) (Non-executive director) A. Q. Braime, ACA, BA (Hons.) C. O. Braime, BSc (Hons.), MSc, MBA Secretary A. Q. Braime, ACA, BA (Hons.) Registered office Independent auditors Bankers Stockbrokers Hunslet Road, Leeds, LS10 1JZ. Kirk Newsholme, Chartered Accountants and Statutory Auditors, 4315 Park Approach, Thorpe Park, Leeds, LS15 8GB. HSBC, Leeds City Branch, 33 Park Row, Leeds, LS1 1LD. W. H. Ireland, Zurich House, Canal Wharf, Leeds, LS11 5DB. Company registration number 488001 (England and Wales) 3 T. F. & J.H. BRAIME (HO LDINGS) P.L.C. Notice of meeting Notice is hereby given that the SIXTY SIXTH Annual General Meeting of the members of T.F. & J.H. BRAIME (HOLDINGS) P.L.C. (the ‘company’) will be held at the registered office of the company at Hunslet Road, Leeds, LS10 1JZ on Friday 10th June 2016 at 11.45am. Ordinary Resolutions 1. To receive and adopt the report of the directors, the statement of accounts and the directors’ remuneration report, for the year ended 31st December 2015, and the report of the auditors thereon. 2. To confirm the dividends paid on 18th October 2015 and 12th May 2016 on the Ordinary and ‘A’ Ordinary shares. 3. a) To re-appoint as a director A. Q. Braime, who is retiring by rotation in accordance with the Company’s Articles of Association and, being eligible, offers himself for re-election. b) To re-appoint as a director C. O. Braime, who is retiring by rotation in accordance with the Company’s Articles of Association and, being eligible, offers himself for re-election. 4. To re-appoint Kirk Newsholme as auditors, to hold office from the conclusion of this meeting until the conclusion of the next Annual General Meeting of the company at which accounts are laid. 5. To authorise the directors to set the remuneration of the auditors. By order of the board, A. Q. Braime Secretary Hunslet Road, Leeds, LS10 1JZ 21st April 2016 4 T. F. & J. H . BR A IM E (HO LDIN G S) P. L.C . Notice of meeting continued ACCOMPANYING NOTES 1. A member entitled to vote at the meeting is entitled to appoint a proxy to attend and vote in his stead. A proxy need not also be a member of the company. A form of proxy which may be used to make such appointment and give proxy instructions accompanies this notice. 2. To be valid, the form of proxy must be received at the company’s registered office at Hunslet Road, Leeds LS10 1JZ by no later than 11:45 am on 8th June 2016. 3. The return of a completed Form of Proxy will not prevent a shareholder attending the Annual General Meeting and voting in person if he/she wishes to do so. 4. In accordance with the company’s Articles of Association, holders of the ‘A’ Ordinary shares are entitled to attend, but not to vote at this meeting. 5. There will be available for inspection at the registered office during the company’s usual business hours (Saturdays, Sundays and public holidays excluded) from the date of this notice until the date of the Annual General Meeting and for at least fifteen minutes prior to and during the meeting: A statement for the period of twelve months to 31st December 2015 of all transactions of each director and, so far as he can reasonably ascertain, of his family interests in the Ordinary shares of the company. The service contract of each executive director, where applicable and the letter of appointment of each non-executive director. 6. CREST members who wish to appoint a proxy or proxies through the CREST electronic proxy appointment service may do so for the Annual General Meeting and any adjournment(s) thereof by using the procedures described in the CREST Manual. CREST Personal Members or other CREST sponsored members, and those CREST members who have appointed a 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 using the CREST service to be valid, the appropriate CREST message (a ‘CREST Proxy Instruction’) must be properly authenticated in accordance with CRESTCo’s specifications, and must contain the information required for such instruction, as described in the CREST Manual. The message, regardless of whether it constitutes the appointment of a proxy or is an amendment to the instruction given to a previously appointed proxy must, in order to be valid, be transmitted so as to be received by the issuer’s agent (ID 7RA11) by 11.30am on 8th June 2016. 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 Application Host) from which the issuer’s agent is able to retrieve the message by enquiry to CREST in the manner prescribed by CREST. After this time any change of instructions to proxies appointed through CREST should be communicated to the appointee through other means. CREST members and, where applicable, their CREST sponsors, or voting service providers should note that CRESTCo does not make available special procedures in CREST for any particular message. Normal system timings and limitations will, therefore, apply in relation to the input of CREST Proxy Instructions. It is 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, to procure that his 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 system providers are referred, in particular, to those sections of the CREST Manual concerning practical limitations of the CREST system and timings. The company may treat as invalid a CREST Proxy Instruction in the circumstances set out in Regulation 35(5)(a) of the Uncertificated Securities Regulations 2001. 5 T. F. & J.H. BRAIME (HO LDINGS) P.L.C. Chairman’s statement Overall performance of the group Group sales revenue in 2015 maintained the consistent growth seen in recent years, increasing by 9% in 2015 to £26.5m from £24.3m in 2014. Operating profit however fell to £897,000 from £1,236,000 in the previous year, as a result of the negative effects on 4B Braime Components of the steep fall in the value of the euro and a disappointing performance from Braime Pressings. The overall profit before tax rose to £1,950,000 from £1,125,000, due to the exceptional circumstances explained below. After deducting tax, the final profit for the year nearly doubled to £1,542,000, compared to £782,000 in 2014. In view of the overall result, the directors have decided to pay a second interim of 6.20p, leaving the total dividends of 9.10p, unchanged from the previous year. Exceptional issues in 2015 During the year, the group completed the sale to the new University Technical College (UTC) of 1.15 acres of the Hunslet Road site. This eliminated both the annual running costs and the long term maintenance of 25% of the building. The funds raised from the sale have enabled the group to modernise the facilities of the UK material handling business and considerably improve its operating efficiency. The sale proceeds, plus an additional contribution from the UTC towards the structural work required, created a gain on disposal of £1,027,000 after taking into account the professional and legal fees required to facilitate the sale. Part of the proceeds were used to fund the construction of a new fire wall separating our facilities from the adjoining UTC building, reducing the gain by a further £258,000. Tax arising on this gain has been deferred against future capital investments in the business. During the year, a fire in Braime Pressings seriously damaged a key automated press line. The group was fully insured against both the damage caused to the press, the additional costs incurred and the loss of contribution as a result of having to source replacement parts from a third party, based in the USA, to satisfy an existing customer contract; up to 31st December 2015 these costs amounted to £243,000. Given the costs and uncertainty involved in a repair, the insurance company determined that the lower risk option to them was to make a contribution of £375,000 towards the costs of a new press line. This will be commissioned in the 1st half of 2016 and the directors believe this will increase both capacity and productivity of this production cell. In line with generally accepted accounting practice, the disposal of the damaged press, which was almost fully depreciated and the contribution received, gives rise to a further gain on disposal of £373,000. The new press line will be capitalised once it has been fully commissioned and then depreciated in line with normal policy. The accountancy treatment of the disposal has no effect on the tax charge. Braime Pressings Limited At an operating profit level, Braime Pressings Limited recorded a loss in 2015, as despite the significant investments in plant made in recent years, productivity has recently declined. The company has addressed this issue by the recruitment of new managers which the directors believe will have a positive impact on performance and quality. Pressings also faced unexpectedly high plant repairs and a significant increase in energy costs, even though the wiring was modernised throughout the facility and energy saving lighting installed in 2014. A number of improvements to the layout of the plant were made in 2015. The tool room was relocated closer to the production area and a new comprehensive system of tool racking was installed. A temperature controlled storage area has also been created for finished parts and the heating system throughout the facility has been modernised to improve the working environment. The goods inwards and despatch areas have been re-located from the front of the building directly adjoining the dual carriageway leading to Leeds City Centre to the quieter rear of the facility, giving better vehicle accessibility and allowing for future increases in capacity. This significantly improves efficiency as the existing historic corner entrance was designed for horse drawn carts in 1911! 4B material handling division On the whole, the overseas subsidiaries within the 4B division increased both sales and profitability. The impact of movements in foreign exchange rates affected the apparent performance of a number of subsidiaries. The contribution to the group from 4B Africa and 4B France were both reduced by the depreciation in the value of their trading currencies during 2015 when consolidated in sterling into the group result. 6 T. F. & J. H . BR A IM E (HO LDIN G S) P. L.C . Chairman’s statement continued On the other hand, the largest subsidiary, 4B Components USA, had a good trading year and benefited from the movement in the dollar exchange rate which lowered the cost of imported goods and increased the value of the subsidiary’s contribution to the group. Unfortunately, the profitability of 4B Braime Components in the UK was impacted by the fall of around 15% in the value of the euro compared to sterling. A large part of the sales of 4B Braime Components to Eurozone customers are priced in euros at the start of each year which meant that the fall in the exchange rate significantly reduced the gross margins achieved on sales in 2015. The 4B division has for many years delivered continuous annual growth and in 2015 sales surpassed £22.5m; 4B is primarily a distribution business and therefore "if you don’t have it, you won’t sell it". Given the size of the product range, the long lead times and the global nature of the business, this rate of growth in sales inevitably puts upward pressure on stocks and the group’s financial resources. The overall group stock grew by £831,000 in 2015 and most of this increase was within the 4B Division. Consequently, stock control within the division will need to be improved to enable the company to continue to invest in new plant and products. Finance and cash flow The company ended 2015 with positive cash reserves of £315,000; a net improvement of £464,000 over the equivalent position at the end of 2014. The cash flow statement shows that the group’s working capital position declined year on year by £596,000. This has been caused by an increase in group stock of £831,000 and a small increase in trade debtors and other receivables of £94,000. This was only partly offset by an increase in trade creditor and other payables of £329,000. The increase in the group stock from £4,889,000 to £5,720,000 represents a 17% increase year on year compared to the 9% increase in sales achieved and this is a primary reason for the substantial increase in working capital. An immediate focus for 2016 will be to reduce stock to its previous ratio relative to sales and improved controls and processes are being put in place to achieve this. Capex In 2015, the group invested £689,000 in plant and equipment and motor vehicles. At 31st December 2015, the group had on order further capital investments of £427,000, made up largely of the new press line and other projects to improve the effectiveness of its manufacturing operations. Funds permitting, the group has plans to make further investments which will improve productivity, capacity, and quality control. Staff Staff are the group’s most important asset. Turnover in staff is extremely low and the directors believe this indicates the level of their loyalty and commitment. Listening carefully to their ideas and encouraging their proactive support is essential, in order to maintain both the survival and the growth of the business in what are ever more challenging circumstances. Management continues to carefully invest in the employment of new staff to strengthen further the group and are very pleased to welcome them to the business. Outlook Truck components both for building new vehicles and for their regular maintenance are the key product of Braime Pressings and currently demand is running well below last year due to the economic slowdown seen across Europe. Demand for the range of 4B material components fell in the last quarter of 2015 leading all subsidiaries to express concerns for 2016. However, with the exception of 4B Braime in the UK, where demand remains subdued, the sales performance of the overseas subsidiaries is exceeding last year and is more than offsetting the effect of the underlying global downturn. The overall result for the group will continue to be affected, as in recent years, by movements in the exchange rates and the slowdown in the global economy which are impossible to predict. The underlying position of the group however, remains positive due to its reputation and the quality of its products and the services it offers. O. N. A. Braime, Chairman 21st April 2016 7 T. F. & J.H. BRAIME (HO LDINGS) P.L.C. Group strategic report Principal activities and risks and uncertainties Our business model The focus of the manufacturing business is to produce quality, technically demanding components. The use of automated equipment allows us to produce in high volumes whilst maintaining flexibility to respond to customer demands. The material handling components business operates from a number of locations around the globe allowing us to be close to our core markets. The focus of the business is to provide innovative solutions drawing on our expertise in material handling and access to a broad product range. The two segments are very different and serve different markets, however together they add strength and balance to the group. Performance of Braime Pressings Limited, manufacturer of deep drawn metal presswork Sales revenues increased in the year although disappointingly, the operational performance of the company deteriorated. This was due to higher energy costs, increases in repairs to plant and difficulties in achieving the productivity gains anticipated. A number of other one time issues and costs associated with the sale of part of the site as well as the press fire were incurred which further impacted performance. At the start of 2016, the management team was strengthened and a significant new press line will be installed in the 1st half of 2016. We anticipate both of these factors will allow us to make the necessary improvements in productivity and to return operating profit. The group comprises two core segments; the manufacture of deep drawn metal presswork, and the distribution of material handling components and monitoring equipment. The metal presswork segment operates across several industries including the automotive sector. The market remains challenging due to pricing pressures throughout the supply chain. The maintenance of the TS16949 quality standard is important to the group and allows it to access growing markets within the automotive and other sectors. A process of continual improvement in systems and processes reduces this risk as well as providing increased flexibility to allow the business to respond to customer requirements. The company is exposed to medium to long term fluctuations in steel prices and to mitigate this volatility, the company fixes its prices with suppliers where possible. The material handling components subsidiaries trade from six countries and export to over fifty countries. The division maintains its competitive edge in a price sensitive market through the provision of engineering expertise and by working closely with our suppliers to supply innovative components of the highest standard. In addition, ranges of complementary products are sold into different industries. These monitoring systems are developed and improved on a regular basis. Exposure to customer credit risk is managed through a variety of methods; credit insurance, credit checking and the setting and monitoring of appropriate credit limits. The group has a centralised treasury function which manages the group’s banking facilities and all lines of funding. Forward contracts are used to hedge against foreign exchange differences arising on cash flows in currencies that differ from the operational entity’s reporting currency. Liquidity risk is managed through the matching of short and long term funding to the needs of the business. Medium and long term cash flow projections are prepared and regularly monitored. Further information on the group’s financial liabilities and exposures are set out in note 17. 8 Group strategic report continued Performance of the 4B division, world wide distributor of components and monitoring systems for the material handling industry The 4B division continued to increase sales revenue in 2015 with growth across all the subsidiaries. This was particularly encouraging given the movement in exchange rates many of the subsidiaries had to manage throughout the year. The outlook for 2016 remains positive with further growth anticipated from our overseas subsidiaries. Taxation The effective rate of tax is 21.00% (2014 – 30.50%). The effective rate is above the standard UK tax rate of 20.25% (2014 – 21.50%) due to the blending effect of the different rates of tax applied by each of the countries in which the group operates. In any financial year the effective rate will depend on the mix of countries in which profits are made. Capital expenditure In 2015, the group invested £689,000 in plant and equipment continuing the recent substantial investment in new manufacturing machinery. The plan for 2016 is to complete the installation of the new press replacing the one damaged by fire in 2015 and to make further tactical investments in key equipment to maximize productivity and improve flexibility and quality. Cash flow Stock increased by £831,000 and debtors by the smaller sum of £94,000; these calls on working capital were partly offset by an increase in our creditors of £329,000. In total the business generated funds from operations of £434,000 net of the movement in working capital. The sale of part of the Hunslet Road site to UTC generated net disposal proceeds of £794,000, the fire which damaged the Benelli press during the year resulted in the disposal of the press and an insurance claim for £375,000. The business made use of these funds to make capital expenditure investments of £1,010,000 and repay £301,000 of borrowings. After the payment of other financial costs and the dividend, the net cash position was £316,000; a net inflow of £464,000. T. F. & J. H . BR A IM E (HO LDIN G S) P. L.C . Bank facilities The group’s operating banking facilities are renewed annually. The arrangements with HSBC provide sufficient headroom to the group and have allowed us to make the necessary investments in the year. Balance sheet Net assets of the group have increased to £8.6 million (2014 – £7.4 million), this is due to the strong profit performance in the year. A foreign exchange loss of £ (147,000) (2014 – £11,000 gain) was recorded on the re-translation of the net assets of the overseas operations. Key performance indicators The group uses certain key performance indicators to assess the performance of the group as a whole and of the individual businesses. The financial KPIs comprise turnover growth, product and customer margins and operating net profit as demonstrated in note 3 in the financial statements. Key balance sheet indicators such as inventory levels, inventory aging, stock turnover and debtor days are monitored monthly for both the group and individual entities. The operational KPIs comprise on time delivery achievement, component quality and rejection rates and labour utilisation. Environment The group’s policy with regard to the environment is to understand and effectively manage the actual and potential environmental impact of our activities. Operations are conducted such that we comply with all legal requirements relating to the environment in all areas where we carry out our business. During the period of this report the group has not incurred any fines or penalties or been investigated for any breach of environmental regulations. 9 T. F. & J.H. BRAIME (HO LDINGS) P.L.C. Group strategic report continued Employees The quality and commitment of our people has played a major role in our business success. This has been demonstrated in many ways, including improvements in customer satisfaction, the development of our product lines and the flexibility they have shown in adapting to changing business requirements. Employee performance is aligned to the achievement of goals set within each subsidiary and is rewarded accordingly. Employees are encouraged to use their skills to best effect and are offered training either externally or internally to achieve this. Research and development The group continues to invest in research and development. This has resulted in improvements in the products which will benefit the group in the medium to long term. O. N. A. Braime, Director 21st April 2016 10 T. F. & J. H . BR A IM E (HO LDIN G S) P. L.C . Directors’ report The directors present their annual report and financial statements for the year ended 31st December 2015. RESULTS AND DIVIDENDS The profit for the year after taxation and transferred to reserves was £1,541,534 (2014 – £782,129). No dividend is to be proposed at the Annual General Meeting. DIRECTORS The directors who served during the year and their beneficial interests in the shares of the company are detailed below: O. N. A. Braime Ordinary shares P. J. O. Alcock Ordinary shares ‘A’ Ordinary shares A. W. Walker Ordinary shares ‘A’ Ordinary shares A. Q. Braime Ordinary shares C. O. Braime Ordinary shares M. L. Mills ‘A’ Ordinary shares 31st December 2015 1st January 2015 143,400 143,400 1,000 5,000 100 300 35,175 35,175 400 1,000 5,000 100 300 35,175 35,175 400 In accordance with the company’s Articles of Association A. Q. Braime and C. O. Braime retire by rotation and, being eligible offer themselves for re-election. M. L. Mills resigned on 24th February 2016 and ceased to be a director from this date. None of the directors had a beneficial interest in any contract to which the company or a subsidiary company was a party during the financial year. The company has made qualifying third party indemnity provisions for the benefit of its directors and officers. 11 T. F. & J.H. BRAIME (HO LDINGS) P.L.C. Directors’ report continued SUBSTANTIAL SHAREHOLDINGS The company has been notified that as at 30th March 2016, apart from the directors, only the following persons are beneficially interested in more than 3% of the Ordinary shares of the company: J M Finn Nominees Limited Ferlim Nominees Limited Des. POOLED Mrs P. V. Smith Mrs L. V. Deacon Mr. M. C. J. Barnes Ordinary shares held 71,000 39,883 27,500 24,000 16,555 Percentage 14.79% 8.30% 5.73% 5.00% 3.45% 12 Directors’ report continued CORPORATE GOVERNANCE As an AIM listed group T.F. & J.H. Braime (Holdings) P.L.C. is not required to comply with the Corporate Governance Code 2014. However, the group applies those principles of good governance it believes appropriate to a group of this size. INTERNAL CONTROLS The board is responsible for the group’s system of internal control and reviewing its effectiveness. Identification and evaluation of risks is an integral part of the board’s planning process. Controls within the group are designed to provide the board with reasonable assurance regarding the maintenance of proper accounting records, the reliability of financial information and the safeguarding of assets. The group’s system of internal control is designed to manage rather than eliminate the risk of failure to achieve business objectives. It can only provide reasonable and not absolute assurance against material loss or misstatement. The board considers that the size of the group does not justify an internal audit function, but continues to keep the need for an internal audit function under review. The board has conducted a review of the effectiveness of the company’s risk management and internal control systems. GOING CONCERN The group’s business activities, together with the factors likely to affect its future development, performance and position are set out in the group strategic report on pages 8 to 10. The financial position of the group, its cash flows, liquidity position and borrowing facilities are also described in the group strategic report. In addition, note 17 to the financial statements includes the group’s objectives, policies and processes for managing its capital; its financial risk management objectives; details of its financial instruments and hedging activities; and its exposure to credit risk and liquidity risk. Growth is being seen in many of the geographic areas in which the group operates. However, the strength of the recovery in certain markets, particularly the UK, continues to be concerning and this creates uncertainty over the level of future demand for the group’s products and services. The exchange rate between sterling, the US dollar and the euro and the price of raw materials provides further uncertainty. T. F. & J. H . BR A IM E (HO LDIN G S) P. L.C . The group's net cash figure increased from an overdrawn opening figure of £(148,219) to a credit position of £315,980 as at 31st December 2015. During the period the group funding of working capital increased by £595,974 principally arising from an increase in inventory which was only partly offset by increases in trade and other payables. Overall cash derived from operating activities generated £434,192 net of the increased working capital funding. The net cash received from the sale of part of the site to UTC during the year has been largely reinvested in the infrastructure and plant at the Leeds manufacturing site. At 31st December 2015, the available headroom within the group’s borrowing facilities amounted to £1,142,497. The directors are of the continued view that through its group banking partner it has sufficient access to financial resources. The group has contracts with a number of customers and suppliers across different geographic areas and industries which act to mitigate the volatility in any one area. The group’s forecasts and projections, taking account reasonably possible changes in trading performance, show that there is no substantial risk that the group will not be able to operate within the level of its current facilities. After due consideration, the directors confirm that they have a reasonable expectation that the company and the group have adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the company’s and the group’s financial statements. 13 T. F. & J.H. BRAIME (HO LDINGS) P.L.C. Directors’ report continued STATEMENT OF DIRECTORS’ RESPONSIBILITIES The directors are responsible for preparing the annual report, the directors’ report, the directors’ remuneration report and the financial statements in accordance with applicable laws and regulations. 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. Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have prepared the group financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union and the rules of the London Stock Exchange for companies trading on the AIM. The directors have chosen to prepare financial statements for the company in accordance with UK Generally Accepted Accounting Practice. 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. Each of the directors at the date of this report confirms that: (a) so far as the director is aware, there is no relevant audit information of which the company’s auditors are unaware; and (b) he has taken all the steps that he ought to have taken as a director in order to make himself aware of any relevant audit information and to establish that the company’s auditors are aware of that information. This confirmation is given and should be interpreted in accordance with the provision of Section 418 of the Companies Act 2006. In preparing these financial statements, the directors are required to: • select suitable accounting policies and then apply them consistently; SUBSCRIPTIONS AND DONATIONS Charitable donations amounting to £2,233 (2014 - £1,000) were paid during the year. There were no donations to political organisations. • make judgements and accounting estimates that are reasonable and prudent; AUDITORS A resolution proposing Kirk Newsholme be re-appointed as auditors of the company will be put to the Annual General Meeting. By order of the board A. Q. Braime Director 21st April 2016 • state whether applicable United Kingdom Accounting Standards have been followed by the parent company and applicable IFRSs as adopted by the European Union have been followed by the group, subject to any material departures disclosed and explained in the financial statements; and • prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business. The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the group’s and company’s transactions and disclose with reasonable accuracy at any time the financial position of the group and company and to enable them to ensure that the financial statements and the directors’ 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 group and the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. 14 T. F. & J. H . BR A IM E (HO LDIN G S) P. L.C . Directors’ remuneration report INFORMATION NOT SUBJECT TO AUDIT Service contracts The executive directors do not have service contracts with the company or its subsidiaries. The executive directors are subject to election by the shareholders at the first Annual General Meeting following their appointment and thereafter at least at every third subsequent Annual General Meeting. No compensation other than that prescribed by legislation is payable on termination of their employment. Mr. P. J. O. Alcock’s service contract, as a non-executive director, expires annually on 10th January. The renewal of this contract is subject to approval of the whole board and has been approved for a further twelve months to 10th January 2017. The renewal of Mr. A. W. Walker’s service contract is subject to approval of the whole board and has been approved for a further three years to 30th March 2019. The purpose of this report is to inform shareholders of the company’s policy with regard to executive remuneration and to provide full details of the salary and other benefits received by individual directors. The directors have adopted the principles of good governance as set out in the Combined Code and the Directors’ Remuneration Report Regulations 2002. However, following the company’s move to AIM compliance with this report is no longer mandatory. Remuneration committee Executive directors’ pay is subject to the decision of the whole board and not of a separate remuneration committee. The directors believe that this is adequate for a group of this size. Statement of company’s policy on directors’ remuneration The board’s policy is that the remuneration of the directors should reflect market rates applicable to a business of its size and complexity. This information is assessed by the board based on their commercial contacts within the industry and the local business community. It is intended that this policy will remain in place for the following financial year and subsequent periods. There are no formal performance related elements, entitlements to share options or entitlements under long-term incentive plans in directors’ remuneration. All employees of the group, including directors, may however receive a discretionary bonus which reflects the results of the group. The only elements of remuneration that are pensionable are salary and bonuses. There are no performance conditions relating to the non-executive directors’ fees. 15 T. F. & J.H. BRAIME (HO LDINGS) P.L.C. Directors’ remuneration report continued INFORMATION SUBJECT TO AUDIT Directors’ remuneration The remuneration of the individual directors who served during the period was as follows: Estimated taxable value of benefits in kind £ Fees £ Salary £ Total 2015 £ Total 2014 £ Pension contributions 2014 £ 2015 £ - - - - 184,872 94,495 94,510 104,690 3,266 1,257 883 1,400 188,138 95,752 95,393 106,090 178,258 86,301 85,913 97,232 - 9,727 9,727 8,901 2,236 8,264 8,264 8,067 24,000 24,000 48,000 - - 478,567 - - 6,806 24,000 24,000 533,373 21,000 21,000 489,704 - - 28,355 - - 26,831 Executive directors O. N .A. Braime A. Q. Braime C. O. Braime M. L. Mills P. J. O. Alcock A. W. Walker Paid by the company 48,000 48,000 42,000 The estimated taxable value of benefits in kind includes private medical cover. Pension contributions represent amounts paid to defined contribution pension schemes. Pension benefits Benefits under the defined benefits scheme are as follows: O. N. A. Braime Approval Normal age retirement Accrued benefit £ 75,000 65 Pension input amount £ (13,594) The directors’ remuneration report was approved by the board on 21st April 2016. A. Q. Braime, Director 16 T. F. & J. H . BR A IM E (HO LDIN G S) P. L.C . Independent auditors’ report TO THE SHAREHOLDERS OF T.F. & J.H. BRAIME (HOLDINGS) P.L.C. We have audited the financial statements of T.F. & J.H. Braime (Holdings) P.L.C. for the year ended 31st December 2015 which comprise the consolidated income statement, the consolidated statement of comprehensive income, the consolidated and parent company balance sheets, the consolidated cash flow statement, the consolidated and parent company statement of changes in equity and the related notes. The financial reporting framework that has been applied in the preparation of the group financial statements is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union. The financial reporting framework that has been applied in the preparation of the parent company financial statements is applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice). This report is made solely to the company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company's members those matters we are required to state to them in a Report of the Auditors and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company's members as a body, for our audit work, for this report, or for the opinions we have formed. Respective responsibilities of directors and auditors As explained more fully in the statement of directors' responsibilities set out on page 14, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board's Ethical Standards for Auditors. Scope of the audit of the financial statements 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 and 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. In addition, we read all the financial and non-financial information in the Chairman’s Statement, Group Strategic Report and the Report of the Directors 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. Opinion on financial statements In our opinion: • the financial statements give a true and fair view of the state of the group’s and of the parent company’s affairs as at 31st December 2015 and of the group’s profit for the year then ended; • the group financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union; • the parent company financial statements have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and • the financial statements have been prepared in accordance with the requirements of the Companies Act 2006; and, as regards the group financial statements, Article 4 of the IAS Regulation. 17 T. F. & J.H. BRAIME (HO LDINGS) P.L.C. Independent auditors’ report continued Opinion on other matter prescribed by the Companies Act 2006 In our opinion: • the information given in the Chairman’s Statement, Group Strategic Report and the Report of the Directors for the financial year for which the financial statements are prepared is consistent with the financial statements. Matters on which we are required to report by exception We have nothing to report in respect of the following: Under the Companies Act 2006 we are required to report to you, if, in our opinion: • adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or • the parent company financial statements are not in agreement with the accounting records and returns; or • certain disclosures of directors’ remuneration specified by law are not made; or • we have not received all the information and explanations we require for our audit. Other matters The company voluntarily prepares a directors’ remuneration report in accordance with the provisions of the Companies Act 2006. The directors have requested that we audit the part of the directors remuneration report specified by the Companies Act 2006 to be audited as if the company were a listed company. In our opinion the part of the directors remuneration report to be audited has been properly prepared in accordance with the Companies Act 2006. Mark Templeton BSc FCA (Senior Statutory Auditor), for and on behalf of Kirk Newsholme, Chartered Accountants and Statutory Auditors, 4315 Park Approach, Thorpe Park, Leeds, LS15 8GB. 21st April 2016 18 T. F. & J. H . BR A IM E (HO LDIN G S) P. L.C . Consolidated income statement for the year ended 31st December 2015 Revenue Changes in inventories of finished goods and work in progress Raw materials and consumables used Employee benefits costs Depreciation expense Other expenses Profit from operations Profit on disposal of tangible fixed assets Finance costs Finance income Profit before tax Tax expense Profit for the year Profit attributable to: Owners of the parent Non-controlling interests Note 2015 £ 2014 £ 6 2 4 4 5 26,470,084 24,291,700 886,480 (15,529,776) (6,022,492) (758,589) (4,148,272) 161,071 (13,535,766) (5,309,357) (564,244) (3,807,604) 897,435 1,235,800 1,158,140 (116,830) 11,726 2,796 (115,291) 2,164 1,950,471 1,125,469 (408,937) (343,340) 1,541,534 782,129 1,584,748 (43,214) 864,011 (81,882) 1,541,534 782,129 Basic and diluted earnings per share 18 107.05p 54.31p Consolidated statement of comprehensive income for the year ended 31st December 2015 Note 2015 £ 2014 £ Profit for the year 1,541,534 782,129 Items that will not be reclassified subsequently to profit or loss Net pension remeasurement gain on post employment benefits 19.11 10,000 44,000 Items that may be reclassified subsequently to profit or loss Foreign exchange (losses)/gains on re-translation of overseas operations Other comprehensive income for the year Total comprehensive income for the year Total comprehensive income attributable to: Owners of the parent Non-controlling interests (146,822) 10,819 (136,822) 54,819 1,404,712 836,948 1,447,926 (43,214) 918,830 (81,882) 1,404,712 836,948 The foreign currency movements arise on the re-translation of overseas subsidiaries’ opening balance sheets at closing rates. 19 T. F. & J.H. BRAIME (HO LDINGS) P.L.C. Consolidated balance sheet at 31st December 2015 Assets Non-current assets Property, plant and equipment Goodwill Financial assets Total non-current assets Current assets Inventories Trade and other receivables Financial assets Cash and cash equivalents Total current assets Total assets Liabilities Current liabilities Bank overdraft Trade and other payables Other financial liabilities Corporation tax liability Total current liabilities Non-current liabilities Financial liabilities Deferred income tax liability Total non-current liabilities Total liabilities Total net assets Note 2015 £ 2015 £ 2014 £ 2014 £ 7 9 10 11 9 12 13 4,677,456 12,270 51,877 5,719,654 5,005,099 57,777 931,018 615,038 4,053,220 1,498,171 66,854 4,056,506 12,270 101,853 4,741,603 4,170,629 4,888,183 4,911,108 98,147 1,357,769 11,713,548 16,455,151 11,255,207 15,425,836 1,505,988 3,752,594 1,323,095 187,054 6,233,283 6,768,731 14 15 1,363,524 230,235 1,111,045 191,623 1,593,759 7,827,042 8,628,109 Capital and reserves attributable to equity holders of the parent company 16 Share capital Capital reserve Foreign exchange reserve Retained earnings Total equity attributable to the shareholders of the parent Non-controlling interests Total equity 360,000 257,319 (58,581) 8,194,467 8,753,205 (125,096) 8,628,109 1,302,668 8,071,399 7,354,437 360,000 257,319 88,241 6,730,759 7,436,319 (81,882) 7,354,437 The financial statements on pages 19 to 50 were approved and authorised for issue by the board of directors on 21st April 2016 and were signed on its behalf by: O. N. A. Braime, Director A. Q. Braime, Director Company Registration Number 488001 The notes on pages 23 to 50 form part of these financial statements 20 T. F. & J. H . BR A IM E (HO LDIN G S) P. L.C . Consolidated cash flow statement for the year ended 31st December 2015 Operating activities Net profit Adjustments for: Depreciation Grants amortised Foreign exchange (losses)/gains Finance income Finance expense Gain on sale of land and buildings, plant, machinery and motor vehicles Adjustment in respect of defined benefits scheme Income tax expense Income taxes paid Operating profit before changes in working capital and provisions Note 2015 £ 2015 £ 2014 £ 1,541,534 2014 £ 782,129 7 4 4 5 758,589 (1,656) (146,677) (11,726) 116,830 (1,158,140) 13,000 408,937 (490,525) 564,244 (1,656) 15,279 (2,164) 115,291 (2,796) 46,000 343,340 (41,685) (511,368) 1,030,166 1,035,853 1,817,982 Increase in trade and other receivables Increase in inventories Increase in trade and other payables (93,991) (831,471) 329,488 (1,044,846) (68,983) 1,114,877 Cash generated from operations Investing activities Purchases of property, plant, machinery and motor vehicles Sale of land and buildings, plant, machinery and motor vehicles Interest received Financing activities Proceeds from long term borrowings Loan financing repayments/(provided) Repayment of borrowings Repayment of hire purchase creditors Interest paid Dividends paid Increase/(decrease) in cash and cash equivalents Cash and cash equivalents, beginning of period Cash and cash equivalents, end of period (595,974) 434,192 1,048 1,819,030 (1,010,401) (1,368,985) 1,190,561 8,726 300,000 90,346 (171,020) (130,335) (116,830) (131,040) 14,540 164 188,886 (1,354,281) 200,000 (200,000) (272,688) (170,231) (115,291) (131,040) (158,879) 464,199 (148,219) 315,980 (689,250) (224,501) 76,282 (148,219) 21 The notes on pages 23 to 50 form part of these financial statements 21 T. F. & J.H. BRAIME (HO LDINGS) P.L.C. Consolidated statement of changes in equity for the year ended 31st December 2015 Note Share Capital £ Capital Reserve £ Foreign Exchange Reserve £ Retained Earnings £ Non- Controlling Interests £ Total £ Total Equity £ Balance at 1st January 2014 360,000 77,319 77,422 6,156,288 6,671,029 - 6,671,029 Comprehensive income Profit Other comprehensive income Net pension remeasurement gain recognised directly in equity Foreign exchange gain on re-translation of overseas subsidiaries consolidated operations Total other comprehensive income Total comprehensive income Transactions with owners Dividends Cancellation of Preference shares Total transactions with owners 19.11 18 - - - - - - - - - - - - - - - 864,011 864,011 (81,882) 782,129 44,000 44,000 - 44,000 10,819 10,819 10,819 - 44,000 908,011 10,819 54,819 918,830 - - (81,882) 10,819 54,819 836,948 - 180,000 180,000 - - - (131,040) (202,500) (333,540) (131,040) (22,500) (153,540) - - - (131,040) (22,500) (153,540) Balance at 1st January 2015 360,000 257,319 88,241 6,730,759 7,436,319 (81,882) 7,354,437 Comprehensive income Profit Other comprehensive income Net pension remeasurement gain recognised directly in equity Foreign exchange losses on re-translation of overseas subsidiaries consolidated operations Total other comprehensive income Total comprehensive income 19.11 Transactions with owners Dividends Cancellation of Preference shares Total transactions with owners 18 - - - - - - - - - - - - - - - - - 1,584,748 1,584,748 (43,214) 1,541,534 - 10,000 10,000 - 10,000 (146,822) (146,822) (146,822) 10,000 (136,822) (146,822) 1,594,748 1,447,926 - - - (146,822) (136,822) (43,214) 1,404,712 - - - (131,040) - (131,040) (131,040) - (131,040) - - - (131,040) - (131,040) Balance at 31st December 2015 360,000 257,319 (58,581) 8,194,467 8,753,205 (125,096) 8,628,109 The capital reserve arose on the listing of the company’s shares on the London Stock Exchange and the cancellation of the 180,000 5% Cumulative Preference shares at a redemption price of £1.125 per share. The foreign exchange reserve relates to the differences arising on the re-translation of overseas subsidiaries consolidated within the group financial statements. The retained earnings reserve includes the accumulated profit and losses of the group. There was no movement in the share capital of the company. 22 Notes to the accounts 1. ACCOUNTING POLICIES 1.1 General company information T.F. & J.H. Braime (Holdings) P.L.C. (‘the company’) and its subsidiaries (together ‘the group’) manufacture metal presswork and handle the distribution of bulk material handling components through trading from locations in Australia, England, France, South Africa, Thailand and the United States. The company is incorporated and domiciled in the UK. The company’s registered number is 488001. The address of its registered office is Hunslet Road, Leeds, LS10 1JZ. The company is a public limited company and has its primary listing on the AIM division of the London Stock Exchange. The group consolidated financial statements were authorised for issue by the board on 21st April 2016. 1.2 Basis of preparation The principal accounting policies adopted in the preparation of the consolidated financial statements are set out below. The policies have been consistently applied to all the years presented, unless otherwise stated. These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union (IFRSs as adopted by the EU), IFRIC interpretations and the Companies Act 2006 applicable to companies reporting under IFRS. The consolidated financial statements have been prepared under the historical cost convention. The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in paragraph 1.3 below entitled critical accounting estimates and assumptions. The company has elected to prepare its parent company financial statements in accordance with UK GAAP; these are presented on pages 51 to 58. T. F. & J. H . BR A IM E (HO LDIN G S) P. L.C . 1.3 Critical accounting estimates and assumptions Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition seldom equal the actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below: Retirement benefit obligations The group operates a defined benefit pension scheme (note 19). Asset valuations are based on the fair value of the assets. The valuation of the liabilities of the scheme are based on statistical and actuarial calculations, using various assumptions including discount rates, future salary and pension increases, life expectancy of scheme members and cash commutations. The actuarial assumptions may differ materially from actual experience due to changes in economic and market conditions, variations in actual mortality, higher or lower cash withdrawal rates and other changes in factors assessed. Any of these differences could impact the assets or liabilities recognised in the balance sheet in future periods. Inventory Inventories are stated at the lower of cost and net realisable value. The assessment of net realisable value requires forecasts of future demand and the selling prices of inventory. 23 T. F. & J.H. BRAIME (HO LDINGS) P.L.C. Notes to the accounts continued 1.4 Changes to accounting policy and disclosure (a) New and amended standards adopted by the group. The application of these standards and interpretations is not expected to have a material impact on the group’s reported financial performance or position. However, they may give rise to additional disclosures being made in the financial statements. The group has adopted the following new and amended IFRS’s as of 1st January 2015. 1.5 Revenue • IAS 19, ‘Defined benefit plans: Employee contributions’; effective on or after 1st July 2014. • Annual improvements 2010 – 2012 cycle IFRS2, IFRS3, IFRS8, IFRS13, IAS16, IAS38 and IAS24; effective on or after 1st July 2014. • Annual improvements 2011 – 2013 cycle IFRS1, Revenue arises solely from sale of goods net of local taxes. Revenue is recognised when the risks and rewards of owning the goods have passed to the customer, which is generally on delivery. IFRS3, IFRS13 and IAS40. 1.6 Basis of consolidation The impact of these new and amended IFRS’s has not had a material impact on these financial statements. (b) New standards, amendments and interpretations issued but not effective for the financial year beginning 1st January 2015 and not early adopted. • IFRS9, ‘Financial instruments’; effective on or after 1st January 2018. • IFRS14, ‘Regulatory deferral accounts’; effective on or after 1st January 2016. • IFRS15, ‘Revenue from contracts with customers’; effective on or after 1st January 2018. • Amendments to IAS16 and IAS38 ‘Clarification of acceptable methods of depreciation and amortisation’; effective on or after 1st January 2016. • Amendments to IFRS11 ‘Accounting for acquisitions of interests in joint operations’; effective on or after 1st January 2016. • Amendment to IAS27 ‘Equity method in separate financial statements’; effective on or after 1st January 2016. • IAS1 ‘Disclosure initiative’; effective on or after 1st January 2016. • Annual improvements to IFRS’s 2012-14 cycle IFRS5, IFRS7, IAS19 and IAS34; effective on or after 1st January 2016. Subsidiaries are all entities over which the group has the power to govern the financial and operating policies generally accompanying a shareholding of more than one half of the voting rights. 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 consolidated financial statements of T.F. & J.H. Braime (Holdings) P.L.C. incorporate the financial statements of the parent company as well as those entities controlled by the group by full consolidation. The group uses the acquisition method of accounting to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred and the equity interests issued by the group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Acquisition related 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. On an acquisition-by-acquisition basis, the group recognises any non-controlling interest in the acquiree either at fair value or at the non-controlling interest’s proportionate share of the acquiree’s net assets. 24 T. F. & J. H . BR A IM E (HO LDIN G S) P. L.C . Notes to the accounts continued The excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition date fair value of any previous equity interest in the acquiree over the fair value of the group’s share of the identifiable net assets acquired is recorded as goodwill. If this is less than the fair value of the net assets of the subsidiary acquired in the case of a bargain purchase, the difference is recognised directly in profit or loss. Inter-company transactions, balances and unrealised gains on transactions between group companies are eliminated. Unrealised losses are also eliminated. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the group. Non-controlling interests in the net assets of the consolidated subsidiaries are identified separately from the group’s equity therein. Non-controlling interests consist of the amount of those interests at the date of the original business combination and the minority’s share of changes in equity since the date of the combination. Where losses are accumulated, all earnings and losses of the subsidiaries are attributed to the parent and the non-controlling interest in proportion to their ownership. 1.7 Foreign currency T.F. & J.H. Braime (Holdings) P.L.C. consolidated financial statements are presented in sterling (£), which is also the functional currency of the parent company. In the separate financial statements of the consolidated entities, foreign currency transactions are translated into the functional currency of the individual entity using the month end exchange rates as an approximation to that prevailing at the dates of the transactions (spot exchange rate). Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities at year-end exchange rates are recognised in the income statement under ‘other income’ or ‘other expenses’, respectively. In the consolidated financial statements, all separate financial statements of subsidiaries originally presented in a currency different from the group’s presentation currency, have been converted into sterling. Assets and liabilities have been translated into sterling at the closing rate at the balance sheet date. Income and expenses have been converted into the group’s presentation currency using the exchange rates prevailing at the dates of the transactions. Any differences arising from this procedure have been charged/(credited) to the currency translation reserve in equity. 1.8 Financial assets The group considers that its financial assets comprise loans and receivables only. These assets are non- derivative financial assets with fixed or determinable payments, not quoted in an active market. They arise principally through the provision of goods and services to customers (trade debtors) but also incorporate other types of contractual monetary assets. They are carried at cost less provision for impairment. Impairment provisions are recognised when there is objective evidence (such as significant financial difficulties on the part of the counterparty or default or significant delay in payment) that the group will be unable to collect all of the amounts due under the terms receivable, the amount of such a provision being the difference between the net carrying amount and the present value of the future expected cash flows associated with the impaired receivable. For trade receivables, which are reported net, such provisions are recorded in a separate allowance account with the loss being recognised within administrative expenses in the income statement. On confirmation that the trade receivable will not be collectable, the gross carrying value of the asset is written off against the associated provision. Financial assets are recognised when the group enters into a contractual agreement with a third party through an instrument. All interest received is recognised as finance income in the income statement. 25 T. F. & J.H. BRAIME (HO LDINGS) P.L.C. Notes to the accounts continued 1.9 Financial liabilities The group’s financial liabilities include bank loans and overdrafts, other loans, trade and other payables, finance leasing liabilities and forward currency contracts. They are included in balance sheet line items ‘bank overdraft’, ‘trade and other payables’, ‘long-term financial liabilities’ and ‘other financial liabilities’. Financial liabilities are recognised when the group becomes a party to the contractual agreements of the instrument. All interest related charges are recognised as an expense in ‘finance cost’ in the income statement. Bank loans are raised for support of long term funding of the group’s operations. They are recognised at fair value, net of direct issue costs. Finance charges, including premiums payable on settlement or redemption and direct issue costs, are charged to the income statement using the effective interest method and are added to the carrying amount of the instrument to the extent that they are not settled in the period in which they arise. Forward currency contracts are held at fair value and are used to hedge exchange risk arising on foreign currency transactions denominated in a currency other than the transacting entities’ functional currency. No adjustment is made for the fair value of forward currency contracts where such adjustment is clearly not material to the results presented in the financial statements (note 17) Trade payables are recognised initially at their fair value and subsequently measured at amortised cost less settlement payments. 1.10 Cash and cash equivalents Cash and cash equivalents include cash at bank and in hand as well as short term highly liquid investments such as money market instruments and bank deposits. For the purposes of the cash flow statement cash and cash equivalents include bank overdrafts. 1.11 Borrowing costs All borrowing costs are expensed as incurred. 1.12 Pension obligations and short term employee benefits Pensions to employees are provided through a defined benefit plan as well as a defined contribution plan. A defined benefit plan is a pension plan that defines an amount of pension benefit that an employee will receive on retirement, usually dependent on one or more factors such as age, years of service and salary. The legal obligation for any benefits from this kind of pension plan remains with the group, even if the plan assets for funding the defined benefit plan have been acquired. Plan assets may include assets specifically designated to a long term benefit fund as well as qualifying insurance policies. A defined contribution plan is a pension plan under which the group pays fixed contributions into an independent entity. The group has no legal or constructive obligations to pay further contributions after payment of the fixed contribution. The asset or liability recognised in the balance sheet for defined benefit pension plans is the present value of the defined benefit obligation (DBO) at the balance sheet date less the fair value of plan assets, together with adjustments for past service costs. The DBO is calculated annually by independent actuaries using the projected unit credit method. The present value of the DBO is determined by discounting the estimated future 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. Remeasurement gains and losses are recognised immediately and in full in the statement of comprehensive income. Past service costs are recognised immediately in the consolidated income statement, unless the changes to the pension plan are conditional on the employees remaining in service for a specified period of time (the vesting period). In this case, the past service costs are amortised on a straight- line basis over the vesting period. 26 T. F. & J. H . BR A IM E (HO LDIN G S) P. L.C . Notes to the accounts continued The contribution recognised in respect of defined contribution plans are expensed as they fall due. Liabilities and assets may be recognised if underpayment or prepayment has occurred and are included in current liabilities or current assets as they are normally of a short-term nature. Short-term employee benefits are recognised for the number of paid leave days (usually holiday entitlement) remaining at the balance sheet date. They are included in current pension and other employee obligations at the undiscounted amount that the group expects to pay as a result of the unused entitlement. If the group will not benefit from a scheme surplus in the form of refunds from the plan or reduced future contributions, an adjustment is made in respect of the minimum funding requirement and no asset resulting from the above policy is recognised. 1.13 Leased assets Where substantially all of the risks and rewards incidental to ownership of a leased asset have been transferred to the group (a ‘finance lease’ or ‘hire purchase contract’), the asset is treated as if it had been purchased outright. The amount initially recognised as an asset is the present value of the minimum lease payments payable over the term of the lease. The corresponding lease commitment is shown as a liability. Lease payments are analysed between capital and interest. The interest element is charged to the consolidated income statement over the period of the lease and is calculated so that it represents a constant proportion of the lease liability. The capital element reduces the balance owed to the lessor. Where substantially all of the risks and rewards incidental to ownership are retained by the lessor (an ‘operating lease’), the total rentals payable under the lease are charged to the income statement on a straight-line basis over the lease term. The land and buildings elements of property leases are considered separately for the purposes of lease classification. 1.14 Impairment of non-financial assets The group’s property, plant and equipment are subject to impairment testing. An asset is impaired where there is objective evidence that, as a result of one or more events that occurred after initial recognition, the estimated recoverable value of the asset has been reduced. Individual assets or cash-generating units with an indefinite useful life or those not yet available for use are tested for impairment at least annually. All individual assets or cash-generating units are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s or cash-generating unit’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of fair value, reflecting market conditions less costs to sell and value in use, based on an internal discounted cash flow evaluation. Impairment losses are charged pro-rata to the assets in the cash-generating unit. All assets are subsequently re-assessed for indications that an impairment loss previously recognised may no longer exist. 1.15 Research and development Costs associated with research activities are expensed in the consolidated income statement as they occur. 1.16 Income taxes Current income tax assets and/or liabilities comprise those obligations to, or claims from, fiscal authorities relating to the current or prior reporting period, that are unpaid at the balance sheet date. They are calculated according to the tax rates and tax laws applicable to the fiscal periods to which they relate, based on the taxable profit for the year. All changes to current tax assets or liabilities are recognised as a component of tax expense in the consolidated income statement. 27 T. F. & J.H. BRAIME (HO LDINGS) P.L.C. Notes to the accounts continued Deferred income taxes are calculated using the liability method on temporary differences. This involves the comparison of the carrying amounts of assets and liabilities in the consolidated financial statements with their respective tax bases. This applies also to temporary differences associated with shares in subsidiaries if reversal of these temporary differences can be controlled by the group and it is probable that reversal will not occur in the foreseeable future. In addition, tax losses available to be carried forward as well as other income tax credits to the group are assessed for recognition as deferred tax assets. Deferred tax liabilities are always provided for in full. Deferred tax assets are recognised to the extent that it is probable that they will be able to be offset against future taxable income. Deferred tax assets and liabilities are calculated, without discounting, at tax rates that are expected to apply to their respective period of realisation, provided they are enacted or substantively enacted at the balance sheet date. Most changes in deferred tax assets or liabilities are recognised as components of tax expense in the income statement. Only changes in deferred tax assets or liabilities that relate to a change in value of assets or liabilities that are charged or credited directly to equity are charged or credited directly to equity. 1.17 Dividends Equity dividends are recognised when they become legally payable. In the case of dividends to equity shareholders, they are recognised when paid. In the case of final dividends, this is when approved by the shareholders at the Annual General Meeting. 1.18 Property, plant and equipment Property, plant and equipment (other than freehold land) are carried at acquisition cost less subsequent depreciation and impairment losses. No depreciation has been charged in respect of certain land and buildings as the directors have assessed that those assets have residual values equal to or greater than current carrying values. The useful lives of property, plant and equipment can be summarised as follows: • Land and buildings – 50 years • Plant, machinery and motor vehicles – 4 - 5 years on a straight line basis 1.19 Inventories Inventories comprise raw materials, supplies and purchased goods. Cost includes all expenses directly attributable to the manufacturing process as well as suitable portions of related production overheads, based on normal operating capacity. Financing costs are not taken into consideration. At the balance sheet date, inventories are carried at the lower of cost and net realisable value. Net realisable value is the estimated selling price in the ordinary course of business less any applicable selling expenses. 1.20 Government grants Government grants received on capital expenditure are generally deducted in arriving at the carrying amount of the asset purchased. Grants for revenue expenditure are netted against the cost incurred by the group. Where retention of a government grant is dependent on the group satisfying certain criteria, it is initially recognised as deferred income. When the criteria for retention has been satisfied, the deferred income balance is released to the consolidated income statement or netted against the asset purchased as appropriate. 1.21 Other provisions, contingent liabilities and contingent assets Other provisions are recognised when present obligations will probably lead to an outflow of economic resources from the group and they can be estimated reliably. Restructuring provisions are recognised only if a detailed formal plan for the restructuring has been developed and implemented, or management has at least announced the plan’s main features to those affected by it. Provisions are not recognised for future operating losses. 28 T. F. & J. H . BR A IM E (HO LDIN G S) P. L.C . Notes to the accounts continued Provisions are measured at the estimated expenditure required to settle the present obligation, based on the most reliable evidence available at the balance sheet date, including the risks and uncertainties associated with the present obligation. Any reimbursement expected to be received in the course of settlement of the present obligation is recognised, if virtually certain as a separate asset, not exceeding the amount of the related provision. Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. In addition, long term provisions are discounted to their present values, where time value of money is material. All provisions are reviewed at each balance sheet date and adjusted to reflect the current best estimate. In those cases where the possible outflow of economic resource as a result of present obligations is considered improbable or remote, or the amount to be provided for cannot be measured reliably, no liability is recognised in the consolidated balance sheet. These contingent liabilities are recognised in the course of the allocation of purchase price to the assets and liabilities acquired in the business combination. They are subsequently measured at the higher amount of a comparable provision as described above and the amount initially recognised, less any amortisation. Probable inflows of economic benefits to the group that do not yet meet the recognition criteria of an asset are considered contingent assets. 29 T. F. & J.H. BRAIME (HO LDINGS) P.L.C. Notes to the accounts continued 2. PROFIT FROM OPERATIONS This has been arrived at after charging/(crediting): Depreciation Foreign exchange differences Research and development costs Write-down of inventory to net realisable value Fees payable to the company’s auditor: • for the audit of the company’s annual accounts • the audit of the company’s subsidiaries, pursuant to legislation • other services pursuant to legislation Profit on disposal of fixed assets Operating lease payments Note 7 2015 £ 758,589 5,686 152,545 81,010 5,250 26,750 3,000 (1,158,140) 173,312 2014 £ 564,244 16,655 138,752 253,081 5,000 27,000 3,000 (2,796) 121,343 Profit on disposal of fixed assets includes £769,277 from the part disposal of the land and buildings in Hunslet, Leeds and £373,350 from the disposal of one item of plant. 30 T. F. & J. H . BR A IM E (HO LDIN G S) P. L.C . Notes to the accounts continued 3. SEGMENTAL INFORMATION Segmental information is presented in respect of the group’s business segments, which are based on the group’s management and internal reporting structure as at 31st December 2015. The chief operating decision-maker has been identified as the board of directors (‘the board’). The board reviews the group’s internal reporting in order to assess performance and allocate resources. Management has determined the operating segments based on these reports and on the internal reporting structure. The board assesses performance based on a measure of earnings before tax. Other information provided to the board is measured in a manner consistent with that in the financial statements. Total segment assets exclude assets and liabilities that are managed on a central basis. These balances are part of the reconciliation to the total balance sheet assets and liabilities. Inter-segment pricing is determined on an arms-length basis. The group comprises the following segments: the manufacture of metal presswork and the distribution of bulk material handling components. Central Manufacturing Distribution 2015 £ 2015 £ 2015 £ Total 2015 £ Revenue External Inter company Total Profit EBITDA Gain on sale of tangible fixed assets Finance costs Finance income Depreciation Tax expense (Loss)/profit for the period Assets Total assets Additions to non current assets Liabilities Total liabilities - 122,593 122,593 3,955,447 3,267,777 7,223,224 22,514,637 4,411,488 26,926,125 26,470,084 7,801,858 34,271,942 (102,140) - (48,347) - - (44,540) (195,027) 35,632 1,149,629 (30,566) 3,666 (432,370) - 725,991 1,722,532 8,511 (37,917) 8,060 (326,219) (364,397) 1,010,570 1,656,024 1,158,140 (116,830) 11,726 (758,589) (408,937) 1,541,534 1,314,918 - 4,588,122 1,146,385 10,552,111 265,722 16,455,151 1,412,107 701,606 2,839,750 4,285,686 7,827,042 31 T. F. & J.H. BRAIME (HO LDINGS) P.L.C. Notes to the accounts continued Revenue External Inter company Total Profit EBITDA Finance costs Finance income Depreciation Tax expense (Loss)/profit for the period Assets Total assets Additions to non current assets Liabilities Total liabilities Central 2014 £ - 113,568 113,568 (5,777) (27,820) - (6,300) (78,099) (117,996) Manufacturing 2014 £ Distribution 2014 £ Total 2014 £ 3,621,626 2,761,536 6,383,162 20,670,074 3,743,664 24,413,738 24,291,700 6,618,768 30,910,468 219,116 (46,387) 2,000 (287,663) (34,335) (147,269) 1,589,501 (41,084) 164 (270,281) (230,906) 1,047,394 1,802,840 (115,291) 2,164 (564,244) (343,340) 782,129 1,323,858 - 4,033,070 1,118,171 10,068,908 399,405 15,425,836 1,517,576 520,316 2,868,453 4,682,630 8,071,399 Geographical analysis The group is domiciled in the UK. Analysis of revenues from external customers by continent is provided below: UK Europe Americas Africa Asia Australasia Revenue 2015 £’000 6,704 6,207 10,701 995 865 998 26,470 Non-current assets 2015 £’000 Revenue 2014 £’000 Non-current assets 2014 £’000 3,010 66 1,523 35 68 40 4,742 6,261 5,312 9,485 1,435 806 993 24,292 2,341 71 1,621 30 45 63 4,171 There is one group customer which accounts for more than 10% of the group’s revenues. 32 T. F. & J. H . BR A IM E (HO LDIN G S) P. L.C . Notes to the accounts continued 4. FINANCE INCOME AND EXPENSE Finance expense Bank borrowings Hire purchase interest Preference share dividend Finance income Bank interest received Other finance income Note 2015 £ 2015 £ 101,001 15,829 - 19.6 8,726 3,000 116,830 11,726 (105,104) 2014 £ 87,913 18,666 8,712 164 2,000 2014 £ 115,291 2,164 (113,127) 5. TAX EXPENSE Current tax expense UK corporation tax UK tax expense on profits for the year Prior year adjustment Foreign corporation tax Foreign tax expense on profits for the year Prior year adjustment Current tax charge Deferred tax – origination and reversal of timing differences Prior year rate difference Total tax charge 2015 £ 2015 £ 2014 £ 2014 £ - - 376,560 (6,235) 13,932 (30,515) - (16,583) 306,325 (22,025) 370,325 370,325 15 15 42,046 (3,434) 75,623 - 38,612 408,937 284,300 267,717 75,623 343,340 33 T. F. & J.H. BRAIME (HO LDINGS) P.L.C. Notes to the accounts continued The reasons for the difference between the actual tax charge for the year and the standard rate of corporation tax in the UK applied to profits for the year are as follows: Profit before tax Expected tax charge based on the standard rate of corporation tax in the UK of 20.25% (2014 – 21.50%) Expenses not deductible for tax purposes Income not taxable Tax credits on research and development Profit on property disposal non taxable Foreign tax Utilisation of tax losses Deferred tax not provided Prior year adjustment Rate differences 2015 £ 1,950,471 2014 £ 1,125,469 394,971 14,760 (336) (24,239) (137,492) 161,282 (5,058) 14,497 (6,235) (3,213) 408,937 241,975 37,612 (356) (24,803) - 145,906 - (2,064) (52,540) (2,390) 343,340 No deferred tax asset arising on tax losses, accelerated depreciation in excess of capital allowances or deferred tax liability in respect of the pension provision has been recognised as their future realisation is relatively uncertain. The amounts not recognised are estimated at £11,000, £6,000 and £(9,000) respectively (2014 - £16,000, £nil and £(10,000)) calculated at a rate of 18% (2014 – 20%). 6. EMPLOYEES The average number of employees of the group during the year was made up as follows: Office and management Manufacturing Staff costs (including directors) comprise: Wages and salaries Defined contribution pension cost Defined benefit pension cost Other long-term employee benefits Ex-gratia pensions Employer’s national insurance contributions and similar taxes Included in other expenses Directors’ remuneration: Emoluments of qualifying services Company pension contributions to money purchase schemes Note 19.6 2015 No. 81 64 145 £ 5,300,358 147,076 67,000 25,198 11,948 566,673 6,118,253 (95,761) 6,022,492 533,373 28,355 561,728 2014 No. 78 58 136 £ 4,641,335 104,283 116,000 10,098 15,287 514,646 5,401,649 (92,292) 5,309,357 489,704 26,831 516,535 The number of directors for whom retirement benefits are accruing under money purchase pension schemes amounts to 3 (2014 – 4) and under defined benefit pension schemes amounted to nil (2014 – 1). Further details of directors remuneration are included in the remuneration report. 34 Notes to the accounts continued 7. PROPERTY, PLANT AND EQUIPMENT At 31st December 2015 Cost Accumulated depreciation Net book value At 31st December 2014 Cost Accumulated depreciation Net book value Year ended 31st December 2015 Opening net book value Additions Disposals Depreciation Exchange differences Closing net book value Year ended 31st December 2014 Opening net book value Additions Disposals Depreciation Exchange differences Closing net book value T. F. & J. H . BR A IM E (HO LDIN G S) P. L.C . Plant, machinery and motor vehicles £ Land and buildings £ Total £ 2,755,211 122,426 2,632,785 7,717,038 5,672,367 2,044,671 10,472,249 5,794,793 4,677,456 2,058,146 83,614 1,974,532 7,429,790 5,347,816 2,081,974 9,487,936 5,431,430 4,056,506 1,974,532 722,626 (30,771) (31,515) (2,087) 2,632,785 2,081,974 689,481 (1,650) (727,074) 1,940 2,044,671 4,056,506 1,412,107 (32,421) (758,589) (147) 4,677,456 1,430,840 551,665 - (6,300) (1,673) 1,974,532 1,688,538 965,911 (11,744) (557,944) (2,787) 2,081,974 3,119,378 1,517,576 (11,744) (564,244) (4,460) 4,056,506 The net book value of tangible fixed assets includes an amount of £504,264 (2014 - £293,698) in respect of assets held under finance leases and hire purchase contracts. The related depreciation charge on these assets for the year was £120,272 (2014 - £114,705). The total cost of non-depreciable assets included in freehold land and buildings was £1,356,863 (2014 - £174,412). 35 T. F. & J.H. BRAIME (HO LDINGS) P.L.C. Notes to the accounts continued 8. SUBSIDIARIES Subsidiary Principal activity Proportion of shares held 2015 and 2014 Ordinary Shares Preference Shares i Registered in and operating from England: Braime Pressings Limited Manufacture of metal presswork 100% 100% 4B Braime Components Limited Distribution of bulk material handling components ii iii Registered in England and operating from the USA: 4B Elevator Components Limited Distribution of bulk material handling components Incorporated in and operating from France: 4B France sarl Distribution of bulk material handling components iv Incorporated in and operating from Thailand: 4B Asia Pacific Company Limited Distribution of bulk material handling components v vi Incorporated in and operating from South Africa: 4B Africa Elevator Components (Pty) Limited Distribution of bulk material handling components Incorporated in and operating from Australia: 4B Australia Pty Limited Distribution of bulk material handling components 100% 100% 100% 48% 100% - - - - - 100% - While only 48% of the ordinary shares are held in 4B Asia Pacific Company Limited the company controls 89% of the voting rights. As a consequence no single investor directly controls the investee however, given the operational management that the company demonstrates, it has the ability to direct the relevant activities and the decision making process such that it has power over the investee. 9. FINANCIAL ASSETS Secured loan to third party Amount due on loan within one year Other loans (unsecured) due within one year Amount due on the loan within one to two years Amount due on the loan within two to five years Total amount due after more than one year 2015 £ 49,977 7,800 57,777 51,877 - 51,877 109,654 2014 £ 98,147 - 98,147 49,977 51,876 101,853 200,000 One of the loans was fully repaid in the year, the remaining secured loan accrues interest at 3.25% above the Bank of England base rate. The loan is repaid quarterly and is due to be fully repaid by 2017. 36 T. F. & J. H . BR A IM E (HO LDIN G S) P. L.C . Notes to the accounts continued 10. INVENTORIES Raw materials Work in progress Finished goods Goods in transit 2015 £ 286,091 34,988 5,309,569 89,006 5,719,654 2014 £ 318,478 39,694 4,418,383 111,628 4,888,183 During the twelve months ended 31st December 2015 the group recognised a charge of finished goods inventories of £81,010 (2014 – £253,081) to reflect the ageing of certain stock items. 11. TRADE AND OTHER RECEIVABLES Trade debtors Other debtors Prepayments 2015 £ 3,943,878 758,739 302,482 5,005,099 2014 £ 4,059,026 347,077 505,005 4,911,108 Where possible credit insurance is obtained and sales to customers kept within agreed credit limits. Experience over the last five years has shown that bad debts in any one year have not exceeded £10,000. The risk in relation to credit risk is considered low and is supported by the low level of bad debts experienced, both pre and post credit insurance claims, by the group in any one year. There are no material bad debt provisions and no material past due balances. 12. TRADE AND OTHER PAYABLES – CURRENT Trade creditors Other taxes and social security costs Other creditors Accruals 13. OTHER FINANCIAL LIABILITIES – CURRENT Bank loans - secured Hire purchase Other creditors 2015 £ 2,605,917 316,552 267,662 863,089 4,053,220 2014 £ 2,767,704 175,252 135,470 674,168 3,752,594 Note 14 2015 £ 245,815 169,884 1,082,472 1,498,171 2014 £ 176,505 92,978 1,053,612 1,323,095 An analysis of the interest rate payable on financial liabilities and information about fair values is given in note 17. Other creditors comprise of an invoice discounting facility which has been secured by a fixed and floating charge over certain assets of certain group companies. 37 T. F. & J.H. BRAIME (HO LDINGS) P.L.C. Notes to the accounts continued 14. FINANCIAL LIABILITIES – NON-CURRENT Bank loans – secured Hire purchase Government grants Note 2015 £ 1,005,064 351,892 6,568 1,363,524 2014 £ 945,394 157,427 8,224 1,111,045 Obligations under finance lease and hire purchase contracts comprise amounts payable as follows: In one year or less, or on demand In more than one year but not more than five years Obligations under bank loan agreements comprise amounts payable as follows: Within one year One to two years Two to five years Over five years 2015 £ 169,884 351,892 521,776 2015 £ 245,815 243,903 540,938 220,223 1,250,879 2014 £ 92,978 157,427 250,405 2014 £ 176,505 174,579 468,724 302,091 1,121,899 Terms and conditions of outstanding loans were as follows: US dollar bank loan US dollar unsecured bank loan US dollar term loan GBP term loan GBP term loan Interest rate % 4.25% fixed 3.00% fixed 2.25% over LIBOR 2.50% over Bank of England base rate 2.75% over Bank of England base rate Year of maturity 2018 2022 2015 £ 123,265 39,955 2014 £ 157,579 43,535 2023 668,062 720,785 2019 159,597 200,000 2020 260,000 - The 4.25% fixed US dollar bank loan is secured on specific plant and equipment held by 4B Elevator Components Limited. The US dollar term loan and the GBP term loans form part of the group funding arrangements. These loans are secured by a fixed and floating charge over certain assets of certain group companies. 38 T. F. & J. H . BR A IM E (HO LDIN G S) P. L.C . Notes to the accounts continued 15. DEFERRED INCOME TAX LIABILITY Accelerated capital allowances in excess of depreciation Rolled over capital gains Balance at 1st January 2015 Charged to income statement during the year Balance at 31st December 2015 2015 £ 159,636 70,599 230,235 2014 £ 191,623 - 191,623 Deferred tax £ 191,623 38,612 230,235 Deferred tax has been recognised at a rate of 39% on accelerated capital allowances in 4B Elevator Components Limited and 18% in respect of the company and Braime Pressings Limited. 16. SHARE CAPITAL Authorised: 480,000 Ordinary shares of 25p each 1,200,000 ‘A’ Ordinary shares of 25p each Allotted, called up and fully paid: 480,000 Ordinary shares of 25p each 960,000 ‘A’ Ordinary shares of 25p each 2015 £ 120,000 300,000 420,000 120,000 240,000 360,000 2014 £ 120,000 300,000 420,000 120,000 240,000 360,000 The ‘A’ Ordinary shares rank pari passu in all respects with Ordinary shares except that the holders of ‘A’ Ordinary shares are not entitled to vote at general meetings. Holders of Ordinary shares are entitled to one vote for every four shares held. 39 T. F. & J.H. BRAIME (HO LDINGS) P.L.C. Notes to the accounts continued 17. FINANCIAL INSTRUMENTS The group’s activities expose it to a variety of financial risks: market risk (including currency risk and cash flow interest rate risk), credit risk and liquidity risk. The group holds financial instruments in order to finance its operations and to manage the interest rate and currency risks arising from those operations. In addition various financial instruments such as trade debtors and trade creditors arise directly from the group’s operations. The group holds both financial assets and financial liabilities. Financial assets comprise cash balances, loans and receivables and are disclosed on the balance sheet as trade and other receivables. Financial liabilities comprise financial liabilities measured at amortised cost including bank loans and overdrafts, trade and other payables and finance leasing liabilities. Financial liabilities also include forward currency contracts at a fair value. There is no formal policy for matching foreign currency cash flows, or matching exposure to foreign currency net assets or liabilities although a careful watch is kept on the positions. As shown below the group’s currency exposure at the year end is £72,090 (2014 - £327,073) and is primarily euros and US dollars to sterling. The group’s policy is to ensure a balance of financial instruments to meet its operating requirements. This has been achieved during the period. Unutilised committed borrowing facilities have been maintained in order to provide flexibility in the management of liquidity. Fair values There is no material difference between the carrying value and the fair value of the group’s financial assets and liabilities. Financial instruments carried at fair value are required to be measured by reference to the following levels: Level 1 - quoted prices (unadjusted) in active markets for identical assets or liabilities; Level 2 - inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and Level 3 - inputs for the asset or liability that are not based on observable market data (unobservable inputs). The level within which the financial asset or liability is classified is determined based on the lowest level of significant input to one fair value measurement. The only derivatives entered into by the group are included in level 2 and consist of fixed interest term loans and foreign currency forward contracts. Forward contracts Forward currency contracts of £1,361,211 were outstanding at 31st December 2015 covering periods from 15th January 2016 to 20th June 2016 (31st December 2014 - £667,040). The fair value of the forward currency contracts is £41,785 (2014 - £17,643). £25,000 has been included within trade and other payables in respect of these derivative financial instruments. Fixed interest term loans As at 31st December 2015 fixed interest rate term loans amounted to £123,265 and £39,955 (see note 14). The directors are of the opinion that the fair value of these fixed interest rate loans is not materially different to their stated carrying values. Maturity analysis Other than is disclosed in note 14 regarding bank loans and obligations under finance lease and hire purchase agreements all financial instruments fall due within one year. In addition to the maturity analysis disclosed in note 14 the interest due on hire purchase agreements repayable within one year totals £21,205 (2014 - £12,390), the interest due on finance lease and hire purchase agreements after one year but not more than five years totals £41,747 (2014 - £18,981). Likewise the interest due on bank loans repayable within one year totals £31,937 (2014 - £29,087), the interest due on bank loans repayable after one year but not more than five years totals £60,199 (2014 - £65,116), and the interest due on bank loans repayable after more than five years totals £6,303 (2014 - £12,022). 40 T. F. & J. H . BR A IM E (HO LDIN G S) P. L.C . Notes to the accounts continued Interest rate and currency of financial assets and liabilities The currency and interest rate profile of the group’s interest bearing financial assets is shown below: Currency As at 31st December 2015 Sterling Euro US dollar Other As at 31st December 2014 Sterling Euro US dollar Other Floating rate financial assets £ Fixed rate financial assets £ Total £ 124,944 227,538 400,922 279,468 1,032,872 702,336 117,166 464,166 274,102 1,557,770 - - - - - - - - - - 124,944 227,538 400,922 279,468 1,032,872 702,336 117,166 464,166 274,102 1,557,770 Interest rate and currency of financial assets and liabilities The currency and interest rate profile of the group’s interest bearing financial liabilities is shown below: Currency As at 31st December 2015 Sterling Euro US dollar Other As at 31st December 2014 Sterling Euro US dollar Other Floating rate financial liabilities £ Fixed rate financial liabilities £ Total £ 1,935,078 344,247 505,844 - 2,785,169 477,875 - 163,220 43,901 684,996 2,412,953 344,247 669,064 43,901 3,470,165 2,261,991 497,521 - 93 2,759,605 223,760 - 921,899 26,644 1,172,303 2,485,751 497,521 921,899 26,737 3,931,908 Floating rate financial liabilities comprise bank borrowings. 41 T. F. & J.H. BRAIME (HO LDINGS) P.L.C. Notes to the accounts continued Currency exposure The monetary assets and liabilities of the group that are not denominated in the functional currency of the operating unit concerned are shown below. Non interest bearing financial assets and liabilities Functional currency At 31st December 2015 Sterling Euro US dollar Functional currency At 31st December 2014 Sterling Euro US dollar Sterling £ Euro £ US dollar £ Other currencies £ Total £ - (961,068) 91,381 (869,687) 151,930 - (38,322) 113,608 (1,005,800) - - (1,005,800) 1,833,969 - - 1,833,969 980,099 (961,068) 53,059 72,090 - (1,015,510) (571,042) (1,586,552) 299,314 - (19,700) 279,614 237,283 - - 237,283 1,396,728 - - 1,396,728 1,933,325 (1,015,510) (590,742) 327,073 Risk sensitivity A change in interest rates of 1% in any of the three currencies invested or borrowed will not affect the income statement by a figure greater or less than £30,000 (2014 - 30,000). A weakening in the value of sterling by 10% will benefit the operating profit by a figure not exceeding £30,000 (2014 - £15,000). A strengthening of sterling by 10% will reduce the operating profit by a figure not greater than £20,000 (2014 - £10,000). These amounts are estimates. Actual results in the future may differ materially from these due to development in the global financial markets which may cause fluctuations in interest and exchange rates to vary. The amounts stated above should not be considered a projection of likely future events and losses. Borrowing facilities The group has the following undrawn committed borrowing facilities: Expiring in one year or less 2015 £ 1,142,497 2014 £ 932,804 These facilities are for the purposes of working capital flexibility and are reviewed annually. Group bank loans and overdrafts and invoice discounting facilities have been secured by a fixed and floating charge over certain assets of certain group companies. 42 Notes to the accounts continued Foreign currency risk Foreign exchange risk arises because the group has operations located in various parts of the world whose functional currency is not the same as the group’s primary functional currency (sterling). Although its global market penetration arguably reduces the group’s risk in that it has diversified into several markets, the net assets from such overseas operations are exposed to currency risk giving rise to gains or losses on re-translation into sterling. Only in exceptional circumstances will the group consider hedging its net investments in overseas operations as generally it does not consider that the cash flow risk created from such hedging techniques warrants the reduction in volatility in consolidated net assets. Foreign exchange risk also arises when individual group operations enter into transactions denominated in a currency other than their functional currency. It is group policy that all such transactions should be hedged locally by entering into forward contracts with group treasury. Where it is considered that the risk to the group is significant, group treasury will enter into a matching forward contract with a reputable bank. It is group policy that transactions between group entities are always denominated in the selling group entity’s functional currency thereby giving rise to foreign exchange risk in the income statement of both the purchasing group entity and the group. Although the purchasing group entity might hedge this exposure with group treasury, no external hedge is entered into at group level as there is no exposure to consolidated net assets from intra-group transactions. Liquidity risk The liquidity risk of each group entity is managed centrally by the group treasury function. Each operation has a facility with group treasury, the amount of the facility being based on budgets. The budgets are set locally and agreed by the board annually in advance, enabling the group’s cash requirements to be anticipated. Where facilities of group entities need to be increased, approval must be sought from the group finance director. Where the amount of the facility is above a certain level agreement of the board is needed. T. F. & J. H . BR A IM E (HO LDIN G S) P. L.C . All surplus cash is held centrally to maximize the returns on deposits through economics of scale. The type of cash instrument used and its maturity date will depend on the group’s forecast cash requirements. The group maintains a draw down facility with a major banking corporation to manage any unexpected short- term cash shortfalls. Interest rate risk The group finances its operations through a mixture of retained profit, bank borrowings and finance lease arrangements. The group borrows at floating rates and has hedging products in place to provide fixed interest payments for a proportion of its debt over a specified period. This enables the group to forecast borrowing costs with a degree of certainty. Credit risk The group is mainly exposed to credit risk from credit sales. It is group policy, implemented locally, to insure sales when insurance cover is available. Qualitative disclosures have been made in note 11. The group does not enter into complex derivatives to manage credit risk. Capital risk The group’s objective when maintaining capital, being the share capital and capital reserves, is to safeguard the group’s ability to continue as a going concern so that it is able to provide returns for shareholders and benefits for other stakeholders. 43 T. F. & J.H. BRAIME (HO LDINGS) P.L.C. Notes to the accounts continued 18. EARNINGS PER SHARE AND DIVIDENDS Both the basic and diluted earnings per share have been calculated using the net results attributable to shareholders of T.F. & J.H. Braime (Holdings) P.L.C. as the numerator. The weighted average number of outstanding shares used for basic earnings per share amounted to 1,440,000 shares (2014 – 1,440,000). There are no potentially dilutive shares in issue. Dividends paid Equity shares Ordinary shares Interim of 6.20p (2014 – 6.20p) per share paid on 2nd April 2015 Interim of 2.90p (2014 – 2.90p) per share paid on 18th October 2015 ‘A’ Ordinary shares Interim of 6.20p (2014 – 6.20p) per share paid on 2nd April 2015 Interim of 2.90p (2014 – 2.90p) per share paid on 18th October 2015 2015 £ 2014 £ 29,760 13,920 43,680 59,520 27,840 87,360 29,760 13,920 43,680 59,520 27,840 87,360 Total dividends paid 131,040 131,040 An interim dividend of 6.20p per Ordinary and ‘A’ Ordinary share will be paid on 12th May 2016. 44 T. F. & J. H . BR A IM E (HO LDIN G S) P. L.C . Notes to the accounts continued 19. PENSION COSTS 19.1 The group operates a funded defined benefit pension scheme, Braime Pressings Limited Retirement Benefits Scheme, which provides benefits based on final salary and length of service on retirement, leaving service or death on behalf of certain companies in the T.F. & J.H. Braime (Holdings) P.L.C. group. The assets of the scheme are held separately from those of the group, being predominantly invested with an insurance company. The scheme is funded to cover future pension liabilities. 19.2 The scheme is subject to the Statutory Funding Objective under the Pensions Act 2004. A valuation of the scheme is carried out at least once every three years to determine whether the Statutory Funding Objective is met. As part of the process the group must agree with the trustees of the scheme the contributions to be paid to address any shortfall against the Statutory Funding Objective and contributions to pay for future accrual of benefits. A qualified actuary determines the contributions payable to the scheme. The most recent actuarial valuation was conducted at 6th April 2013. The market value of scheme assets at 6th April 2013 was £7,808,000. The funding level at 6th April 2013 was 101% on an ongoing basis. 19.3 The scheme exposes the company to a number of risks: • Investment risk. The scheme holds investments in asset classes such as equities, which have volatile market values and while these assets are expected to provide real returns over the long-term the short-term volatility can cause additional funding to be required if a deficit emerges. • Interest rate risk. The scheme’s liabilities are assessed using market yields on high quality corporate bonds to discount the liabilities. As the scheme holds assets such as equities or annuity policies the value of the assets and liabilities may not move in the same way. • Inflation risk. A significant proportion of the benefits under the scheme are linked to inflation. Although the scheme’s assets are expected to provide a good hedge against inflation over the long-term, movements over the short-term could lead to deficits emerging. • Mortality risk. In the event that members live longer than assumed a deficit will emerge in the scheme. There were no plan amendments, curtailments or settlements during the period. Remeasurement gains and losses arising from experience adjustments and changes in actuarial assumptions are recognised within the consolidated statement of comprehensive income. 19.4 The expected return on assets is equivalent to the discount rate applied and based on the yield available on high quality corporate bands of appropriate term and currency. The scheme is managed by a board of Trustees appointed in part by the group. The Trustees have responsibility for obtaining valuations of the fund, administering benefit payments and investing the scheme’s assets. The Trustees delegate some of these functions to their professional advisers where appropriate. 45 T. F. & J.H. BRAIME (HO LDINGS) P.L.C. Notes to the accounts continued 19.5 The amounts recognised in the balance sheet are as follows: Fair value of scheme assets Present value of funded obligations Surplus Adjustment in respect of minimum funding requirement Net asset Note 19.8 19.7 2015 £ 7,271,000 (7,221,000) 50,000 (50,000) - 2014 £ 7,847,000 (7,796,000) 51,000 (51,000) - 19.6 The amounts recognised in the consolidated income statement are as follows: Current service cost Total included in employee benefits expense Interest on liabilities Interest on assets Past service cost Total amounts recognised in the consolidated income statement Note 6 4 6 19.7 Changes in the present value of the defined benefit obligation are as follows: Opening defined benefit obligation Current service cost Contributions by scheme participants Past service cost Interest cost Benefits paid Remeasurement (gain)/loss from changes to financial assumptions Closing defined benefit obligation 19.8 Changes in the fair value of plan assets are as follows: Opening fair value of scheme assets Interest on assets Return on scheme assets in excess of interest Benefits paid Employer contributions Contributions by scheme participants Closing fair value of scheme assets 2015 £ 51,000 51,000 255,000 (258,000) (3,000) 16,000 64,000 2015 £ 7,796,000 51,000 8,000 16,000 255,000 (596,000) (309,000) 7,221,000 2015 £ 7,847,000 258,000 (300,000) (596,000) 54,000 8,000 7,271,000 2014 £ 116,000 116,000 284,000 (286,000) (2,000) - 114,000 2014 £ 6,505,000 116,000 18,000 - 284,000 (122,000) 995,000 7,796,000 2014 £ 6,513,000 286,000 1,082,000 (122,000) 70,000 18,000 7,847,000 46 T. F. & J. H . BR A IM E (HO LDIN G S) P. L.C . Notes to the accounts continued 19.9 Analysis of fair value of plan assets between asset categories is as follows: Annuity policies in payment Equities – unquoted - overseas Equities – unquoted - UK Cash Money market funds – unquoted With profit deferred annuities Total % of total assets 67.0% 9.1% 2.3% 1.8% - 19.8% 100.0% 2015 £ 4,874,000 659,000 167,000 129,000 2,000 1,440,000 7,271,000 2014 £ 2,781,000 626,000 166,000 83,000 382,000 3,809,000 7,847,000 The assets do not include any investment in shares of the company. 19.10 The actual return on scheme assets is as follows: Actual (loss)/return on scheme assets 19.11 Amount recognised in the statement of comprehensive income is as follows: (Loss)/gain on scheme assets in excess of interest Remeasurement gain/(loss) from changes to financial assumptions Changes in effect of asset ceiling Total amount recognised in statement of comprehensive income 2015 £ (42,000) 2014 £ 1,368,000 2015 £ (300,000) 309,000 1,000 10,000 2014 £ 1,082,000 (995,000) (43,000) 44,000 19.12 Cumulative amount of remeasurement gains and losses recognised in the statement of comprehensive income is as follows: Remeasurement gains 2015 £ 317,000 2014 £ 307,000 19.13 Amounts for the current period and previous periods are as follows: Present value of funded obligations Fair value of scheme assets Surplus Experience gains/(losses) on plan liabilities Losses from changes to demographic assumptions Changes in assumptions used to value scheme liabilities (Losses)/gains on scheme assets in excess of interest 2015 £‘000 (7,221) 7,271 50 - - 309 (300) 2014 £’000 (7,796) 7,847 51 - 2013 £’000 (6,505) 6,513 8 45 - (106) (995) 1,082 118 (51) 2012 £’000 (6,295) 6,328 33 - - (573) 566 2011 £’000 (5,648) 5,691 43 (29) - (522) 501 47 T. F. & J.H. BRAIME (HO LDINGS) P.L.C. Notes to the accounts continued 19.14 Principal actuarial assumptions at the balance sheet date (expressed as weighted averages): Discount rate Salary increase Inflation Expected return on scheme assets LP15 pension increase Revaluation in deferment Post retirement mortality table 2015 2014 2013 2012 2011 3.70% 4.45% 3.45% 3.70% 3.30% 3.45% 120% PNA00 YoU mc min 1.0% 3.40% 4.30% 3.30% 3.40% 3.20% 3.30% 120% PNA00 YoU mc min 1.0% 4.40% 4.70% 3.70% 5.00% 3.55% 3.70% 120% PNA00 YoU mc min 1.0% 4.10% 4.10% 3.10% 4.10% 3.10% 3.10% 120% PNXA00 YoU mc min 1.0% 4.70% 4.20% 3.20% 5.00% 3.20% 3.20% 120% PNXA00 YoU mc min 1.0% 19.15 The company is required to agree a schedule of contributions with the Trustees of the scheme following a valuation which must be carried out at least once every three years. The next valuation of the scheme is due as at 6th April 2016. In the event that the actuarial valuation reveals a larger deficit than expected the company may be required to increase contributions above those set out in the existing schedule of contributions. Conversely, if the position is better than expected contributions may be reduced. The employer’s best estimate of contributions expected to be paid to the plan during the annual period beginning after the balance sheet date is £41,000. The weighted average duration of the defined benefit obligation is approximately 17.3 years. 19.16 The amounts recognised in the balance sheet are as follows: Net asset at start of period Pension cost Employer contributions Remeasurement gain recognised in the statement of comprehensive income Changes in effect of asset ceiling Net asset at end of period Note 19.6 2015 £ - (64,000) 54,000 9,000 1,000 - 2014 £ - (114,000) 70,000 87,000 (43,000) - 48 T. F. & J. H . BR A IM E (HO LDIN G S) P. L.C . Notes to the accounts continued 19.17 Sensitivity of the value placed on the surplus (before minimum funding requirement adjustment) Adjustments to assumptions Discount rate Plus 0.50% Minus 0.50% Inflation Plus 0.50% Minus 0.50% Salary increase Plus 0.50% Minus 0.50% Life expectancy Plus 1.0 years Minus 1.0 years Approximate effect on surplus £ 125,000 (143,000) (259,000) (234,000) 81,000 (77,000) (8,000) 12,000 % With-profit deferred annuities converted on retirement using guaranteed annuity rates Plus 10.00% Minus 10.00% 114,000 (114,000) Note that the above sensitivities are approximate and only show the likely effect of an assumption being adjusted whilst all other assumptions remain the same. The sensitivity analysis shown above was determined using the same method as per the calculation of liabilities for the balance sheet disclosures, but using assumptions adjusted as detailed above. 20. OPERATING LEASES The group has entered into commercial leases on certain properties, motor vehicles and items of plant and equipment. At the balance sheet date, the group had outstanding commitments for minimum lease payments under non-cancellable operating leases, which fall due as follows: Not later than one year Later than one year and not later than five years 2015 £ 173,028 197,186 370,214 2014 £ 164,631 308,971 473,602 49 T. F. & J.H. BRAIME (HO LDINGS) P.L.C. Notes to the accounts continued 21. NOTES SUPPORTING THE CONSOLIDATED CASH FLOW STATEMENT Cash and cash equivalents Cash at bank and in hand Bank overdrafts Major non-cash transaction 2015 £ 931,018 615,038 315,980 2014 £ 1,357,769 1,505,988 (148,219) During the year the group acquired tangible assets of £254,782 subject to finance (2014 - £148,591) under hire purchase agreements and raised finance on assets acquired in previous periods of £146,924. 22. CAPITAL COMMITMENTS There were capital commitments of £426,817 (2014 - £96,466) which are contracted but not provided for in these financial statements. 23. RELATED PARTY TRANSACTIONS The key management of the company are considered to be the directors of the company. Key management compensation is disclosed in the directors’ remuneration report. There were no other related party transactions during the year. 50 T. F. & J. H . BR A IM E (HO LDIN G S) P. L.C . Company balance sheet as at 31st December 2015 Note 2015 £ 2015 £ 2014 £ 2014 £ Fixed assets Investment property Investments Current assets Debtors: due within one year Debtors: due after more than one year Cash at bank and in hand Creditors: amounts falling due within one year Net current assets Total assets less current liabilities Creditors: amounts falling due after more than one year Provisions for liabilities Capital and reserves Called up share capital Capital redemption reserve Retained earnings Shareholders’ funds 3 4 7 8 9 10 11 12 1,349,619 598,351 1,947,970 1,264,551 512,351 1,776,902 31,507 3,256,084 18,860 3,306,451 306,697 9,341 3,430,282 49,966 3,489,589 308,027 2,999,754 4,947,724 1,345,708 75,312 3,526,704 360,000 180,000 2,986,704 3,526,704 3,181,562 4,958,464 1,373,857 52,288 3,532,319 360,000 180,000 2,992,319 3,532,319 These financial statements were approved and authorised for issue by the board of directors on 21st April 2016 and signed on its behalf by: O. N. A. Braime, Director A. Q. Braime, Director 51 T. F. & J.H. BRAIME (HO LDINGS) P.L.C. Company statement of changes in equity for the year ended 31st December 2015 Balance at 1st January 2014 Comprehensive income for the financial year – profit Cancellation of preference shares Dividends paid Balance at 31st December 2014 Comprehensive income for the financial year – profit Dividends paid Balance at 31st December 2015 Capital Redemption Reserve £ Retained Earnings £ Total £ - 2,861,332 2,861,332 - 180,000 - 180,000 464,527 (202,500) (131,040) 2,992,319 464,527 (22,500) (131,040) 3,172,319 - - 180,000 125,425 (131,040) 2,986,704 125,425 (131,040) 3,166,704 The capital redemption reserve represents the nominal value of preference share capital repurchased by the company. The retained earnings represents cumulative profit or losses net of dividends and other adjustments. 52 T. F. & J. H . BR A IM E (HO LDIN G S) P. L.C . Notes to the accounts 1. COMPANY INFORMATION 2.3 Investment property T.F. & J.H. Braime (Holdings) P.L.C. is a company limited by shares, incorporated in England & Wales. Its registered office is given on page 3. The company is a holding company. Details of the group’s activities are provided on page 8. 2. ACCOUNTING POLICIES 2.1 Accounting convention These financial statements have been prepared in accordance with Financial Reporting Standard 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland” and the Companies Act 2006. The financial statements have been prepared under the historical cost convention modified to include certain items at fair value. This is the first year in which the financial statements have been prepared under FRS 102. Refer to note 13 below for explanation of the transition. The functional currency of the company is considered to be pounds sterling. 2.2 Financial Reporting Standard 102 – reduced disclosure exemptions The company has taken advantage of the following disclosure exemptions in preparing these financial statements as permitted by FRS102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland”. • The requirements of Section 7 Statement of Cash Flows; • the requirement of Section 3 Financial Statement Presentation paragraph 3.17 (d); • the requirements of Section 11 Financial Instruments paragraphs 11.39 to 11.48A; • the requirements of Section 12 Other Financial Instruments paragraphs 12.26 to 12.29; • the requirement of Section 33 Related Party Disclosures paragraph 33.7. The investment property is shown at the most recent valuation. Any aggregate surplus or deficit arising from changes in value are recognised in the income statement of the company. 2.4 Financial instruments The following assets and liabilities are classified as financial instruments – group balances, bank loans and investments in subsidiary undertakings. Bank loans and group balances not repayable on demand, are initially measured at the present value of future payments, discounted at a market rate of interest and subsequently at amortised cost using the effective interest method. Group balances, being repayable on demand, are measured at the undiscounted amount of the cash or other consideration expected to be paid or received. Investments in subsidiary undertakings are measured at cost less impairment. Impairment of assets Assets, other than those measured at fair value, are assessed for indicators of impairment at each balance sheet date, if there is objective evidence of impairment, an impairment loss is recognised in the income statement as described below. Non financial assets An asset is impaired where there is objective evidence that, as a result of one or more events that occurred after initial recognition, the estimated recoverable value of the asset has been reduced. The recoverable amount of an asset is the higher of its fair value less costs to sell and its value in use. Financial assets Where indicators exist for a decrease in impairment loss, and the decrease can be related objectively to an event occurring after the impairment was recognised, the prior impairment loss is tested to determine reversal. An impairment loss is reversed on an individual impaired financial asset to the extent that the revised recoverable value does not lead to a revised carrying amount higher than the carrying value had the impairment not been recognised. 53 T. F. & J.H. BRAIME (HO LDINGS) P.L.C. Notes to the accounts continued 2.5 Taxation 2.6 Foreign currencies Current tax, including UK corporation tax is provided at amounts expected to be paid (or recovered) using the tax rates and laws that have been enacted or substantively enacted by the balance sheet date. Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the balance sheet date and that give rise to an obligation to pay more tax or a right to pay less tax in the future. Timing differences are differences between the company's taxable profits and its results as stated in the financial statements that arise from the inclusion of gains and losses in tax assessments in different periods from those in which they are recognised in the financial statements. Unrelieved tax losses and other deferred tax assets are recognised only to the extent that, on the basis of all available evidence, it can be regarded as more likely than not that there will be suitable taxable profits from which the future reversal of the underlying timing differences can be deducted. Deferred tax is measured using the tax rates and laws that have been enacted or substantively enacted by the balance sheet date and are expected to apply to the reversal of the timing difference. Deferred tax relating to investment property is measured using the tax rates and allowances that apply to sale of the asset. Where items recognised in other comprehensive income or equity are chargeable to or deductible for tax purposes, the resulting current or deferred tax expense or income is presented in the same component of comprehensive income or equity as the transaction or other event that resulted in the tax expense or income. Transactions in foreign currencies are recorded at the rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are reported at the rate of exchange ruling at the balance sheet date. Exchange differences are recognised in the income statement in the period in which they arise. 2.7 Critical accounting judgements and sources of estimation uncertainty In the application of the Company’s accounting policies, management is required to make judgements, estimates and assumptions about carrying values of assets and liabilities that are not readily available from other sources. The estimates and underlying assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates. The key judgements and sources of estimation uncertainty that have a significant effect on the amounts recognised in the financial statements are described below: Valuation of investment property As described in note 3 to the financial statements, investment property is stated in the balance sheet at fair value, based on the valuation performed by an independent professional valuer, Professional Valuation Technology LLC, with recent experience in the location and category of property valued. The year-end valuation was based on observable market prices. Present value of group balances Group balances not repayable on demand, are initially measured as the present value of the future payments discounted at a market rate of interest that would apply to similar debt instruments. This has been estimated by management based upon the UK group’s current cost of borrowing from third party financial institutions. 54 T. F. & J. H . BR A IM E (HO LDIN G S) P. L.C . Notes to the accounts continued 3. INVESTMENT PROPERTY Fair value At 1st January 2015 Revaluation At 31st December 2015 Land and buildings £ 1,264,551 85,068 1,349,619 The investment property, which is all freehold was revalued to fair value at 31st December 2015 at £1,349,619 by Professional Valuation Technology LLC, an independent valuer with recent experience in the location and category of property being valued. The valuation is based on an open market value. The historical cost of the investment property is £1,274,526. 4. INVESTMENTS Subsidiary undertakings At 1st January 2015 Additions Impairment At 31st December 2015 £ 512,351 100,000 (14,000) 598,351 The financing shortfalls arising from the effect of initially discounting future payments on group balances not repayable on demand have been recognised as an addition to the cost of the investment in the relevant subsidiary company in respect of balances receivable and as investment income received for group balances payable by the company. Any increase in the value of the cost of the company’s investments has been reviewed for indicators of impairment. Subsidiary Principal activity Proportion of shares held 2015 and 2014 Ordinary Shares Preference Shares i Registered in and operating from England: Braime Pressings Limited 4B Braime Components Limited Manufacture of metal presswork 100% 100% Distribution of bulk material handling components ii iii Registered in England and operating from the USA: 4B Elevator Components Limited Distribution of bulk material handling components Incorporated in and operating from France: 4B France sarl iv Incorporated in and operating from Thailand: 4B Asia Pacific Company Limited Distribution of bulk material handling components Distribution of bulk material handling components v vi Incorporated in and operating from South Africa: 4B Africa Elevator Components (Pty) Limited Distribution of bulk material handling components Incorporated in and operating from Australia: 4B Australia Pty Limited Distribution of bulk material handling components 100% 100% 100% 48% 100% 100% - - - - - - 55 T. F. & J.H. BRAIME (HO LDINGS) P.L.C. Notes to the accounts continued 5. EMPLOYEES Office and management Directors’ remuneration Emoluments for qualifying service 2015 Number 6 2014 Number 6 2015 £ 2014 £ 48,000 42,000 Further details of directors’ remuneration are included in the remuneration report. 6. PROFIT FOR THE FINANCIAL YEAR The company has taken advantage of the exemption allowed under section 408 of the Companies Act 2006 and has not presented its own Income Statement in these financial statements. The company’s profit for the year was £125,425 (2014 - £464,527). 7. DEBTORS: AMOUNTS RECEIVABLE WITHIN ONE YEAR Other taxes Prepayments 8. DEBTORS: AMOUNTS RECEIVABLE AFTER MORE THAN ONE YEAR Amount owed by a subsidiary company 9. CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR Bank overdraft Bank loan Other taxes and social security costs Trade creditors Accruals 2015 £ 14,263 17,244 31,507 2014 £ 7,828 1,513 9,341 2015 £ 3,256,084 2014 £ 3,430,282 2015 £ 163,870 100,000 3,234 14,736 24,857 306,697 2014 £ 184,666 40,000 13,019 33,935 36,407 308,027 Cross guarantees exist in respect of all group company bank borrowings. At 31st December 2015 the borrowings guaranteed by the company amounted to £883,072 (2014 - £1,365,314). 56 T. F. & J. H . BR A IM E (HO LDIN G S) P. L.C . Notes to the accounts continued 10. CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR Bank loan Amount owed to subsidiary companies The amounts owed to subsidiary companies are repayable on 3rd January 2017. 11. PROVISIONS FOR LIABILITIES Deferred tax liability Accelerated capital allowances in excess of depreciation Rolled over capital gains Investment property fair value adjustment Balance at 1st January 2015 Charged to income statement during the year Balance at 31st December 2015 2015 £ 319,598 1,026,110 1,345,708 2014 £ 160,000 1,213,857 1,373,857 2014 £ 52,288 - - 52,288 2015 £ - 60,000 15,312 75,312 Deferred tax £ 52,288 23,024 75,312 Deferred tax has been recognised at a rate of 18% (2014 – 20%) based on tax rates and laws that have been enacted or substantively enacted at the balance sheet date. 12. SHARE CAPITAL Authorised: 480,000 Ordinary shares of 25p each 1,200,000 ‘A’ Ordinary shares of 25p each Allotted, called up and fully paid: 480,000 Ordinary shares of 25p each 960,000 ‘A’ Ordinary shares of 25p each 2015 £ 120,000 300,000 420,000 120,000 240,000 360,000 2014 £ 120,000 300,000 420,000 120,000 240,000 360,000 The ‘A’ Ordinary shares rank pari passu in all respects with Ordinary shares except that the holders of ‘A’ Ordinary shares are not entitled to vote at general meetings. Holders of Ordinary shares are entitled to one vote for every four shares held. 13. FIRST YEAR ADOPTION This is the first year that the company has presented its financial statements under Financial Reporting Standard 102 (FRS 102) issued by the Financial Reporting Council. The last financial statements prepared under the previous UK GAAP were for the year ended 31st December 2014 and the date of transition was therefore 1st January 2014. The only adjustments arising upon transition to FRS 102 are in respect of the measurement at their present value of group balances not repayable on demand. The financial effect of these adjustments is scheduled below. 57 T. F. & J.H. BRAIME (HO LDINGS) P.L.C. Notes to the accounts continued Reconciliations on adoption of FRS 102 Fixed assets Current assets Creditors: amounts falling due within one year Note 1 1 1 As previously Effect of Stated transition £ 76,971 £ 1,615,546 At 1st January 2014 FRS 102 (as restated) £ 1,692,517 As previously Stated £ 1,609,246 At 31st December 2014 FRS 102 (as restated £ 1,776,902 Effect of transition £ 167,656 3,056,086 (87,806) 2,968,280 3,590,342 (100,753) 3,489,589 (214,685) - (214,685) (308,027) - (308,027) Net current assets 2,841,401 (87,806) 2,753,595 3,282,315 (100,753) 3,181,562 Total assets less current liabilities 4,456,947 (10,835) 4,446,112 4,891,561 66,903 4,958,464 Creditors due after more than one year 1 (1,254,347) 29,567 (1,224,780) (1,408,209) 34,352 (1,373,857) Provisions for liabilities - - - (52,288) - (52,288) Net assets 3,202,600 18,732 3,221,332 3,431,064 101,255 3,532,319 Total capital and reserves 1 3,202,600 18,732 3,221,332 3,431,064 101,255 3,532,319 Notes to reconciliation on adoption of FRS 102 1. Present value of group balances Under previous UK GAAP group balances not repayable on demand were measured at the undiscounted amount of the cash or other consideration expected to be paid or received. Under FRS 102 such balances are initially measured at the present value of future payments, discounted at a market rate of interest and subsequently at amortised cost. Consequently, group balances receivable have been discounted by £87,806 and group balances payable by £29,567 as at 1st January 2014 and £100,753 and £34,352 respectively as at 31st December 2014. The financing shortfalls on loans made to subsidiary companies has had the effect of increasing the investment in those subsidiaries, subject to impairment, by £76,971 as at 1st January 2014 and £167,636 as at 31st December 2014. The equivalent shortfalls on loans due to subsidiary companies have been recognised in the income statement. The cumulative adjustments through retained earnings are £18,732 as at 1st January 2014 and £101,255 as at 31st December 2014. 58 T. F. & J. H . BR A IM E (HO LDIN G S) P. L.C . Five year record 2015 £’000 2014 £’000 2013 £’000 2012 £’000 2011 £’000 Turnover 26,470 24,292 22,954 21,212 20,068 Profit from operations Profit before tax Profit after tax 897 1,950 1,542 1,236 1,125 782 1,075 1,010 752 659 678 427 1,294 1,244 814 Basic and diluted earnings per share 107.05p 54.31p 52.23p 29.64p 56.53p 59 T. F. & J.H. BRAIME (HO LDINGS) P.L.C. Explanatory notes of resolutions 3. Re-appointment of directors The Articles of Association of the company require the nearest number to one third of the directors to retire at each Annual General Meeting. Accordingly, A. Q. Braime and C. O. Braime are retiring by rotation in accordance with the Company’s Articles of Association and, being eligible, offer themselves for re-election. 4. Re-appointment of auditors The company is required to appoint auditors at each Annual General Meeting to hold office until the next such meeting at which accounts are presented. The resolution proposes the reappointment of the company’s existing auditors, Kirk Newsholme, and authorises the directors to agree their remuneration. The following notes give an explanation of the proposed resolutions. Resolutions 1 to 4 inclusive are proposed as Ordinary resolutions. This means that for each of those resolutions to be passed, more than half of the votes cast must be in favour of the resolution. The directors consider that all of the resolutions to be proposed at the AGM are in the best interests of the company and its shareholders as a whole and unanimously recommend that shareholders vote in favour of all of the resolutions, as the directors intend to do in respect of their own beneficial holdings. BUSINESS TO BE TRANSACTED AT THE AGM Details of the resolutions which are to be proposed at the AGM are set out below. Ordinary resolutions 1. To receive and adopt the report and accounts The directors are required to present the accounts for the year ended 31st December 2015 to the meeting. 2. Confirmation of dividends To confirm the interim dividend on the ordinary and ‘A’ ordinary shares of 2.90p per share paid on 18th October 2015 and 6.20p per share paid on 12th May 2016. 60 T.F. & J.H. BRAIME (HOLDINGS) P.L.C. Designed and printed by PrintPod | www.print-pod.com
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