Braime Group PLC
Annual Report 2016

Plain-text annual report

T.F. & J.H. BRAIME (HOLDINGS) P.L.C. REPORT & ACCOUNTS 2016 Designed and printed by PrintPod | www.print-pod.com T.F. & J.H. BRAIME (HOLDINGS) P.L.C. T.F. & J.H. BRAIME (HOLDINGS) P.L.C. Contents Company information Notice of meeting Chairman’s statement Group strategic report Director’s 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 Notes to the accounts Company balance sheet Notes to the accounts Five year record Explanatory notes of resolutions 3 4 6 8 12 15 17 19 19 20 21 22 23 52 54 61 62 1 T.F. & J.H. BRAIME (HOLDINGS) P.L.C. 2 T.F. & J.H. BRAIME (HOLDINGS) 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 P. Tiffany, ACA, BSc (Hons.) Secretary P. Tiffany, ACA, BSc (Hons.) Registered office Hunslet Road, Leeds, LS10 1JZ. Independent auditors Kirk Newsholme, Chartered Accountants and Statutory Auditors, 4315 Park Approach, Thorpe Park, Leeds, LS15 8GB. Bankers Stockbrokers 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 (HOLDINGS) P.L.C. Notice of meeting Notice is hereby given that the SIXTY SEVENTH 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 Thursday 1st June 2017 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 2016, and the report of the auditors thereon. 2. To confirm the dividends paid on 21st October 2016 and 12th May 2017 on the Ordinary and ‘A’ Ordinary shares. 3. a) To re-appoint as a director P. Tiffany, 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 P. J. O. Alcock, 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, P. Tiffany Secretary Hunslet Road, Leeds, LS10 1JZ 26th April 2017 4 T.F. & J.H. BRAIME (HOLDINGS) 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 30th May 2017. 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 2016 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 30th May 2017. 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 (HOLDINGS) P.L.C. Chairman’s statement Overall performance of the group Sales revenue in 2016 increased by 7.3% to £28.4m compared to £26.5m in 2015 and the profit from operations increased to £1.4m from £0.9m in the previous year. The group revenue continues to grow year on year. To do so in 2016 it required an increase in both stocks and debtors, by £400,000 and £208,000 respectively, although the increase in debtors was more than offset by an increase in the creditors of £272,000. The profit before tax in 2016 reduced to £1.27m compared to £1.95m in 2015 however the prior year result had benefitted from the exceptional profit of £1.16m from the sale of part of the Hunslet site. Results from some subsidiaries of the group were below expectations but the performance in other parts of the group more than offset this and, overall, the 2016 result was positive. The group also benefited, like many UK exporters, from the immediate fall in pound sterling following the result of the EU Referendum. Dividends The directors have decided to increase the total dividend for 2016 by 2.2% to 9.30p. The first interim dividend of 2.90p, paid in October 2016, was unchanged but the second interim dividend will be increased to 6.40p (2015 - 6.20p). Capex During 2016, the group invested £1.1m in plant and equipment. Further major investments are planned for 2017, focusing on improving productivity in manufacturing and extending our overseas distribution. The final ‘go ahead’ for these investments and their timing are dependent on maintaining adequate cash flow and the availability of long term finance. Cash flow Continuous monitoring of the cash flow and the headroom between the actual borrowings and the agreed maximum borrowing facility with our bankers is increasingly important. Although the group has distinct ‘seasonal’ periods when outgoings peak, the timing of payments for exceptional purchases fluctuate throughout the year. In 2016, the group generated a £1.9m cash inflow from operations and, after taking account of the net increase in working capital required, the payment of other financial costs and the dividend, the group was cash positive by £427,000. Group stocks increased by 7.0%, roughly in line with the 7.3% increase in sales revenue, but overall group stocks remain high. Reducing them is an important potential source of funds required for ongoing investment, while maintaining adequate stock is a pre-requisite of achieving the all-important delivery performance required by our customers. Achieving this balance is a never-ending battle and rightly remains a key individual responsibility for the managing directors of each subsidiary and for the group directors. Staff The positive and proactive contribution of all individual staff at all levels and in all parts of the group is crucial to the continuing success of the business. Every year customers look for improvements in pricing and for higher standards of quality and delivery. This puts pressure on management, office staff and on everyone involved in production. This in turn impacts family life as many of our technical and sales staff are required to spend more time travelling away from home. We thank them all for their ongoing effort. Braime Pressings Limited The new transfer line came on stream in the third quarter of 2016 but initially did not achieve its potential throughput. Combined with exceptional demand, this resulted in additional shifts which disproportionally increased manufacturing costs and resulted in a disappointing result. With the significant contribution being made by new senior staff, the situation is gradually improving in 2017. Additionally the company has secured a large contract for a new product line which we are confident we can produce competitively based on our existing skill set. When this product comes on stream in late 2017, it will make a major positive contribution. 6 Chairman’s statement continued 4B material handling division The results from the subsidiaries making up the 4B division were mixed in 2016. 4B USA, operating in both North and South America, enjoyed a strong year, as did both 4B Africa and 4B Australia. In contrast, 4B France had a poor year due to weak demand resulting from a lower than expected harvest. The result from the UK division, 4B Braime, was initially damaged by the very high value of sterling in the first half of 2016 and only partially rectified in the second part of 2016 by the effective 10% devaluation in June. 4B Asia Pacific faced major additional short term costs but is now meeting our positive long term expectations. Overall the 4B group had a positive year which illustrates the benefit provided by the diversity of products it offers to customers and the wide range of industries and regions which make up its customer base. Brexit As 80% of group sales are made in overseas markets, the company benefited substantially from the steep fall in the value of pound sterling following the referendum. The lower value of sterling considerably increased the margins both on direct overseas sales and those made through an overseas subsidiary. Additionally, the contribution of the individual overseas subsidiaries are enhanced when converted back into sterling and consolidated in the group result. The medium term effects of Brexit will be much more complex. The company imports the majority of its raw materials for manufacture and imports some products for re-sale in the UK. In both cases, it will be difficult to pass on the magnitude of these cost increases to customers. Where the company buys products from overseas suppliers in euros or dollars and then resells the products in export markets, the effect may be neutral - but may not be if the products involved have to be imported and processed first in the UK before being re-exported. The company may have to look at different locations for stocking and processing products. Until agreements are finalised with the EU, and probably beyond that, there is going to remain a great deal of uncertainty as to the overall effect on the group. T.F. & J.H. BRAIME (HOLDINGS) P.L.C. That said, only 25% of group sales are made to the EU compared to 55% to other overseas markets and the likelihood is that the group will be a major beneficiary from Brexit. Moreover, the group had already identified the overseas markets outside the EU as the regions with the greatest potential for future growth and has for some time been focused on their development. Brexit offers a major opportunity that the group needs to seize. Ironically the one major risk is that the currency market itself decides that on balance the UK is going to be a long term “winner” from Brexit and the fall in the pound is reversed, just at the same time as the UK faces new tariffs. In the long term, the level of the pound relative to other currencies is likely to play a bigger factor than the possible implementation of tariffs by the EU. Outlook We continue to invest in the future, in improving productivity, in developing new markets and in introducing new innovative products. In spite of the current level of uncertainty and ever increasing competition, the group has started this financial year positively and overall is currently performing ahead of both last year and the 2017 budget. O. N. A. Braime, Chairman 26th April 2017 7 Group strategic report The Chairman’s Statement on pages 6 to 7 provides a review of the business for the year and future developments. Principal activities and risks and uncertainties 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 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. Raw material price risk The group 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. Reputational risk As the group operates in relatively small markets any damage to, or loss of reputation could be a major concern. Rigorous management attention and quality control procedures are in place to maximise right first time and on time delivery. Responsibility is taken for ensuring swift remedial action on any issues and complaints. Operational risk Solid reporting systems and accurate and timely management information is reviewed by the directors monthly. Brexit impact The group is prepared for the economic and political uncertainty in the future resulting from the UK vote to leave the EU. The group still maintains its long term strategic aim of growing core products and aims to continue to expand its operations with new and existing customers, this is commented upon in detail in the Chairman’s Statement. Financial instruments The group’s operations expose it to a variety of financial risks including the effect of changes in interest rate on debt, foreign exchange rates, credit risk and liquidity risk. The group does not have material exposure in any of the areas identified above. The group’s principal financial instruments comprise sterling and foreign cash and bank deposits, bank loans and overdrafts, other loans and obligations under finance leases together with trade debtors and trade creditors that arise directly from operations. The main risks arising from the group’s financial instruments can be analysed as follows: Price risk The group has no significant exposure to securities price risk, as it holds no listed equity instruments. Foreign currency risk The group has a centralized 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. 8 T.F. & J.H. BRAIME (HOLDINGS) P.L.C.Group strategic report continued Credit risk The group’s principal financial assets are bank balances, cash and trade debtors, which represent the group’s maximum exposure to credit risk in relation to financial assets. The group’s credit risk is primarily attributable to its trade debtors. Credit risk is mitigated by a stringent management of customer credit limits by monitoring the aggregate amount and duration of exposure to any one customer depending upon their credit rating. The group also has credit insurance in place. The amounts presented in the balance sheet are net of allowance for doubtful debts, estimated by the group’s management based on prior experience and their assessment of the current economic environment. The credit risk on liquid funds is limited because the counterparties are banks with high credit-ratings assigned by international credit-rating agencies. The group has no significant concentration of credit risk, with exposure spread over a large number of counterparties and customers. Liquidity risk The group’s policy has been to ensure continuity of funding through acquiring an element of the group’s fixed assets under finance leases and arranging funding for operations via medium-term loans and overdrafts to aid short term flexibility. Cash flow interest rate risk Interest rate bearing assets comprise cash and bank deposits, all of which earn interest at a fixed rate. The interest rate on the bank overdraft is at market rate and the group’s policy is to keep the overdraft within defined limits such that the risk that could arise from a significant change in interest rates would not have a material impact on cash flows. The group’s policy is to maintain other borrowings at fixed rates to fix the amount of future interest cash flows. The directors monitor the level of borrowings and interest costs to limit any adverse affects on financial performance of the company. 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 At the start of 2016, the management team was strengthened and a significant new press line was installed following the fire in 2015. The year started out with low demand from Europe for new or replacement parts for commercial vehicles due to the uncertainty surrounding Brexit. This can be seem from the year on year decrease in external revenues, however the forecast improvements in productivity have enabled the business to increase EBITDA year on year. 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 2016 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 2017 remains positive with further growth anticipated from our overseas subsidiaries. 9 T.F. & J.H. BRAIME (HOLDINGS) P.L.C.T.F. & J.H. BRAIME (HOLDINGS) P.L.C. Group strategic report continued Taxation The effective rate of tax is 33% (2015 – 21.00%). The effective rate is above the standard UK tax rate of 20% (2015 – 20.25%) 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 2016, the group invested £1.1m in plant and equipment continuing the recent substantial investment in new manufacturing machinery. The plan for 2017 is to make further tactical investments in key equipment and maximise productivity. Cash flow Inventories increased by £399,841 and debtors by £207,920; these calls on working capital were partly offset by an increase in our creditors of £272,025. In total the business generated funds from operations of £1.9m net of the movement in working capital. After the payment of other financial costs and the dividend, the net cash position was £742,000; a net inflow of £427,000. 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 £10.0m (2015 - £8.6m), this is due to the strong profit performance in the year. A foreign exchange gain of £598,000 (2015 – £(147,000)) was recorded on the re-translation of the net assets of the overseas operations. Key performance indicators The group uses the following key performance indicators to assess the performance of the group as a whole and of the individual businesses: 10 Key performance indicator Turnover growth Gross margin Operating profit Stock days Debtor days On time delivery achievement – 4B division Note 2016 2015 1 2 3 4 5 6 7.3% 8.9% 45.3% 44.7% £1.39m £0.90m 144 days 143 days 55 days 51 days 80% 69% Turnover growth Notes to KPI’s 1. The group aims to increase shareholder value by measuring the year on year growth in group revenue. Whilst the growth in 2016 has been lower than 2015, this is due to uncertainty in the general economic environment resulting from the EU referendum and US presidential election. Gross margin 2. Gross profit (revenue less change in inventories and raw materials used) as a percentage of turnover is monitored to maximise profits available for reinvestment and distribution to shareholders. The year on year improvement in margin has resulted from operational efficiency and gains from movement in foreign exchange rates. Operating profit 3. Sustainable growth in operating profit is a strategic priority to enable ongoing investment and increase shareholder value. Year on year improvement in operating profits resulting from the improvement in gross margin and also efficient cost control over operating expenses. T.F. & J.H. BRAIME (HOLDINGS) 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, Chairman 26th April 2017 Stock days 4. The average value of stock divided by the cost of goods sold expressed as a number of days is monitored to ensure the right level of stocks are held in order to meet customer demands whilst not carrying excessive amounts which impacts upon working capital requirements. In 2016 whilst increased revenues have required an increase in the overall stock levels, the group has maintained stock days in line with prior years. Debtor days 5. The average value of debtors divided by revenue expressed as a number of days. This is an important indicator of working capital requirements. In 2016 there has been an increase in the debtor days, however they are still averaging within standard payment terms of 60 days. On time delivery achievement 6. The percentage of customer orders delivered on or before the required date. On time delivery is a key customer service requirement in the material handling division and continuous improvement is required in an increasingly competitive market. 2016 has seen a significant improvement and senior management continue to focus on improving this to meet customer expectations. 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. 11 T.F. & J.H. BRAIME (HOLDINGS) P.L.C. Directors’ report The directors present their annual report and financial statements for the year ended 31st December 2016. RESULTS AND DIVIDENDS The profit for the year after taxation and transferred to reserves was £854,517 (2015 – £1,541,534). 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 31st December 2016 1st January 2016 143,400 143,400 1,000 5,000 100 300 35,175 35,175 1,000 5,000 100 300 35,175 35,175 In accordance with the company’s Articles of Association P. J. O. Alcock retires by rotation and, being eligible offers himself for re-election. P. Tiffany was appointed to the board on 1st December 2016 and having been appointed since the last Annual General Meeting, also offers himself for re-election. M. L. Mills resigned his position from the board as of 24th February 2016. 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. SUBSTANTIAL SHAREHOLDINGS The company has been notified that as at 31st March 2017, 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 Hargreaves Lansdown (Nominees) Limited Mrs P. V. Smith Ferlim Nominees Limited Des. POOLED Mr. M. C. J. Barnes Ordinary shares held 71,000 29,176 27,500 26,083 16,555 Percentage 14.79% 6.08% 5.73% 5.43% 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 11. 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. The exchange rate between sterling, the US dollar and the euro and the price of raw materials creates uncertainty over the future gross margin of the group. T.F. J.H. BRAIME (HOLDINGS) P.L.C. The group’s net cash figure increased from an opening figure of £315,980 to a credit position of £742,474 as at 31st December 2016. During the period the group funding of working capital increased by £335,736 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 £1.9m net of the increased working capital funding. At 31st December 2016, the available headroom within the group’s borrowing facilities amounted to £1,756,420. 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 (HOLDINGS) 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. 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. 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. 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. 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. In preparing these financial statements, the directors are required to: This confirmation is given and should be interpreted in accordance with the provision of Section 418 of the Companies Act 2006. • select suitable accounting policies and then apply SUBSCRIPTIONS AND DONATIONS Charitable donations amounting to £1,467 (2015 - £2,233) were paid during the year. There were no donations to political organisations. 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 P. Tiffany, Director 26th April 2017 them consistently; • make judgements and accounting estimates that are reasonable and prudent; • 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. 14 T.F. & J.H. BRAIME (HOLDINGS) P.L.C. Directors’ remuneration report INFORMATION NOT SUBJECT TO AUDIT Service contracts 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. Other than P. Tiffany, 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. 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. 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 2018. The renewal of Mr. A. W. Walker’s service contract is subject to approval of the whole board and has been previously approved until 30th March 2019. 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 (HOLDINGS) 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 2016 £ Total 2015 £ Pension contributions 2015 £ 2016 £ - - - - - 206,503 106,277 106,292 13,505 22,549 3,259 1,162 825 142 1,310 209,762 107,439 107,117 13,647 23,859 188,138 95,752 95,393 - 106,090 - 10,958 10,958 1,050 5,794 - 9,727 9,727 - 8,901 Executive directors O. N .A. Braime A. Q. Braime C. O. Braime P. Tiffany M. L. Mills P. J. O. Alcock A. W. Walker 25,500 25,500 51,000 - - 455,126 - - 6,698 25,500 25,500 512,824 24,000 24,000 533,373 - - - - 28,760 28,355 Paid by the company 51,000 51,000 48,000 The estimated taxable value of benefits in kind includes private medical cover. Pension contributions represent amounts paid to defined contribution pension schemes. Approval The directors’ remuneration report was approved by the board on 26th April 2017. P. Tiffany, Director 16 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 2016 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 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) including Financial Reporting Standard 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland”. 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. T.F. & J.H. BRAIME (HOLDINGS) P.L.C. 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 2016 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 (HOLDINGS) P.L.C.Independent auditors’ report continued 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. Neill Rayland BA FCA (Senior Statutory Auditor), for and on behalf of Kirk Newsholme, Chartered Accountants and Statutory Auditors, 4315 Park Approach, Thorpe Park, Leeds, LS15 8GB. 26th April 2017 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. • the Group Strategic Report and the Report of the Directors have been prepared in accordance with applicable legal requirements. Matters on which we are required to report by exception In light of the knowledge and understanding of the company, and the group, and its environment obtained in the course of the audit, we have not identified material misstatements in the Report of the Directors of the Strategic Report. We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion: • adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or • the parent company financial statements are not in agreement with the accounting records and returns; or • certain disclosures of directors’ remuneration specified by law are not made; or • we have not received all the information and explanations we require for our audit. 18 T.F. & J.H. BRAIME (HOLDINGS) P.L.C.Consolidated income statement for the year ended 31st December 2016 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 expense Finance income Profit before tax Tax expense Profit for the year Profit attributable to: Owners of the parent Non-controlling interests Note 2016 £ £ 2015 6 2 4 4 5 28,415,449 26,470,084 337,116 (15,890,401) (6,726,428) (801,376) (3,940,015) 886,480 (15,529,776) (6,022,492) (758,589) (4,148,272) 1,394,345 897,435 - (150,142) 29,902 1,158,140 (116,830) 11,726 1,274,105 1,950,471 (419,588) (408,937) 854,517 1,541,534 932,101 (77,584) 1,584,748 (43,214) 854,517 1,541,534 Basic and diluted earnings per share 18 59.34p 107.05p Consolidated statement of comprehensive income for the year ended 31st December 2016 2016 Note 2015 Profit for the year £ £ 854,517 1,541,534 Items that will not be reclassified subsequently to profit or loss Net remeasurement gain on post employment benefits 19.11 10,000 10,000 Items that may be reclassified subsequently to profit or loss Foreign exchange gains/(losses) on re-translation of overseas operations Other comprehensive income for the year 597,976 (146,822) 607,976 (136,822) Total comprehensive income for the year 1,462,493 1,404,712 Total comprehensive income attributable to: Owners of the parent Non-controlling interests 1,540,077 (77,584) 1,462,493 1,447,926 (43,214) 1,404,712 The foreign currency movements arise on the re-translation of overseas subsidiaries’ opening balance sheets at closing rates. The notes on pages 23 to 51 form part of these financial statements 19 T.F. & J.H. BRAIME (HOLDINGS) P.L.C. Consolidated balance sheet at 31st December 2016 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 2016 £ 2016 £ £ 2015 £ 2015 7 9 10 11 9 5,357,772 12,270 - 6,119,495 5,213,019 51,877 742,474 4,677,456 12,270 51,877 5,370,042 4,741,603 5,719,654 5,005,099 57,777 931,018 12,126,865 17,496,907 11,713,548 16,455,151 12 13 - 4,181,683 1,730,288 146,703 615,038 4,053,220 1,498,171 66,854 6,058,674 6,233,283 14 15 1,360,947 117,724 1,363,524 230,235 1,478,671 7,537,345 9,959,562 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 360,000 257,319 539,395 9,005,528 10,162,242 (202,680) 9,959,562 1,593,759 7,827,042 8,628,109 360,000 257,319 (58,581) 8,194,467 8,753,205 (125,096) 8,628,109 The financial statements on pages 19 to 51 were approved and authorised for issue by the board of directors on 26th April 2017 and were signed on its behalf by: O. N. A. Braime, Director P. Tiffany, Director Company Registration Number 488001 20 The notes on pages 23 to 51 form part of these financial statements T.F. & J.H. BRAIME (HOLDINGS) P.L.C. Consolidated cash flow statement for the year ended 31st December 2016 Operating activities Net profit Adjustments for: Depreciation Grants amortised Foreign exchange gains/(losses) 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 2016 £ 2016 £ 2015 £ 2015 £ 854,517 1,541,534 7 4 4 5 801,376 (6,568) 525,324 (29,902) 150,142 (12,538) 12,000 419,588 (491,778) 758,589 (1,656) (146,677) (11,726) 116,830 (1,158,140) 13,000 408,937 (490,525) 1,367,644 2,222,161 (511,368) 1,030,166 Increase in trade and other receivables Increase in inventories Increase in trade and other payables (207,920) (399,841) 272,025 (93,991) (831,471) 329,488 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 Repayment of borrowings Repayment of hire purchase creditors Interest paid Dividends paid (335,736) 1,886,425 (595,974) 434,192 (998,617) (1,010,401) 12,538 27,902 - 57,777 (101,917) (176,432) (150,142) (131,040) 1,190,561 8,726 (958,177) 188,886 300,000 90,346 (171,020) (130,335) (116,830) (131,040) Increase in cash and cash equivalents Cash and cash equivalents, beginning of period Cash and cash equivalents, end of period 21 (501,754) 426,494 315,980 742,474 (158,879) 464,199 (148,219) 315,980 The notes on pages 23 to 51 form part of these financial statements 21 T.F. & J.H. BRAIME (HOLDINGS) P.L.C. Consolidated statement of changes in equity for the year ended 31st December 2016 Note Foreign Share Capital Exchange Capital Reserve Reserve £ £ £ Retained Earnings £ Non- Controlling Interests £ Total £ Total Equity £ 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 Transactions with owners Dividends 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) (136,822) - (146,822) 1,594,748 1,447,926 - 10,000 - - (146,822) (136,822) (43,214) 1,404,712 - - - - (131,040) (131,040) (131,040) (131,040) - - (131,040) (131,040) Balance at 1st January 2016 360,000 257,319 (58,581) 8,194,467 8,753,205 (125,096) 8,628,109 Comprehensive income Profit Other comprehensive income Net pension remeasurement gain recognised directly in equity Foreign exchange gains on re-translation of overseas subsidiaries consolidated operations Total other comprehensive income Total comprehensive income Transactions with owners Dividends Total transactions with owners 19 18 - - - - - - - - - - 932,101 932,101 (77,584) 854,517 - 10,000 10,000 - 10,000 - 597,976 - 597,976 - 597,976 - 10,000 597,976 607,976 942,101 1,540,077 (77,584) 1,462,493 597,976 607,976 - - - - - - (131,040) (131,040) (131,040) (131,040) - - (131,040) (131,040) Balance at 31st December 2016 360,000 257,319 539,395 9,005,528 10,162,242 (202,680) 9,959,562 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 T.F. & J.H. BRAIME (HOLDINGS) P.L.C. Notes to the accounts 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. 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 26th April 2017. 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 52 to 60. 23 T.F. & J.H. BRAIME (HOLDINGS) P.L.C.Notes to the accounts continued • Clarifications to IFRS 15, ‘Revenue from contracts with customers’; effective on or after 1st January 2018. • Amendments to IFRS 2, ‘Classification and measurements of share-based payment transactions’; effective on or after 1st January 2018. IFRS 14, ‘Regulatory deferral accounts’. IFRS 16. ‘Leases’; effective on or after 1st January 2019. • • Other than in respect of the application of IFRS 16, the application and interpretations surrounding the other standards 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. 1.5 Revenue 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. 1.4 Changes to accounting policy and disclosure (a) New and amended standards adopted by the group. The group has adopted the following new and amended IFRS’s as of 1st January 2016. • Amendments to IFRS 11 ‘Accounting for acquisitions of interests in joint operations’; effective on or after 1st January 2016. • Amendment to IAS 27 ‘Equity method in separate financial statements’; effective on or after 1st January 2016. • Amendments to IAS 16 and IAS 38 ‘Clarification of acceptable methods of depreciation and amortisation’; effective on or after 1st January 2016. • Amendments to IAS 16 and IAS 41 ‘Agriculture: Bearer Plants’; effective on or after 1st January 2016. • Amendments to IFRS 10, IFRS 12 and IAS 28 ‘Investment entities: Applying the consolidation exceptions’; effective on or after 1st January 2016. IAS 1 ‘Disclosure initiative’; effective on or after 1st January 2016. • • Annual improvements to IFRS’s 2012-14 cycle IFRS 5, IFRS 7, IAS 19 and IAS 34; effective on or after 1st January 2016. 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 2016 and not early adopted. • IAS 12, ‘Recognition of deferred tax assets for unrealised losses’; effective on or after 1st January 2017. • Amendments to IAS 7, ‘Disclosure initiative’; • • effective on or after 1st January 2017 IFRS 9, ‘Financial instruments’; effective on or after 1st January 2018. IFRS 15, ‘Revenue from contracts with customers’; effective on or after 1st January 2018. 24 T.F. & J.H. BRAIME (HOLDINGS) P.L.C. Notes to the accounts continued 1.6 Basis of consolidation 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. 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 acquireee 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 the income statement. 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 average rates of exchange. Any differences arising from this procedure have been charged/(credited) to the currency translation reserve in equity. 25 T.F. & J.H. BRAIME (HOLDINGS) P.L.C.Notes to the accounts continued 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. 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. 26 T.F. & J.H. BRAIME (HOLDINGS) P.L.C.Notes to the accounts continued 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. 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 other 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. 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. 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. 27 T.F. & J.H. BRAIME (HOLDINGS) P.L.C.Notes to the accounts continued 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. 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. 1.15 Research and development 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 – 25 - 50 years • Plant, machinery and motor vehicles – 3 - 5 years on a straight line basis 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. 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 where material 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 28 T.F. & J.H. BRAIME (HOLDINGS) P.L.C. Notes to the accounts continued 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. 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. 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 29 T.F. & J.H. BRAIME (HOLDINGS) 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 Inventory recognised as an expense 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 2016 £ 2015 £ 801,376 (233,582) 40,662 158,213 15,553,285 758,589 5,686 152,545 54,356 14,643,296 6,000 31,000 3,000 (12,538) 117,794 5,250 26,750 3,000 (1,158,140) 173,312 30 T.F. & J.H. BRAIME (HOLDINGS) 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 2016. 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 2016 £ 2016 £ 2016 £ Total 2016 £ 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 - 472,671 472,671 3,564,987 2,659,476 6,224,463 24,850,462 4,443,233 29,293,695 28,415,449 7,575,380 35,990,829 (143,881) (73,959) - (279,022) (40,740) (537,602) 180,991 (25,867) 2,489 (140,585) 98,242 115,270 2,158,611 (50,316) 27,413 (381,769) (477,090) 1,276,849 2,195,721 (150,142) 29,902 (801,376) (419,588) 854,517 4,497,238 1,022,501 1,008,429 - 11,991,240 347,010 17,496,907 1,369,511 1,022,777 2,139,638 4,374,930 7,537,345 31 T.F. & J.H. BRAIME (HOLDINGS) P.L.C. Notes to the accounts continued 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 Central 2015 £ Manufacturing 2015 £ Distribution 2015 £ Total 2015 £ - 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 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 2016 £,000 5,808 7,083 12,223 1,291 859 1,151 28,415 Non-current assets 2016 £,000 Revenue 2015 £,000 Non-current assets 2015 £,000 3,460 81 1,468 199 102 60 5,370 6,704 6,207 10,701 995 865 998 26,470 3,010 66 1,523 35 68 40 4,742 There is one group customer which accounts for more than 10% of the group’s revenues. 32 T.F. & J.H. BRAIME (HOLDINGS) P.L.C. Notes to the accounts continued 4. FINANCE INCOME AND EXPENSE Finance expense Bank borrowings Hire purchase interest Finance income Bank interest received Other finance income 5. TAX EXPENSE Note 2016 £ 127,184 22,958 2016 £ 2015 £ 101,001 15,829 2015 £ 150,142 116,830 19.6 27,902 2,000 8,726 3,000 29,902 11,726 2016 £ 2016 £ 2015 £ 2015 £ 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 96,870 - 448,978 (10,839) - - 96,870 - 376,560 (6,235) 438,139 535,009 Current tax charge Deferred tax – origination and reversal of timing differences Prior year rate difference Total tax charge 15 15 (114,571) (850) 42,046 (3,434) (115,421) 419,588 370,325 370,325 38,612 408,937 33 T.F. & J.H. BRAIME (HOLDINGS) 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% (2015 – 20.25%) 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 2016 £ 1,274,105 2015 £ 1,950,471 254,821 49,983 (1,338) (24,298) (178,852) 160,964 - 122,174 (10,839) 46,973 419,588 394,971 14,760 (336) (24,239) (137,492) 161,282 (5,058) 14,497 (6,235) (3,213) 408,937 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 £10,000, £45,000 and £(4,000) respectively (2015 - £11,000, £6,000 and £(9,000)) calculated at a rate of 17% (2015 – 18%). 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 2016 No. 88 70 158 £ 5,864,367 192,292 51,000 25,808 - 638,970 6,772,437 (46,009) 6,726,428 2015 No. 81 64 145 £ 5,300,358 147,076 67,000 25,198 11,948 566,673 6,118,253 (95,761) 6,022,492 512,824 28,760 541,584 533,373 28,355 561,728 The number of directors for whom retirement benefits are accruing under money purchase pension schemes amounts to 3 (2015 – 3) and under defined benefit pension schemes amounted to nil (2015 – nil). Further details of directors remuneration are included in the remuneration report. 34 T.F. & J.H. BRAIME (HOLDINGS) P.L.C. Notes to the accounts continued 7. PROPERTY, PLANT AND EQUIPMENT At 31st December 2016 Cost Accumulated depreciation Net book value At 31st December 2015 Cost Accumulated depreciation Net book value Year ended 31st December 2016 Opening net book value Additions Depreciation Exchange differences Closing net book value Year ended 31st December 2015 Opening net book value Additions Disposals Depreciation Exchange differences Closing net book value Plant, machinery and motor vehicles £ Land and buildings £ Total £ 3,033,034 141,860 2,891,174 9,105,922 6,639,324 2,466,598 12,138,956 6,781,184 5,357,772 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 2,632,785 272,660 (18,845) 4,574 2,891,174 2,044,671 1,096,851 (782,531) 107,607 2,466,598 4,677,456 1,369,511 (801,376) 112,181 5,357,772 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 The net book value of tangible fixed assets includes an amount of £833,059 (2015 - £504,264) in respect of assets held under finance leases and hire purchase contracts. The related depreciation charge on these assets for the year was £159,884 (2015 - £120,272). Assets in the course of construction which have not been depreciated total £195,571. The total cost of non-depreciable assets included in freehold land and buildings was £2,876,428 (2015 - £1,356,863). 35 T.F. & J.H. BRAIME (HOLDINGS) P.L.C. Notes to the accounts continued 8. SUBSIDIARIES Subsidiary Principal activity Proportion of shares held 2016 and 2015 Ordinary Preference Shares i Shares Registered in and operating from Hunslet Road, Leeds, West Yorkshire, LS10 1JZ, England: 100% Braime Pressings Limited Manufacture of metal presswork 100% 4B Braime Components Limited Distribution of bulk material handling components 100% ii Registered at Hunslet Road, Leeds, West Yorkshire, LS10 1JZ England and operating from the USA: 4B Elevator Components Limited Distribution of bulk material handling components 100% iii iv v vi Incorporated in and operating from 9 Route de Corbie, 80800 Lamotte Warfusee, France: 4B-France sarl Distribution of bulk material handling components Incorporated in and operating from 899/1 Moo 20, Soi Chongsiri, Bangplee-Tam Ru Road, Samutprakam, 10540, Thailand: 4B Asia Pacific Company Limited Distribution of bulk material handling components 100% 48% Incorporated in and operating from 14 Newport Business Park, Mica Drive, Kya Sand, 2163 Johannesburg, South Africa: 4B Africa Elevator Components (Pty) Limited Distribution of bulk material handling components 100% Incorporated in and operating from Unit 1, 18 Overlord Place, Acacia Ridge, Queensland 4110, Australia: 4B Australia Pty Limited Distribution of bulk material handling components 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 2016 £ 51,877 - 51,877 - - - 51,877 2015 £ 49,977 7,800 57,777 51,877 - 51,877 109,654 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 the end of 2017. 36 T.F. & J.H. BRAIME (HOLDINGS) P.L.C. Notes to the accounts continued 10. INVENTORIES Raw materials Work in progress Finished goods Goods in transit 2016 £ 298,886 56,426 5,625,245 138,938 6,119,495 2016 £ 286,091 34,988 5,309,569 89,006 5,719,654 During the twelve months ended 31st December 2016 the group recognised a charge of finished goods inventories of £158,213 (2015 – £54,356) to reflect the ageing of certain stock items. 11. TRADE AND OTHER RECEIVABLES Trade debtors Other debtors Prepayments 2016 £ 4,640,021 376,610 196,388 5,213,019 2015 £ 3,943,878 758,739 302,482 5,005,099 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 2016 £ 2,741,240 190,602 304,335 945,506 4,181,683 2016 £ 278,062 226,192 1,226,034 1,730,288 2015 £ 2,605,917 316,552 267,662 863,089 4,053,220 2015 £ 245,815 169,884 1,082,472 1,498,171 Note 14 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 (HOLDINGS) P.L.C. Notes to the accounts continued 14. FINANCIAL LIABILITIES – NON-CURRENT Bank loans – secured Hire purchase Government grants Note 2016 £ 870,900 490,047 - 1,360,947 2015 £ 1,005,064 351,892 6,568 1,363,524 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 2016 £ 226,192 490,047 716,239 2015 £ 169,884 351,892 521,776 2016 £ 278,062 258,099 466,494 146,307 1,148,962 2015 £ 245,815 243,903 540,938 220,223 1,250,879 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 2016 £ 91,143 39,971 2015 £ 123,265 39,955 2023 694,952 668,062 2019 123,562 159,597 2020 199,333 260,000 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. BRAIME (HOLDINGS) 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 2016 Exchange differences Credit to income statement during the year Balance at 31st December 2016 Note 2016 £ 35,898 81,826 117,724 2015 £ 159,636 70,599 230,235 Deferred tax £ 230,235 2,910 (115,421) 117,724 Deferred tax has been recognised at a rate of 39% (2015 – 39%) on accelerated capital allowances in 4B Elevator Components Limited and 17% (2015 – 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 2016 £ 120,000 300,000 420,000 2015 £ 120,000 300,000 420,000 120,000 240,000 360,000 120,000 240,000 360,000 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 (HOLDINGS) P.L.C. Notes to the accounts continued 17. FINANCIAL INSTRUMENTS Level 1 - quoted prices (unadjusted) in active markets 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. All financial assets and liabilities are initially measured at transaction price (including transaction costs). If an arrangement constitutes a financing transaction, the financial asset or financial liability is measured at the present value of the future payments discounted at a market rate of interest for a similar debt instrument. Trade and other receivables net of impairment losses, loans, cash and bank balances, trade and other payables are subsequently measured at the amortised cost equivalent to the undiscounted amount of cash or other consideration expected to be paid or received. Bank loans are initially measured at the present value of future payment, discounted at a market rate of interest and subsequently measured at amortised costs using the effective interest method. Whilst finance leasing liabilities within notes 13 and 14 are included within financial liabilities they do not constitute a financial instrument. 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 £2,126,552 (2015 - £72,090) 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: 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 instruments 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 £nil were outstanding at 31st December 2016 (31st December 2015 - £1,361,211). The fair value of the forward currency contracts is £nil (2015 - £41,785), of which £25,000 was included within trade and other payables in respect of these financial statements in 2015. Fixed interest term loans As at 31st December 2016 fixed interest rate term loans amounted to £91,143 and £39,971 (2015 - £163,220) (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 £24,674 (2015 - £21,205), the interest due on finance lease and hire purchase agreements after one year but not more than five years totals £46,173 (2015 - £41,747). Likewise the interest due on bank loans repayable within one year totals £28,071 (2015 - £31,937), the interest due on bank loans repayable after one year but not more than five years totals £69,214 (2015 - £60,199), and the interest due on bank loans repayable after more than five years totals £2,215 (2015 - £6,303). 40 T.F. & J.H. BRAIME (HOLDINGS) 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 2016 Sterling Euro US dollar Other Floating rate financial assets £ Fixed rate financial assets £ Total £ (1,169,259) 288,448 1,320,912 351,469 791,570 - - - - - (1,169,259) 288,448 1,320,912 351,469 791,570 Negative sterling floating rate financial assets relate to bank overdrafts available for offset against credit currency balances where a legal right of set-off exists. As at 31st December 2015 Sterling Euro US dollar Other 124,944 227,538 400,922 279,468 1,032,872 - - - - - 124,944 227,538 400,922 279,468 1,032,872 41 T.F. & J.H. BRAIME (HOLDINGS) 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 liabilities is shown below: Floating rate financial liabilities £ Fixed rate financial liabilities £ Total £ 1,528,810 20,121 - 63,805 1,612,736 652,433 - 826,066 - 1,478,499 2,181,243 20,121 826,066 63,805 3,091,235 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 Currency As at 31st December 2016 Sterling Euro US dollar Other As at 31st December 2015 Sterling Euro US dollar Other Floating rate financial liabilities comprise bank borrowings. 42 T.F. & J.H. BRAIME (HOLDINGS) 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 Sterling £ Euro US dollar £ £ Other currencies £ Total £ Functional currency At 31st December 2016 Sterling Euro US dollar At 31st December 2015 Sterling Euro US dollar Risk sensitivity - (1,035,690) 558,441 (477,249) 630,814 - (19,895) 610,919 (66,729) - - (66,729) 2,059,611 - - 2,059,611 2,623,696 (1,035,690) 538,546 2,126,552 - (961,068) 91,381 (869,687) 151,930 (1,005,800) - - (38,322) - 113,608 (1,005,800) 1,833,969 - - 1,833,969 980,099 (961,068) 53,059 72,090 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 £25,000 (2015 - 30,000). A weakening in the value of sterling by 10% will benefit the operating profit by a figure not exceeding £238,000 (2015 - £30,000). A strengthening of sterling by 10% will reduce the operating profit by a figure not greater than £290,000 (2015 - £20,000). 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 2016 £ 1,756,420 2015 £ 1,142,497 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. 43 T.F. & J.H. BRAIME (HOLDINGS) P.L.C. 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 generally denominated in the buying 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. 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 generally borrows at floating rates but some borrowing arrangements 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. Quantitative 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. 44 T.F. & J.H. BRAIME (HOLDINGS) 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 (2015 – 1,440,000). There are no potentially dilutive shares in issue. Dividends paid Equity shares Ordinary shares Interim of 6.20p (2015 – 6.20p) per share paid on 12th May 2016 Interim of 2.90p (2015 – 2.90p) per share paid on 21st October 2016 ‘A’ Ordinary shares Interim of 6.20p (2015 – 6.20p) per share paid on 12th May 2016 Interim of 2.90p (2015 – 2.90p) per share paid on 21st October 2016 Total dividends paid 2016 £ 2015 £ 29,760 13,920 43,680 29,760 13,920 43,680 59,520 27,840 87,360 59,520 27,840 87,360 131,040 131,040 An interim dividend of 6.40p per Ordinary and ‘A’ Ordinary share will be paid on 12th May 2017. 45 T.F. & J.H. BRAIME (HOLDINGS) P.L.C. Notes to the accounts continued 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. 19.4 The expected return on assets is equivalent to the discount rate used to value the schemes liabilities and based on the yield available on high quality corporate bands of appropriate term and currency. 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. Remeasurement gains and losses arising from experience adjustments and changes in actuarial assumptions are recognised within the consolidated statement of comprehensive income. 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 46 T.F. & J.H. BRAIME (HOLDINGS) P.L.C. T.F. & J.H. BRAIME (HOLDINGS) 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 2016 £ 8,781,000 (8,758,000) 23,000 (23,000) - 2015 £ 7,271,000 (7,221,000) 50,000 (50,000) - 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 gains based on experience Remeasurement gains due to changes in demographic assumptions Remeasurement loss/(gain) 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 2016 £ 51,000 51,000 2015 £ 51,000 51,000 264,000 (266,000) (2,000) 255,000 (258,000) (3,000) - 49,000 16,000 64,000 2016 £ 7,221,000 51,000 9,000 - 264,000 (196,000) (1,000) (214,000) 1,624,000 8,758,000 2016 £ 7,271,000 266,000 1,392,000 (196,000) 39,000 9,000 8,781,000 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 47 T.F. & J.H. BRAIME (HOLDINGS) P.L.C. T.F. & J.H. BRAIME (HOLDINGS) 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 60.3% 9.8% 2.2% 2.2% - 25.5% 100.0% 2016 £ 5,298,000 857,000 195,000 191,000 2,000 2,238,000 8,781,000 2015 £ 4,874,000 659,000 167,000 129,000 2,000 1,440,000 7,271,000 The assets do not include any investment in shares of the company. 19.10 The actual return on scheme assets is as follows: Actual return/(loss) on scheme assets 19.11 Amount recognised in the statement of comprehensive income is as follows: Gain/(loss) on scheme assets in excess of interest Remeasurement (loss)/gain from changes to financial assumptions Changes in effect of asset ceiling Experience gains Gains from changes to demographic assumptions Total amount recognised in statement of comprehensive income 2016 £ 1,658,000 2015 £ (42,000) 2016 £ 1,392,000 (1,624,000) 27,000 1,000 214,000 10,000 2015 £ (300,000) 309,000 1,000 - - 10,000 19.12 Cumulative amount of remeasurement gains and losses recognised in the statement of comprehensive income is as follows: Remeasurement gains 19.13 Amounts for the current period and previous periods are as follows: 2016 £ 327,000 2015 £ 317,000 Present value of funded obligations Fair value of scheme assets Surplus Experience gains on plan liabilities Gains from changes to demographic assumptions Changes in assumptions used to value scheme liabilities Gains/(losses) on scheme assets in excess of interest 2016 £ ,000 (8,758) 8,781 23 1 2015 £,000 (7,221) 7,271 50 - 2014 £,000 (7,796) 7,847 51 - 2013 £,000 (6,505) 6,513 8 45 2012 £,000 (6,295) 6,328 33 - 214 - - (106) - (1,624) 309 (995) 118 (573) 1,392 (300) 1,082 (51) 566 48 T.F. & J.H. BRAIME (HOLDINGS) P.L.C. T.F. & J.H. BRAIME (HOLDINGS) 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 2016 2015 2014 2013 2012 2.60% 4.65% 3.65% 2.60% 3.50% 3.65% 110% 52NA YoU mc min 1.0% 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% PNXA00 YoU mc min 1.0% 4.40% 4.70% 3.70% 5.00% 3.55% 3.70% 120% PNXA00 YoU mc min 1.0% 4.10% 4.10% 3.10% 4.10% 3.10% 3.10% 120% PNXA00 YoU mc min 1.0% 19.15 The group 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 and is currently being completed. 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 £42,000. The weighted average duration of the defined benefit obligation is approximately 17.9 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 recognised in the statement of comprehensive income Net asset at end of period Note 19.6 19.11 2016 £ - (49,000) 39,000 2015 £ - (64,000) 54,000 10,000 - 10,000 - 49 T.F. & J.H. BRAIME (HOLDINGS) 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 £ 159,000 (182,000) (286,000) 281,000 (83,000) 79,000 (19,000) 24,000 % With-profit deferred annuities converted on retirement using guaranteed annuity rates Plus 10.00% Minus 10.00% 204,000 (204,000) 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 Over five years 2016 £ 2015 £ 132,328 148,904 22,750 - 303,982 173,028 197,186 370,214 50 T.F. & J.H. BRAIME (HOLDINGS) P.L.C. Notes to the accounts continued 21. NOTES SUPPORTING CONSOLIDATED CASH FLOW STATEMENT Cash and cash equivalents Cash at bank and in hand Bank overdrafts 2016 £ £ 2015 742,474 - 742,474 931,018 (615,038) 315,980 Major non-cash transaction During the year the group acquired tangible assets of £370,895 subject to finance (2015 - £254,782) under hire purchase agreements. 22. CAPITAL COMMITMENTS There were capital commitments of £nil (2014 - £426,817) 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. During the year certain group companies made sales and recharged expenses to 4B Asia Pacific Company Limited, a 48% owned subsidiary of T.F. & J.H. Braime (Holdings) P.L.C., totalling £399,185. Group companies also made purchases of £22,552 from 4B Asia Pacific Company Limited. As at 31st December 2016 amounts due from 4B Asia Pacific Company Limited totalled £962,065, exclusive of provision of £405,000 and £38,445 was due to 4B Asia Pacific Company Limited. There were no other related party transactions during the year. 51 T.F. & J.H. BRAIME (HOLDINGS) P.L.C. Company balance sheet at 31st December 2016 Note 2016 £ 2016 £ 2015 £ 2015 £ Fixed assets Property, plant and equipment Investment property Investments Current assets Debtors: due within one year Debtors: due after more than one year Cash at bank and in hand 3 4 5 8 9 Creditors: amounts falling due within one year Amount owed to subsidiary companies Other creditors falling due within one year 10 Net current (liabilities)/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 11 12 13 2,130,175 4,533,081 598,351 7,261,607 - 1,349,619 598,351 1,947,970 1,316,345 - 2,887 1,319,232 2,603,965 335,565 2,939,530 31,507 3,256,084 18,860 3,306,451 - 306,697 306,697 (1,620,298) 5,641,309 615,397 340,198 4,685,714 360,000 180,000 4,145,714 4,685,714 2,999,754 4,947,724 1,345,708 75,312 3,526,704 360,000 180,000 2,986,704 3,526,704 Company’s profit for the financial year 1,290,050 125,425 These financial statements were approved and authorised for issue by the board of directors on 26th April 2017 and signed on its behalf by: O. N. A. Braime, Director P. Tiffany, Director 52 The notes on pages 54 to 60 form part of these financial statements T.F. & J.H. BRAIME (HOLDINGS) P.L.C. Company statement of changes in equity for the year ended 31st December 2016 Capital Called up Redemption Reserve £ Share Capital Retained Earnings £ Total £ Balance at 1st January 2015 Comprehensive income for the financial year – profit Dividends paid Balance at 31st December 2015 Comprehensive income for the financial year – profit Dividends paid Balance at 31st December 2016 360,000 - - 360,000 - - 360,000 180,000 - - 180,000 3,523,319 2,992,319 125,425 125,425 (131,040) (131,040) 2,986,704 3,526,704 - - 180,000 1,290,050 1,290,050 (131,040) (131,040) 4,145,714 4,685,714 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. Included within retained earnings is a non-distributable amount of £299,686. 53 T.F. & J.H. BRAIME (HOLDINGS) P.L.C. Notes to the accounts continued 1. COMPANY INFORMATION 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. 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. 2.3 Property, plant and equipment Property, plant and equipment is stated at purchase cost together with any incidental expenses of acquisition, net of depreciation and any provision for impairment. Depreciation is provided on all tangible assets, other than investment properties at rates calculated to write off the cost less estimated residual value of each asset on a straight line basis over its expected useful life. • Plant and machinery – 4-5 years on a straight line basis • Fixtures and fittings – 4-5 years on a straight line basis – 4-5 years on a straight line basis • Motor vehicles Residual value represents the estimated amount which would currently be obtained from the disposal of an asset after deducting estimated costs of disposal, if the asset were already at an age and in the condition expected at the end of its estimated useful life. The need for any fixed asset impairment write down is assessed by comparison of the carrying value of the assets against the higher of realisable value and value in use. The gain or loss arising on the disposal of an asset is determined on the difference between the sale proceeds and the carrying value of the asset, and is recognised in the profit and loss account. Investment properties 2.4 Investment properties for which fair value can be measured reliably without undue cost or effort on an ongoing basis are measured at fair value annually with any charge recognised in the profit and loss account. 2.5 Financial instruments Financial assets and financial liabilities are recognised when the company becomes a party to the contractual provisions of the instrument. Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the company after deducting all of its liabilities. 54 T.F. & J.H. BRAIME (HOLDINGS) P.L.C. Notes to the accounts continued All financial assets and liabilities are initially measured at transaction price (including transaction costs). If an arrangement constitutes a financing transaction, the financial asset or financial liability is measured at the present value of the future payments discounted at a market rate of interest for a similar debt instrument. Financial assets For financial assets carried at cost less impairment, the impairment loss is the difference between the asset’s carrying amount and the best estimate of the amount that would be received for the asset if it were sold at the reporting date. The following assets and liabilities are classified as basic financial instruments – cash and bank balance, trade creditors, bank loans and inter-company balances. Cash and bank balances, trade creditors and inter- company balances (being repayable on demand) are measured at the amortised cost equivalent to the undiscounted amount of cash or other consideration expected to be paid or received. Bank loans are initially measured at the present value of future payments, discounted at a market rate of interest and subsequently measured at amortised cost using the effective interest method. 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 loss not been recognised. 2.7 Cash and cash equivalents Cash and cash equivalents include cash in hand and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities, escept where a legal right of set off exists. 2.6 Impairment of assets 2.8 Investments 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 profit and loss 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. Investments in subsidiaries are measured at cost less impairment. 2.9 Taxation 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. 55 T.F. & J.H. BRAIME (HOLDINGS) P.L.C.Notes to the accounts continued 2.12 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 associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods. The critical judgements that the directors have made in applying the company’s accounting policies and the key sources of estimation uncertainty that have had the most significant effect on the financial statements are described below: Valuation of investment property As described in note 4 to the financial statements, investment property is stated in the balance sheet at fair value, based on the valuation performed by the directors with reference to recent valuations carried out by professionals who have experience in the location and category of the properties valued. The year end valuation has been linked to observable market prices. 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 2.10 Foreign currencies 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. 2.11 Hire purchase and leasing commitments Assets held under finance leases, hire purchase contracts and other similar arrangements, which confer rights and obligations similar to those attached to owned assets, are capitalised as tangible fixed assets at the fair value of the leased asset (or, if lower the present value of the minimum lease payments as determined at the inception of the lease) and are depreciated over the shorter of the lease terms and their useful lives. The capital elements of future lease obligations are recorded as liabilities, while the interest elements are charged to the profit and loss account over the period of the leases to produce a constant periodic rate of interest on the remaining balance of the liability. 56 T.F. & J.H. BRAIME (HOLDINGS) P.L.C.Notes to the accounts continued 3. PROPERTY, PLANT AND EQUIPMENT Cost At 1st January 2016 Additions Disposals At 31st December 2016 Depreciation At 1st January 2016 Provided for the year Disposals At 31st December 2016 Net book value At 31st December 2016 At 31st December 2015 Plant and Fixtures and fittings machinery £ £ Motor vehicles £ - 2,468,035 - 2,468,035 - 405,930 - 405,930 - 82,149 - 82,149 - 14,079 - 14,079 - 1,562 - 1,562 - 1,562 - 1,562 Total £ - 2,551,746 - 2,551,746 - 421,571 - 421,571 2,062,105 68,070 - - - - 2,130,175 - The net book value of tangible fixed assets includes an amount of £661,614 in respect of assets under finance leases and hire purchase contracts. The related depreciation on these assets for the year was £82,289. Assets in the course of construction which have not been depreciated total £195,571. 4. INVESTMENT PROPERTY Fair value At 1st January 2016 Additions Fair value adjustment At 31st December 2016 Land and buildings £ 1,349,619 2,907,462 276,000 4,533,081 The investment properties, which are all freehold were adjusted to fair value at 31st December 2016 of £4,533,081 by the company’s directors. The valuations are based on open market values linked to observable market prices with reference to recent professional valuations conducted on the properties. The historical cost of the investment properties is £2,846,645. 57 T.F. & J.H. BRAIME (HOLDINGS) P.L.C. Notes to the accounts continued 5. INVESTMENTS Subsidiary undertakings At 1st January 2016 and 31st December 2016 Subsidiary Principal activity £ 598,351 Proportion of shares held 2016 and 2015 Ordinary Preference Shares i Shares Registered in and operating from Hunslet Road, Leeds, West Yorkshire, LS10 1JZ, England: 100% Braime Pressings Limited Manufacture of metal presswork 4B Braime Components Limited Distribution of bulk material handling components 100% ii Registered at Hunslet Road, Leeds, West Yorkshire, LS10 1JZ, England and operating from the USA: 4B Elevator Components Limited Distribution of bulk material handling components 100% Incorporated in and operating from 9 Route de Corbie, 80800 Lamotte Warfusee, France: 4B-France sarl Distribution of bulk material handling components 100% Incorporated in and operating from 899/1 Moo 20, Soi Chongsiri, Bangplee-Tam Ru Road, Samutprakam, 10540, Thailand: 4B Asia Pacific Company Limited Distribution of bulk material handling components 100% Incorporated in and operating from 14 Newport Business Park, Mica Drice, Kya Sand, 2163 Johannesburg, South Africa: 4B Africa Elevator Components (Pty) Limited Distribution of bulk material handling components 100% iii iv v vi Incorporated in and operating from Unit 1, 18 Overlord Place, Acacia Ridge, Queensland, 4110, Australia: 4B Australia Pty Limited Distribution of bulk material handling components 100% - - - - - 6. EMPLOYEES Office and management Directors’ remuneration Emoluments for qualifying service Further details of directors’ remuneration are included in the remuneration report. 58 100% - 2016 Number 6 6 2015 Number £ £ 51,000 48,000 T.F. & J.H. BRAIME (HOLDINGS) P.L.C. Notes to the accounts continued PROFIT FOR THE FINANCIAL YEAR 7. 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. 8. DEBTORS: AMOUNTS RECEIVABLE WITHIN ONE YEAR Other taxes Prepayments Amounts owed by a subsidiary company 9. DEBTORS: AMOUNTS RECEIVABLE AFTER MORE THAN ONE YEAR Amount owed by a subsidiary company 10. CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR Bank overdraft Bank loan - secured Other taxes and social security costs Corporation tax Trade creditors Accruals Hire purchase - secured 2016 £ 6,288 43,930 1,266,127 1,316,345 2015 £ 14,263 17,244 - 31,507 2016 £ - 2015 £ 3,256,084 2016 £ - 108,230 - 1,178 7,821 33,705 184,631 335,565 2015 £ 163,870 100,000 3,234 - 14,736 24,857 - 306,697 Cross guarantees exist in respect of all group company bank borrowings. At 31st December 2016 the borrowings guaranteed by the company amounted to £970,665 (2015 - £883,072). 59 T.F. & J.H. BRAIME (HOLDINGS) P.L.C. Notes to the accounts continued 11. CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR Bank loan - secured Amount owed to subsidiary companies Hire purchase creditor - secured 2016 £ 214,666 - 400,731 615,397 2015 £ 319,598 1,026,110 - 1,345,708 The bank loan and hire purchase creditors are secured by fixed charges over certain assets of the company. 12. PROVISIONS FOR LIABILITIES Deferred tax liability Rolled over capital gains Investment property fair value adjustment Balance at 1st January 2016 Charged to income statement during the year Balance at 31st December 2016 2016 £ 2015 £ 60,000 15,312 75,312 71,816 268,382 340,198 Deferred tax £ 75,312 264,886 340,198 Deferred tax has been recognised at a rate of 17% (2015 – 18%) based on tax rates and laws that have been enacted or substantively enacted at the balance sheet date. 13. 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 2016 £ 120,000 300,000 420,000 2015 £ 120,000 300,000 420,000 120,000 240,000 360,000 120,000 240,000 360,000 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. 60 T.F. & J.H. BRAIME (HOLDINGS) P.L.C. Five year record 2016 £’000 2015 £’000 2014 £’000 2013 £’000 2012 £’000 Turnover 28,415 26,470 24,292 22,954 21,212 Profit from operations 1,394 897 1,236 1,075 Profit before tax 1,274 1,950 1,125 1,010 Profit after tax 855 1,542 782 752 659 678 427 Basic and diluted earnings per share 59.34p 107.05p 54.31p 52.23p 29.64p 61 T.F. & J.H. BRAIME (HOLDINGS) P.L.C. Explanatory notes of resolutions 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 2016 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 21st October 2016 and 6.40p per share paid on 12th May 2017. 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, P. Tiffany and P. J. O. Alcock 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. 62 T.F. & J.H. BRAIME (HOLDINGS) P.L.C. 63 T.F. & J.H. BRAIME (HOLDINGS) P.L.C.64 T.F. & J.H. BRAIME (HOLDINGS) P.L.C.T.F. & J.H. BRAIME (HOLDINGS) P.L.C. REPORT & ACCOUNTS 2016 Designed and printed by PrintPod | www.print-pod.com T.F. & J.H. BRAIME (HOLDINGS) P.L.C. 

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