Braime Group PLC Annual Report 2021

Plain-text annual report

2021 Braime Group – a rich heritage dating back to 1888 The Group has a rich heritage, tracing back its origins to the 19th century, when oilcans made in a small workshop by Thomas Braime quickly gained a reputation for quality. Thomas, the eldest son of a veterinary surgeon, was apprenticed to McLaren, an engineering company manufacturing steam traction engines. After losing his thumb in an accident, he was inspired to look for effective ways to apply oil to machinery. In 1888, he set up production in Hunslet, Leeds, using the new pressings technology. His younger brother Harry, also a skilled engineer joined him as partner. The rise of the motor industry increased demand for metal pressings and larger premises were soon needed for the expanding business. The current Braime buildings, with its attractive red brick and terracotta frontage, was constructed between 1911 and 1914. During the First World War, the Company played an important role in armament provision, training women as skilled munition workers. The Group’s headquarters remains its listed buildings on Hunslet Road, the beautiful interiors are often used in film sets. However, today, the Group is truly international with subsidiaries in North America, Europe, China, South East Asia, Africa and Australia. B r a i m e G r o u p P L C | A n n u a l R e p o r t & A c c o u n t s 2 0 2 1 Braime Group PLC Hunslet Road Leeds LS10 1JZ England, UK www.braimegroup.com Annual Report & Accounts 2021 204709 Braime Group Cov AR21 PRINT.indd 1 204709 Braime Group Cov AR21 PRINT.indd 1 12/05/2022 08:03 12/05/2022 08:03 Braime Group PLC The Group is involved in the manufacture of metal presswork and the distribution of bulk material handling components. Our electronics division specialises in level controls, intelligent sensors and safety control systems for bucket elevators and conveyors. The Group is headquartered in Leeds, United Kingdom, but also trades from locations in France, South Africa, Australia, Thailand, China and the United States. OVER 130 YEARS OF ENGINEERING EXCELLENCE Front cover: Cement kiln elevator steel cord belt installation, Martinsburg, West Virginia, USA. Above: Inside the IE-Node: remote sensor monitoring interface for PLCs and automation systems. Designed and produced by corporateprm, Edinburgh and London www.corporateprm.co.uk 204709 Braime Group Cov AR21 PRINT.indd 2 204709 Braime Group Cov AR21 PRINT.indd 2 12/05/2022 08:03 12/05/2022 08:03 Strategic Report Governance Financial Statements 69 Explanatory notes of resolutions (continued) resolution. The following notes give an explanation of the proposed resolutions. Resolutions 1 to 6 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 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 2021 to the meeting. To confirm the interim dividend on the Ordinary and ‘A’ Ordinary shares of 4.25p per share paid on 14th October 2021 and 8.20p The Articles of Association of the Company require the nearest number to one third of the directors to retire at each Annual General Meeting. The following directors are retiring by rotation in accordance with the Company’s Articles of Association and, being eligible, The Company is required to appoint auditors at each Annual General Meeting to hold office until the next such meeting at which The resolution proposes the reappointment of the Company’s existing auditors, Kirk Newsholme, and authorises the directors to 2. Confirmation of dividends per share paid on 8th June 2022. Re-appointment of directors offer themselves for re-election. 3. C. O. Braime 4. A. Q. Braime 5. Re-appointment of auditors accounts are presented. 6. Remuneration of auditors agree their remuneration. Directors and advisers Directors Nicholas Braime, MA (Oxon), MBIM (Chairman) Peter Alcock, B. Eng. (Non-executive director) Andrew Walker, MA (Cantab) (Non-executive director) Alan Braime, BA (Hons), FCA Carl Braime, BSc (Hons), MSc, MBA Cielo Cartwright, BSc (Hons), FCA Secretary Cielo Cartwright, BSc (Hons), FCA Registered office Hunslet Road, Leeds LS10 1JZ Independent auditors Bankers Kirk Newsholme Chartered Accountants and Statutory Auditors 4315 Park Approach, Thorpe Park, Leeds LS15 8GB HSBC Leeds City Branch 33 Park Row, Leeds LS1 1LD Stockbrokers W H Ireland 3rd Floor, Royal House, 28 Sovereign Street, Leeds LS1 4BJ Company registration 488001 (England and Wales) Number Strategic Report Governance Financial Statements 1 “We expected 2021 to be challenging. Instead, all our subsidiaries across the Group exceeded both their budget and their prior year sales.” Nicholas Braime, Chairman 27th April 2022 Financial Highlights 2021 Turnover (£m) Proﬁt from operations (£m) before exceptional item 35.7 33.4 32.8 31.4 36.4 3.2 2.3 2.2 2.5 Contents Strategic report Chairman’s statement Group strategic report 1.4 The Board 2017 2018 2019 2020 2021 2017 2018 2019 2020 2021 Governance Corporate governance report Proﬁt before tax (£m) Proﬁt after tax (£m) Directors’ report 3.0 2.2 Directors’ remuneration report Independent auditors’ report 4 7 12 13 17 19 20 2.2 1.6 1.7 1.3 Financial statements Consolidated income statement 26 1.2 1.1 0.9 0.8 2017 2018 2019 2020 2021 2017 2018 2019 2020 2021 Basic and diluted earnings per share (pence) Dividend per share (pence) Consolidated statement of comprehensive income Consolidated balance sheet Consolidated cash ﬂow statement Consolidated statement of changes in equity Notes to the accounts 12.45 Company balance sheet 154.79 109.73 93.68 59.31 52.08 11.5 11.6 11.8 10.2 2017 2018 2019 2020 2021 2017 2018 2019 2020 2021 Company statement of changes in equity Notes to the Company accounts Five year record Notice of meeting Explanatory notes of resolutions Directors and advisers 27 28 29 30 31 59 59 60 66 67 68 69 204709 Braime Group Text AR21 PRINT.indd 1 12/05/2022 07:59 Braime Group PLC Annual Report & Accounts 2021 2 Strategic Report Group at a glance Principal activities The Group manufactures deep drawn metal presswork and distributes material handling components and monitoring equipment. Manufacturing activity is delivered through Braime Pressings Limited and the distribution activity is through the 4B division. Our strategy The main area of the business is the supply of goods and services for handling and processing industrial, and in particular, agricultural commodities. This sector is currently a growth industry with a global market. Our strategy is to invest in increasing our market reach while continuing to develop new products. Our latest subsidiary, 4B China, in Changzhou, Jiangsu province of China, was launched in 2018, having closely consulted on local opportunities with our key customers in the region. We continue to enhance features of our secure, cloud based industrial monitoring solution, Hazardmon which is revolutionary for introducing greater levels of transparency and record keeping. We will continue to investigate new geographical markets. Braime Pressings Braime Pressings specialises in metal presswork, including deep drawing, multi-stage progression and transfer presswork. The business manufactures precision stamped components for the automotive and industrial sectors, with automation capabilities such as pick and place, roll threading, washing and robotic welding. 4B Group “Better by design” The 4B division is an industry leader in developing high quality, innovative and dependable material handling components for the agricultural and industrial sector, from elevator buckets to forged conveyor chain and level monitors to hazard monitors. 4B works in close partnership with its customers on new designs and on the upgrade of existing elevators and conveyor machines. Braime Pressings has over 130 years of manufacturing experience and a proven record of world class supply to the automotive industry and a range of other markets. It offers innovative solutions to customer requirements which exceed expectations on cost, quality and delivery. • Deep Drawn Presswork • Multi Stage Progression • Transfer Presswork • Robot Technology • Sub Assembly Braime Pressings prides itself on the maintenance and continual improvement of a full quality management system and is accredited to IATF-ISO. For more information please visit: www.braimepressings.com The 4B division consists of the following companies: • 4B Braime Components Limited, based in Leeds, UK • 4B Elevator Components Limited, based in Morton, Illinois, USA • 4B-France sarl, based in Villers-Bretonneux, France • 4B Africa Elevator Components (Pty) Limited, based in Johannesburg, South Africa • 4B Australia Pty Limited, based in Queensland, Australia • 4B Asia Paciﬁc Company Limited, based in Samutprakam, Thailand • 4B Braime (Changzhou) Industrial Control Equipment Co Limited, based in Changzhou, China For more information please visit: www.go4b.com Braime Group PLC Annual Report & Accounts 2021 204709 Braime Group Text AR21 PRINT.indd 2 12/05/2022 07:59 The Group manufactures deep drawn metal presswork and distributes material handling components and monitoring equipment. Manufacturing activity is delivered through Braime Pressings Limited and the distribution activity is through the 4B division. Our strategy The main area of the business is the supply of goods and services for handling and processing industrial, and in particular, agricultural commodities. This sector is currently a growth industry with a global market. Our strategy is to invest in increasing our market reach while continuing to develop new products. Our latest subsidiary, 4B China, in Changzhou, Jiangsu province of China, was launched in 2018, having closely consulted on local opportunities with our key customers in the region. We continue to enhance features of our secure, cloud based industrial monitoring solution, Hazardmon which is revolutionary for introducing greater levels of transparency and record keeping. We will continue to investigate new geographical markets. Braime Pressings 4B Group “Better by design” Strategic Report Governance Financial Statements 3 Seamless Steel Buckets Braime Pressings have manufactured pressed seamless steel buckets and supplied them worldwide to the bulk material handling sector for over 120 years. The buckets, including the Company’s “StarcoTM” and “Super StarcoTM” models, have been designed after extensive research and development and offer a range of alternative styles to suit the different individual materials being conveyed and achieve the optimum ﬁll, effective discharge and throughput over a wide speed range. Pressings Braime Pressings is equipped with 5 transfer presses, each with up to 8 stations, as well as numerous single station and progression presses, fed by coil, and including robotic transfer of product where appropriate. The range of equipment includes both mechanical and hydraulic presses with capacities up to 500T, as well as ancillary forming and welding machinery. Deep Seamless Enclosures and Large Panels Production includes deep drawn pressings up to 500mm deep, as well as large panels up to 2.4 meters long. The Company manufactures to the highest quality standards required by the automotive and other industry sectors and holds annual accreditation to: IATF 16949:2016 ISO 9001:2015 Elevator Bolts Braime Pressings manufactures bolts and fasteners, used in bulk material handling to attach elevator buckets to vertical conveyors which are used in the storage and processing of agricultural products, such as cereals, animal feed, and sugar, and equally for moving industrial commodities, such as aggregates, cement, coal and glass cullet. The bolts are cold forged making them exceptionally strong. Elevator Buckets 4B has the world’s largest range of elevator buckets used for conveying bulk materials. With over 400 different sizes and styles, 4B supplies steel and plastic elevator buckets for both agricultural applications such as grain, feed, seeds, and sugar and industrial applications such as cement, glass, aggregates and coal. Electronic Monitoring 4B offers an extensive range of monitoring equipment and sensors for bucket elevators, belt and chain conveyors, screw conveyors and silos. 4B’s sensors and monitors have worldwide approvals for use in dust hazardous environments. Our sensors and hazard monitoring systems are designed to reduce the risk of ﬁres and explosions, and prevent breakdowns that result in costly down time. Elevator Belting 4B has a wide range of elevator belting to suit all applications. Belt types include anti-static, abrasion-resistant, high temperature, oil resistant and ﬂame retardant and steel web belting for the toughest environments. Belts are supplied slit, cut to length and punched to customer requirement. Dropped Forged Conveyor Chain 4B is a manufacturer of drop forged chain for agricultural and industrial applications. 4B’s superior heat treatment technique provides the optimum chain link with a more resilient ductile core for shock resistance, and an extremely hard exterior surface for superior wear resistance, ideal for handling ash, cement, gypsum, coal and wood chips. 4B offers a range of conveyor sprockets and trailers and nylon or welded ﬂights. Braime Group PLC Annual Report & Accounts 2021 204709 Braime Group Text AR21 PRINT.indd 3 12/05/2022 07:59 4 Strategic Report Chairman’s statement date is the 19th May 2022). This brings the total dividend paid in relation to 2021 to 12.45p, compared to 11.8p in 2020. Strategy The business has continued to pursue its longstanding strategy of aiming to achieve growth in sales and proﬁt by consistently investing in 3 key areas:- – new machinery and equipment to achieve ongoing improvements in productivity and efﬁciency; – product development to add further innovative products for existing and new customers; – developing new markets which offer opportunities to expand the customer base. This strategy is pursued through a policy of maintaining low central overheads, and by limiting central control to the areas of ﬁnance, capital expenditure, product development and marketing support. Control over other areas of the business is delegated to the subsidiaries, who are best placed to develop policies to suit their own local markets. Capital Investment In 2021 the Group made capital investments totalling £2.1m, repeating the level of investment made in 2020. Of this, £0.7m was invested in production equipment, £0.5m in the completion of the new operating and distribution facility for 4B France, and £0.7m spent towards the cost of the new warehouse being constructed for our UK manufacturing facility. The new premises at 4B France, completed in May 2021, provide larger and more modern ofﬁce and storage facilities, signiﬁcantly improve the ability to serve existing customers, support future growth, and enable it to provide support, where necessary post Brexit, to other European customers still supplied primarily from the UK. The new climate controlled warehouse in Leeds will provide Braime Pressings with additional centralised climate-controlled storage for both raw materials and ﬁnished parts. The new warehouse, dispatch area, and extra employee parking were scheduled for completion in October 2021 but have been seriously delayed by the issue in the Chain Cell and the unexpected discovery of a 30m deep water well at a point where the new building joins the existing facility, as announced in February 2022. The well, not marked on any current or historical maps, and missed by the ground survey and exploratory bore holes, was probably part of Union Foundry, built around 1850, occupying part of the current manufacturing site prior to its acquisition by T.F. & J.H. Braime in 1910. The cost of plugging and securing the well beneath the foundations, and the resulting delay to the building program, have added around £300,000 to the cost of this project. Completion is ﬁnally expected in the summer of this year. Nicholas Braime Chairman Overview We expected 2021 to be challenging. Instead, all our subsidiaries across the Group exceeded both their budget and their prior year’s sales. In particular, the revenues of Braime Pressings increased substantially due to exceptionally high demand from its external customers for commercial vehicle components, as well as increased demand from its internal customers in the Group for the supply of material handling components to the 4B division, due to a surprising increase in infrastructure projects globally. The combined effect was to lift the annual revenue of Braime Pressings by 38%. In consequence, the manufacturing business made a very signiﬁcant contribution to the Group operating proﬁt for the ﬁrst time in recent years. Across the Group in 2021, sales increased from £32.8m in 2020 to £36.4m in 2021, and the overall gross margin rose from 46.7% to 48.4%. Meanwhile the effect of exchange rate movements on overseas margins and earnings was marginally positive in 2021. So the Group operating proﬁt increased from £1.4m to £2.5m before exceptional costs, an excellent result in the context of the pandemic. However, the results include £1.2m of exceptional costs, £1.0m of which the directors have set aside as a provision to cover the costs of re-building part of the UK facility, which had to be demolished in December. This issue is discussed further later in the statement. After deducting both the ﬁnance expense of £0.2m and the exceptional cost of £1.2m the proﬁt before tax, is £1.1m, similar to the ﬁgure in 2020. Dividends The Company paid an interim dividend of 4.25p in October 2021. Based on the positive result for 2021, and strong current trading, the directors propose paying a second dividend of 8.20p on the 8th June to the holders of the Ordinary and “A” Ordinary Shares on the Share Register on the 20th May 2022. (The ex-dividend Braime Group PLC Annual Report & Accounts 2021 204709 Braime Group Text AR21 PRINT.indd 4 12/05/2022 07:59 Strategic Report Governance Financial Statements 5 New Product Development In 2021, we brought to market a number of new innovative products and continued our investment in product development. The long process from original concept, through the assessment of the technical and commercial feasibility of the idea, detailed design, gaining the relevant approvals standard and certiﬁcation, carrying out ﬁeld trials, to ﬁnal product launch, takes a minimum of 3 years and sometimes much more. Devoting current time to continuously progressing a stream of new product development is crucial to the future of the business. Repairs to the UK Facility In July 2021, following a major storm, bricks under a beam supporting the roof of the North-East corner of the Leeds facility, fell to ground in the Chain Cell. Very fortunately nobody was hurt, but the drop of a structural beam by 300mm, caused another supporting beam to rotate off its location in the opposite chimney wall and pushed out the top of an external wall running adjacent to Sayner Lane, forcing the wall to bow outwards and the public highway had to be closed. Our structural engineers advised that the building would inevitably deteriorate further, cause the roof to collapse and, when it did so, would pull down further areas of rooﬁng over the main workshops and that the only option was full demolition. We reserved £250,000 for this at the interim results stage. The Leeds facility is a Grade II Listed Building. Under the 1990 Listed Buildings Act, it is a criminal offence to demolish or materially alter a Listed Building without the prior consent of the local authority, in our case Leeds City Council (LCC). Prior to granting their consent for demolition, LCC required that our structural engineers justiﬁed the demolition and that our architects submitted a planning application for the demolition and the restoration of the building, which included important features of the historic structure deemed of particular value. These features included rebuilding the original facade of the building adjacent to Sayner Lane re-using the original bricks and restoring the original ﬁreplace and chimney, which dominated the rear of the property and formed an important part of the Union Foundry, built in the mid-19th Century, during the early industrial revolution in Leeds. Following an application for demolition and re-building, the Planning Application was granted in mid-January 2022. The current best estimate from specialist advisors is that the total cost will be in the region of £850,000 which will have to be ﬁnanced from internal resources. However, we are still in discussion with LCC planners, architects, and potential contractors to minimise the cost of the re-construction, including the costly features required by the council but creating a new low maintenance building designed to increase efﬁciency, reduce operational costs and provide additional usable space for storage and production. We hope to receive ﬁrm pricing in early May and complete the works in 2022. Further updates will be provided. 4B France’s new facility, located near Amiens This unexpected event forced Braime Pressings to temporarily relocate and condense some of its manufacturing operation in another part of the UK facility, causing additional stress at a time when resources were already fully stretched. The only mitigating factors are that it involved the oldest part of the facility, dating from 1850, was in poor condition, badly designed, and built on clay without foundations. Despite these setbacks, the overall results to date have remained positive. Risk Business risks are set out in the strategic report but the two principal risks to the Group are its exposure to currency ﬂuctuations, and its exposure to claims for compensation linked to product failure. These primary risks are due respectively, to the very high proportion of the Group products which are sold overseas, and to the speciﬁc nature of the markets in which it is engaged. The Group also buys part of its raw materials in overseas currencies, and this partly offsets the fact that around 80% of Group revenues are made in overseas markets and currencies. The business holds substantial funds in key foreign currencies and, to the limited extent to which this is possible, it minimises the risk by reacting to currency ﬂuctuations. This involves both judgement and luck and the risk, inherent in the Groups proﬁle, remains unavoidable in the long-term. Braime Group PLC Annual Report & Accounts 2021 204709 Braime Group Text AR21 PRINT.indd 5 12/05/2022 07:59 6 Strategic Report Chairman’s statement (continued) The invasion of Ukraine by Russia has tragic and unimaginable humanitarian consequences. It has also largely closed, for the moment, two very signiﬁcant markets for agro-industrial components supplied both directly, and especially indirectly, by Group subsidiaries. The Group is being badly affected by huge increases in the cost of our main raw materials, steel, plastic resin and rubber. In 2022, these increases have already averaged 50% and are unprecedented in peacetime. Meanwhile, the over 600% increase in the cost of sea freight, and the doubling of delivery times during 2021 has shown no sign of abating. On occasions, the shipping cost now exceeds the ex-works cost of the products. The size of the increases, and the long and unreliable delivery times, are very disruptive for a Group dependent on trading globally. These problems seriously affect purchasing, production and sales and create a huge increase in the stress and the daily work of our employees. Above all, the knock-on effect of this instability puts every order and every customer perpetually “at risk”. We therefore look to the year ahead with concern, and anticipate difﬁcult times ahead, although historically, the diversity of our product range and the global nature of our sales have together helped us weather such challenges. Nicholas Braime, Chairman 27th April 2022 A large proportion of the Group’s products are sold into the material handling market, primarily to storage and processing facilities. In the case of the mechanical components, the parts are used in physically transporting the granular product; in the case of the electronic components, they are designed to help reduce the risk that the combination of the dust and oxygen present in moving high volumes of combustible product, triggers a ﬁre or dust explosion. As a result, the business is exposed periodically to claims for ﬁnancial compensation although no such claims have been made in the ﬁnancial year. Great care is taken in the design and manufacture of our products in order to meet and maintain a multitude of complex international Standards and Approvals. This process involves signiﬁcant ongoing cost. Nevertheless, the risk cannot be entirely eliminated so the Group carries insurance to enable it to defend itself against any claims that may arise. New Business Opportunity In April 2022, the Group purchased the exclusive sales rights, and customer list, for an additional range of electrical components used in the bulk material handling industry. This product range will be re-labelled and integrated with our own “4B” brand and the purchase increases our current small UK market, expands our customer base and creates potential for further growth. Staff In my 2020 Report, we praised our staff for their courage in working through the pandemic and their willingness to change their patterns of work to meet the much higher demand from our customers and compensate for those employees who became ill or who needed to be furloughed. The large degree of ﬂexibility shown by our staff in coping with the additional problems outlined above has continued through 2021. Just as everyone thought the pandemic was ﬁnally over and normality was slowly returning, the workload of many of our staff has been massively increased by further new challenges. As always, the continued success of the business depends almost entirely on the efforts and enthusiasm of our staff at all levels of the business. Current Trading and Outlook The ﬁrst quarter of 2022 has begun very positively. Sales across the Group are currently running well ahead of the same period in 2021, as customers continue to enjoy a post pandemic bounce. Group sales are diversiﬁed by product and industry and are sold in a wide spread of overseas markets, some of which will be less affected by any recession. In some cases, these markets will actually beneﬁt from the steep rise in grain and other commodity prices. Currently though, the immediate future is uncertain and a major recession in the UK, and Europe is widely anticipated. Braime Group PLC Annual Report & Accounts 2021 204709 Braime Group Text AR21 PRINT.indd 6 12/05/2022 07:59 Strategic Report Governance Financial Statements 7 Group strategic report The directors present their strategic report of the Company and the Group for the year ended 31st December 2021. Principal activities The principal activities of the Group during the year under review was the manufacture of deep drawn metal presswork and the distribution of material handling components and monitoring equipment. Manufacturing activity is delivered through the Group’s subsidiary Braime Pressings Limited and the distribution activity through the Group’s 4B division. Braime Pressings specialises in metal presswork, including deep drawing, multi-stage progression and transfer presswork. Founded in 1888, the business has over 130 years of manufacturing experience. The metal presswork segment operates across several industries including the automotive sector and supplies external as well as group customers. The subsidiaries within the 4B division are industry leaders in developing high quality, innovative and dependable material handling components for the agricultural and industrial sectors. They provide a range of complementary products including elevator buckets, elevator and conveyor belting, elevator bolts and belt fasteners, forged chain, level monitors and sensors and controllers for monitoring and providing preventative maintenance systems which facilitate handling and minimise the risk of explosion in hazardous areas. The 4B division has operations in the Americas, Europe, Asia, Australia and Africa and in 2021 traded in ninety countries. The US subsidiary also has an injection-molding plant. All injection-molded products are made wholly for internal consumption and this is classed as 4B division activity rather than included in the manufacturing segment. Performance highlights The board is pleased to report a signiﬁcant improvement in the underlying results of the Group. For the year ended 31st December 2021, the Group generated revenues of £36.4m, up £3.6m from prior year. Proﬁt from operations before exceptional costs was £2.5m, up £1.1m from prior year and EBITDA before exceptional costs was £3.8m up £1.2m from prior year. As mentioned in the Chairman’s Statement, exceptional costs of £1.2m relate to extensive repairs to the chain cell area of our Hunslet Road property, following the discovery of a series of structural faults along three walls. As at the year end, we had spent £0.2m demolishing the walls, dismantling a large area of rooﬁng and securing the surrounding area. However, because the property is Grade II listed, the external walls will require careful restoration of original features using materials agreed with the local authority conservation ofﬁcers. At the time of writing, we have provided for additional costs of £0.85m being our best estimate of the required cost of restoration. The chain cell repair has also contributed to £0.2m of delays to the completion of our warehouse which is not now expected to be completed until the summer and this is also included in our provision. Proﬁt before tax is £1.1m including exceptional costs is in line with prior year (2020 – £1.2m). At 31st December 2021, the Group had net assets of £15.7m. Cash ﬂow Inventories increased by £1.3m as the Group planned for increased demand partly as a result of the easing of Covid-19 restrictions on world economies, and partly to reduce the impact of anticipated inﬂation on raw materials. Trade and other receivables increased by £0.3m reﬂecting increased customer activity close to the year end for the same reason. These were largely offset by an increase in our trade and other payables of £0.2m and an increase in provisions of £1.1m. In total the business generated funds from operations of £1.9m (2020 – £2.7m). The Group continued its investment programme during the year, spending £2.1m on capital items; £0.7m of this was on the construction of the new warehouse in the UK announced in the summer of 2021 and a further £0.5m to complete the new warehouse in France which was ofﬁcially opened in May 2021. After the payment of other ﬁnancial costs and the dividend, the cash balance (net of overdraft) was £1.0m, a decrease of £0.2m from the prior year. Bank facilities The Group’s operating banking facilities are renewed annually. As announced last year, the new UK warehouse construction is being funded largely through the procurement of a development loan of £0.9m from HSBC. The development loan will be converted to a ﬁve year term loan when construction of the warehouse is completed. Our facility with HSBC provides ample headroom for the Group to make the necessary investments in the year and to carry out the repairs mentioned above to the chain cell operations. The business continues to enjoy good relations with its bankers. Taxation The tax charge for the year was £0.3m, with an effective rate of tax of 29.9% (2020 – 28.5%). The effective rate is higher than the standard UK tax rate of 19% (2020 – 19%); this results from the blending effect of the different rates of tax applied by each of the countries in which the Group operates, in particular, our US operations’ tax charge affects the blended rate. In any ﬁnancial year the effective rate will depend on the mix of countries in which proﬁts are made, however the Group continues to review its tax proﬁle to minimise the impact. Capital expenditure In 2021, the Group invested £2.1m (2020 – £2.1m) in property, plant and equipment. In addition to £1.2m spent on both the UK and French warehouse construction, the Group has made improvements to its employee facilities and enhanced its engineering capabilities, purchasing equipment in welding, bolt threading and pointing, and has continued to expand its bucket tooling portfolio. Balance sheet Net assets of the Group have increased to £15.7m (2020 – £15.0m). A foreign exchange gain of £0.1m (2020 – £0.1m loss) was recorded on the re-translation of the net assets of the overseas operations, which has increased retained earnings in the year. 204709 Braime Group Text AR21 PRINT.indd 7 12/05/2022 07:59 Braime Group PLC Annual Report & Accounts 2021 8 Strategic Report Group strategic report (continued) STRATEGY DRIVERS ENGINEERING LED IDENTIFY OPPORTUNITIES STRONG RELATIONSHIPS LONG TERM VALUED EMPLOYEES Engineering led business focused on the needs of the end user Identify opportunities to suit local conditions and local markets Strong relationships with long term partners Long term outlook – continuing to invest in designs and new machinery Place value on employee engagement – loyalty and creativity and entrepreneurship Principal exchange rates The Group reports its results in sterling, its presentational currency. The Group operates in six other currencies and the principal exchange rates in use during the year and the comparative ﬁgures for the year ending 31st December 2020 are shown in the table below. Currency Australian Dollar Chinese Renminbi (Yuan) Euro South African Rand Thai Baht United States Dollar Symbol AUD CNY EUR ZAR THB USD Average rate Full year 2021 1.838 8.875 1.165 20.490 44.073 1.374 Average rate Full year 2020 1.867 8.880 1.126 21.309 40.404 1.290 Closing rate 31st Dec 2021 1.859 8.606 1.191 21.494 44.690 1.348 Closing rate 31st Dec 2020 1.763 8.890 1.112 20.030 40.838 1.365 Performance of the 4B division, world-wide distributor of components and monitoring systems for the material handling industry Revenues increased from £34.2m to £37.9m, with external sales up £2.2m. The 4B Group saw revenue growth as the world economies started to recover from the Covid pandemic. Revenue in the European market increased by £0.1m compared to 2020 with the Americas increasing by £0.6m and China by £0.5m. Proﬁt for the period fell by £0.2m to £1.3m with the prior year beneﬁtting from the forgiveness of £0.4m of a government loan received by our US subsidiary. Our business model The two segments of the Group are very different operations and serve different markets, however together they provide diversiﬁcation, strength and balance to the Group and their activities. 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. Performance of Braime Pressings Limited, manufacturer of deep drawn metal presswork Braime Pressings Limited sales of £9.5m were up £2.7m on prior year. Intercompany sales and external sales were £4.3m and £5.2m as compared to £3.0m and £3.8m respectively in 2020. Proﬁt for the period was £0.8m (2020 – loss £0.2m). The manufacturing arm beneﬁtted from strong demand from the automotive sector and from stronger intercompany sales as world economies started to recover from the pandemic. The board believes the business continues to add strategic value through its supply to the 4B division and complementary engineering expertise. Braime Group PLC Annual Report & Accounts 2021 204709 Braime Group Text AR21 PRINT.indd 8 12/05/2022 07:59 Strategic Report Governance Financial Statements 9 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: Key performance indicator Note 1 Turnover growth 2 Gross margin Operating proﬁt before exceptional item Stock days Debtor days Notes to KPIs 1. Turnover growth 3 4 5 2021 11.0% 48.4% 2020 (1.9%) 46.7% 2.49m 1.38m 184 days 54 days 182 days 56 days The Group aims to increase shareholder value by measuring the year on year growth in Group revenue. The board is pleased with the signiﬁcant turnaround of Group revenues following the global pandemic. 2. Gross margin Gross proﬁt (revenue plus change in inventories less raw materials used) as a percentage of revenue is monitored to maximise proﬁts available for reinvestment and distribution to shareholders. The increase in gross margin is the result of recovery from the pandemic. 3. Operating proﬁt Sustainable growth in operating proﬁt is a strategic priority to enable ongoing investment and increase shareholder value. The increase in operating proﬁt before exceptional items reﬂects recovery from the pandemic. 4. Stock days The average value of inventories divided by raw materials and consumables used and changes in inventories of ﬁnished goods and work in progress 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. Stockholding has increased due to inventory build-up in December 2021 to mitigate the impact of anticipated increases in raw materials costs in 2022. 5. Debtor days The average value of trade receivables divided by revenue expressed as a number of days. This is an important indicator of working capital requirements. Debtor days have continued to improve and management are focusing on reducing this to improve cashﬂows given the signiﬁcant outlays for the chain cell rebuild. Other metrics monitored weekly or monthly include quality measures (such as customer complaints), raw materials buying prices, capital expenditure, line utilisation, reportable accidents and near-misses. Principal risks and uncertainties In the current economic, political and physical climate, the only certainty is uncertainty. As the global economy emerges from the impact of the Covid pandemic, increased demand and shortage of raw materials has placed upward inﬂationary pressure on supply chains. The recent invasion of Ukraine and consequent sanctions placed by the West on Russia has increased political tensions worldwide. This is creating volatility in the energy and commodities markets. Prior to this, the COP26 summit saw the UK government commit to ambitious targets to cut greenhouse emissions, and this commitment is being passed onto businesses. The UK’s transition arrangements with the EU ended at the end of 2021. A trade agreement with the EU has been struck but the ﬁner details of the agreement remain to be negotiated. The directors consider that these events all pose business threats but may well create other opportunities. The Company’s short reporting lines of management means it can remain nimble footed to sudden and/or large changes in the business landscape. The two principal risks associated with our particular business model are discussed in the Chairman’s statement. General risks The market remains challenging for our manufacturing division, 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. Our 4B division maintains its competitive edge in a price sensitive market through the provision of engineering expertise and by working closely with our suppliers to design and supply innovative components of the highest standard. In addition, ranges of complementary products are sold into different industries. The monitoring systems are developed and improved on a regular basis. The directors receive monthly reports on key customer and operational metrics from subsidiary management and review these. The potential impact of business risks and actions necessary to mitigate the risks, are also discussed and considered at the monthly board meetings. The directors have put in place formal business continuity and disaster recovery plans with respect to its UK and US operations. 204709 Braime Group Text AR21 PRINT.indd 9 12/05/2022 07:59 Braime Group PLC Annual Report & Accounts 2021 10 Strategic Report Group strategic report (continued) The more signiﬁcant risks and uncertainties faced by the Group are set out below: • Raw material price ﬂuctuation: The Group is exposed to ﬂuctuations in steel and other raw material prices and to mitigate this volatility, the Group 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. • Damage to warehouse or factory: Any signiﬁcant damage to a factory or warehouse will cause short-term disruption. To mitigate these risks, the Group has arrangements with key suppliers to step up supply in the event of a disruption. • Economic ﬂuctuations: The Group derives a signiﬁcant proportion of its proﬁts from outside the UK and is therefore sensitive to ﬂuctuations in the economic conditions of overseas operations including foreign currency ﬂuctuations. As the Covid-19 pandemic has demonstrated, economies are greatly intertwined and reverberations feed through the supply chain. • Cyber security: All businesses now rely almost totally on computers, networks and systems with ‘data’ information held on them, and require privacy and integrity of this data. The likelihood of cyber security attacks and security threats are key risks for every organisation. The Group reviews its security measures regularly with its IT providers. Financial instruments The operations expose the Group to a variety of ﬁnancial risks including the effect of changes in interest rates on debt, foreign exchange rates, credit risk and liquidity risk. The Group’s exposure in the areas identiﬁed above are discussed in note 19 of the ﬁnancial statements. 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 direct exposure to securities price risk, as it holds no listed equity instruments. The Group maintains a deﬁned beneﬁt scheme, the asset valuations are subject to market changes (note 21). Foreign currency risk The Group operates a centralised treasury function which manages the Group’s banking facilities and all lines of funding. Forward contracts are on occasions used to hedge against foreign exchange differences arising on cash ﬂows in currencies that differ from the operational entity’s reporting currency. Credit risk The Group’s principal ﬁnancial assets are bank balances, cash and trade receivables, 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 receivables. 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 medium term loans and ﬁnance leases and arranging funding for operations via bank 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 effects on the ﬁnancial performance of the Group. Health and safety We maintain healthy and safe working conditions on our sites and measure our ability to keep employees and visitors safe. We continuously aim to improve our working environments to ensure we are able to provide safe occupational health and safety standards to our employees and visitors. The directors receive monthly H&S reports and we carry out regular risk management audits to identify areas for improvement and to minimise safety risks. As a global business, the Group is able to tap into the experience of its various international locations to share best practice and learning points. The experience of the past two years has improved our plans and procedures in the event of future pandemics. Braime Group PLC Annual Report & Accounts 2021 204709 Braime Group Text AR21 PRINT.indd 10 12/05/2022 07:59 Strategic Report Governance Financial Statements 11 Research and development The Group continues to invest in research and development and from time to time liaises with university engineering groups with a view to improving features of its products. This has resulted in innovations in the products which will beneﬁt the Group in the medium to long term. Duties to promote the success of the Company Section 172 of the Companies Act 2006 requires the directors to act in a way that they consider, in good faith, would be most likely to promote the success of the Company for the beneﬁt of its members as a whole, and in doing so have regard (amongst other matters) to: – – – – – – the most likely consequences of any decision in the long term; the interest of the Company’s employees; the need to foster the Company’s business relationships with suppliers, customers and others; the impact of the Company’s operations on the community and the environment; the desirability of the Company maintaining a reputation for high standards of business conduct; and the need to act fairly between the members of the Company. The board conﬁrms that, during the year, it has had regard to the matters set out above. Further details as to how the directors have fulﬁlled their duties are set out below and in the Governance Report which in particular, expands on directors’ duties and stakeholder liaison. Business ethics and human rights The board is respectful of the Company’s long history, and considers the long-lasting impact of its decisions. We are committed to conducting our business ethically and responsibly, and treating employees, customers, suppliers and shareholders in a fair, open and honest manner. As a business, we receive audits by both our independent auditors and by our customers and we look to source from suppliers who share our values. We encourage our employees to provide feedback on any issues they are concerned about and have a whistle-blowing policy that gives our employees the chance to report anything they believe is not meeting our required standards. The Group is similarly committed to conducting our business in a way that is consistent with universal values on human rights and complying with the Human Rights Act 1998. The Group gives appropriate consideration to human rights issues in our approach to supply chain management, overseas employment policies and practices. Where appropriate, we support community partnering. 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. As a global business, the Group fully recognises and seeks to harness the beneﬁts of diversity within its work force. The Group is grateful to its employees for continuing to come to work in what has been a worrying time for themselves and their families. 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. The Group continuously looks for ways to harness energy reduction (electricity and gas) and water. The Company already has a 190KW solar system on its UK premises and is currently seeking permission from the national grid to extend our installation of solar panels. During the year, the Group conducted an energy audit of its principal plant and property with the help of energy consultants and has been implementing the ﬁndings to reduce our energy consumption. During the period of this report the Group has not incurred any ﬁnes or penalties or been investigated for any breach of environmental regulations. The board is cognizant that climate change will change the business landscape for the future and is working to understand its wide-ranging impact on the Group’s activities and operations. Social and community matters We recognise our responsibility to work in partnership with the communities in which we operate and we encourage active employee support for their community in particular, in aid of technical awareness and training. We regularly participate in a number of education events encouraging interest in engineering in young people. It is our policy not to provide political donations. On behalf of the board Cielo Cartwright, Group Finance Director 27th April 2022 204709 Braime Group Text AR21 PRINT.indd 11 12/05/2022 07:59 Braime Group PLC Annual Report & Accounts 2021 12 Strategic Report The Board Nicholas Braime Chairman Alan Braime Group Commercial Director Carl Braime Group Sales Director Nicholas Braime was appointed Chairman in 1987. He joined the Group in 1972 and was instrumental in the set-up of the 4B division’s USA business in 1984, where he spent a number of years before returning as Sales Director for Braime Pressings Limited. Nicholas is also the Group Managing Director and is responsible for overseeing the overseas subsidiaries, with the managing directors of these businesses reporting to Nicholas. Nicholas has built close relationships with the company’s key suppliers over several decades and has a clear vision of expansion for the business in strategic locations. Alan Braime is the Group Commercial Director. Alan qualiﬁed as a chartered accountant with KPMG where he worked for four years before joining the Group. Alan joined the board in 2010. Alan oversees the commercial operations of Braime Pressings Limited and is also responsible for the Group’s IT strategy and operations. Alan has spent considerable time on the implementation and development of the Group’s ERP systems, giving him a unique perspective into the impact of technology on the Group’s business drivers. Carl Braime is the Group Sales Director. Carl joined the Group in 2003 and spent a number of years in South America with the Group prior to being appointed to the board in 2010. He is responsible for overseeing strategic customer relationships, as well as the management of key supply chains in the 4B division. Carl has built up a strong expertise and know-how of the Group’s product offerings and technologies, and their interdependencies. Cielo Cartwright Group Finance Director Andrew Walker Non-executive Peter Alcock Non-executive Andrew Walker, non-executive, is a corporate lawyer. He was the Managing Partner of Simpson Curtis, Senior Partner of Pinsent Curtis, Leeds and former President of the Leeds Chamber of Commerce. Andrew has held a number of non-executive and trustee roles. Andrew is particularly interested in governance matters and his legal training makes his contribution to the discussion of risks particularly valuable. Peter Alcock, non-executive, is a mechanical engineer and brings a deep understanding of engineering processes having been, for 32 years, director of Hunslet Holdings PLC, a key manufacturer of locomotives, mining equipment and machine tools originally founded in 1864 and whose operations now form part of the Wabtec Corporation in the US. Peter is the Senior Independent Director. Cielo Cartwright, Group Finance Director, joined the Group in 2018. Cielo qualiﬁed as a chartered accountant with EY and has been divisional ﬁnance director in various public listed companies including KCOM plc and NEXT plc. She was Group FD of Chaucer Foods, a private-equity owned multinational manufacturer and before joining the Group, she was at Froneri, a JV of Nestle SA. Cielo’s extensive experience in international businesses makes her fully attuned to the cultural issues of global operations and their impact on ﬁnancial management. Cielo is on the board of governors of Leeds Becketts University and is a member of the regional advisory board of Make UK for Yorkshire and the Humber. Braime Group PLC Annual Report & Accounts 2021 204709 Braime Group Text AR21 PRINT.indd 12 12/05/2022 08:00 Strategic Report Governance Financial Statements 13 Corporate governance report Chairman’s statement on corporate governance At Braime we recognise that high standards of corporate governance underpin our continuing success. We continually review the framework within which we operate and the processes implemented to ensure that they reﬂect the complexities of our business and, whilst acknowledging our size, are also capable of adding value as the business grows to ensure that the stakeholders interests are always aligned with the Company. The Company seeks guidance from the Quoted Companies Alliance, as set out in their publication, “The QCA Corporate Governance Code”. The board sets out the overall strategic direction for the Group, regularly reviews management performance and ensures that the Group has the right level of resources available to support our strategic goals. The board is satisﬁed that the necessary controls and resources are in place such that these responsibilities can be properly addressed. Within the Group we promote a culture of good governance in dealing with all key stakeholders: our employees, our customers and our shareholders. The following report describes our corporate governance structures and processes and how they have been applied throughout the year ended 31st December 2021. The board considers that it has complied with the recommendations of the QCA Code throughout the year with the exception of the role of Chairman and chief executive being fulﬁlled by a single individual, this is commented on further below. Principles and approach As an AIM company, Braime Group PLC is not required to comply with the UK Corporate Governance Code (the ‘Code’) which applies only to fully listed UK companies and adherence to which requires the commitment of signiﬁcant resources and cost. However high standards of corporate governance are a key priority of the board. Details of how the Company addresses key governance issues by reference to the 10 Principles of Corporate Governance as developed by the Quoted Companies Alliance (QCA) are discussed further in this report and set out in the Corporate Governance section of the Group website www. braimegroup.com/corporate-governance. These principles are as follows: 1. Establish a strategy and business model which promote long-term value for shareholders 2. Seek to understand and meet shareholder needs and expectations 3. Take into account wider stakeholder and social 8. Promote a culture that is based on ethical values and behaviours 9. Maintain governance structures and processes that are ﬁt for purpose and support good decision making 10. Communicate how the company is governed and is performing by maintaining a dialogue with shareholders and other relevant stakeholders Strategy and risks The Strategic Report on pages 7 to 11 sets out our strategy, which focuses on increasing our geographical reach in global markets, and developing new products to enhance our offering, particularly in the agricultural commodities sector. Our strategy setting includes review of the principal risks pertaining to the business and the extent to which the Group is able and willing to bear these risks. The board has put into place formal business continuity plans in its larger operations to understand its exposure to loss of key staff, suppliers, customers and other natural catastrophic events, enabling the generation of a risk register. The existence of this plan was particularly helpful at the onset of the Covid-19 pandemic. The principal risks facing the business are set out in pages 9 to 10 of the Strategic Report. Insurance of key risks is an integral part of the Group’s risk management framework, and the board actively reviews its cover requirements on an ongoing, and at least annual, basis. The duties of the board of directors The board is responsible for the overall operations of the Group, including strategic planning, approval of the annual budget, changes to the Group’s ﬁnancing arrangements, acquisitions and disposals, material contract and signiﬁcant capital expenditure. It meets monthly to discuss reports from the overseas operations and to assess and action areas of signiﬁcant change, risks and opportunities for the Group. The board’s time can be grouped into six key areas as outlined below. A portion of their time is also spent on administrative matters. Strategy • Setting strategic targets. • Reviewing new business developments, including potential acquisitions. • Research and technology. Risk • Group’s risk and internal control framework. Governance • Legal updates and new disclosure requirements. • Internal board review. • Succession planning. responsibilities and their implications for long term success Finance • Budget approval. 4. Embed effective risk management considering both opportunities and threats 5. Maintain the board as a well functioning balanced team led by the chair 6. Ensure that between them the directors have the necessary up to date experience, skills and capabilities 7. Evaluate board performance based on clear and relevant objectives, seeking continuous improvement • Oversight of the preparation and management of the ﬁnancial statements. • Dividend policy. • Pensions strategy. Stakeholder engagement • AGM and other shareholder feedback. • Investor calls and meetings. Safety • Health and safety monthly updates and management. Braime Group PLC Annual Report & Accounts 2021 204709 Braime Group Text AR21 PRINT.indd 13 12/05/2022 08:00 14 Governance Corporate governance report (continued) The powers of the directors are set out in the Company’s Articles of Association. In addition, the directors have responsibilities and duties under legislation, in particular the Companies Act 2006. future changes. The nomination committee also discusses the appointment and replacement of senior management within the Group. Composition of the board During the year ended 31st December 2021 the board comprised 4 executive directors and 2 non-executive directors. The Group Financial Director also serves as Company Secretary to the board. The board members’ experience and areas of expertise can be found in the board biography section on page 12. The board is committed to the promotion of gender balance and diversity within its workforce. There are currently three male executive members and one female executive board member and two male non-executive independent board members. The Company has periodically held brieﬁngs for directors covering regulations that are relevant to their role as directors of an AIM quoted company. Historically, these brieﬁngs have coincided with signiﬁcant changes in regulations and accounting standards, however going forward, the Company proposes that such brieﬁngs should be held at a minimum on an annual basis. The Company has not sought external advice on keeping directors’ skills up to date but the directors believe that their blend of formal qualiﬁcations, past and ongoing experience provides them with the relevant up-to-date skills needed to act as board members for a company of its size. Board committees The board operates a number of committees as set out below, these are also available on the Group website. Remuneration committee The executive directors’ pay is subject to the decision of the whole board and not of a separate committee. However, a separate meeting takes place annually whereby the non- executives receive and consider recommendations from the Chairman of proposed pay for the executive directors as shown in the meeting attendance table. Any signiﬁcant changes to awards to senior management are discussed by the whole board. The Company’s policy on directors’ remuneration is discussed further in the directors’ remuneration report. The directors believe this is adequate for a group of this size. Audit and risk committee The whole board formally receives presentation of audit and risk matters from the Group’s independent statutory auditors at least once a year. The consideration of business risks is a regular item on the board’s agenda. The board considers that the size of the Group does not justify an internal audit function but continues to assess the requirement for an internal audit function under review. Nomination committee The Company uses the whole board to consider matters of nomination and succession. The nomination committee ensures there is a robust process for the appointment of new board directors, and works to identify the skills, experience, personal qualities and capabilities required for the next stage in the Company’s development, linking the Company’s strategy to Responsibilities of the board The board members are collectively and legally responsible for promoting the interests of the Company and for deﬁning corporate governance arrangements. Ultimately, the quality of and approach to governance lies with the chair. The QCA Code recommends that there should be a clear division of responsibility between the running of the board and executive responsibilities for running the Company. The Chairman is responsible for: • • setting the board agenda; the leadership of the board and ensuring its effectiveness on all aspects of its role; • providing strategic insight from his long business experience in the industry and with the Company; and • providing a sounding board for the executives on key business decisions and challenging proposals where appropriate. The executive directors are responsible for: • • • • the day-to-day management of the Group’s business; leading the business and the rest of the management team in accordance with the strategy agreed by the board; leading the development of the Group’s strategy with input from the rest of the board; leading the management team in the implementation of the Group’s strategy; and • bringing matters of particular signiﬁcance to the board for discussion and consideration by the board if appropriate. The roles of Chairman and chief executive are fulﬁlled by Nicholas Braime. This is a departure from the recommendation of the QCA code however the board considers this practical arrangement enables the Group to utilise Nicholas’ deep knowledge of the business and his extensive relationships with key stakeholders, whilst at the same time beneﬁting from his strategic vision. Given the size of the business, the board believes Nicholas is currently best placed to lead the development and execution of the Group strategy. In his role as Chairman, he is ably supported by the two non-executive directors who actively participate in the development of governance structures. The board will continue to assess these structures as the Group grows. The role of Company Secretary is fulﬁlled by Cielo Cartwright, the Group Finance Director. The Company Secretary liaises with the Chairman and the independent directors in the preparation of board meetings, including the timely provision of information. The Company Secretary also acts as a link between the Company and shareholders on matters of governance and investor relations. The Company is aware that at certain times, it may become necessary to separate the role of executive and secretary and should such events occur, takes the appropriate steps to do so. Braime Group PLC Annual Report & Accounts 2021 204709 Braime Group Text AR21 PRINT.indd 14 12/05/2022 08:00 Strategic Report Governance Financial Statements 15 Board attendance and agenda The board met formally 12 times throughout the year. During the year, as a result of continuing Covid-19 restrictions, some board meetings were held on-line and brieﬁng papers were circulated electronically. In addition to the regular scheduled meetings throughout the year, unscheduled supplementary meetings also take place as and when necessary. Directors who are unable to attend a particular meeting receive relevant brieﬁng papers and are given the opportunity to discuss any issues with the Chairman or the Group Finance Director. To enable the directors of the board to carry out their responsibilities all directors are provided access to all relevant information. The board has a schedule of matters for its discussion, which is reviewed against best practice. A summary of matters reserved for the schedule is available on the Group’s website. In advance of all board meetings the directors are supplied with papers covering the Group’s strategy and operations. Members of the executive management team can attend and make presentations as appropriate at meetings of the board. Details of the number of meetings of the board during the period are set out in the table below. There were no new appointments to the board during the period. Meeting attendance during 2021 Director Board (12) Audit & Risk Committee (1) Remuneration Committee (1) O. N. A. Braime A. Q. Braime C. O. Braime C. B. Cartwright A. W. Walker P. J. O. Alcock 12 12 12 12 11 12 1 1 1 1 1 1 1 – – – 1 1 Board evaluation The board continues to evaluate improvements to its conduct of business. Improvements have continued to be implemented throughout the year. During 2021, presentations from MD’s of all subsidiaries have taken place to provide the non-executive directors with a greater opportunity to hear the diverse nature of the Group’s operations ﬁrst hand and there is a rolling programme of such presentations set out for 2022. Performance targets are set as part of the budgeting process. Evaluation of the performance of the board has historically been implemented in an informal manner whereby the Chairman appraised the individual performance of the executives. The board supports and encourages all directors to undertake the necessary training and take up opportunities for professional and personal development. On an ongoing basis, board members maintain a watching brief to identify relevant internal and external candidates who may be suitable additions to or backup for current board members. However, the directors consider that the company is too small to either have an internal succession plan and it would not be cost effective to maintain an external candidate list prior to the need arising. Key performance indicators are set out in the Strategic Report. Support Directors can obtain independent professional advice at the Company’s expense in performance of their duties as directors. None of the directors obtained independent professional advice in the period under review. All directors have access to the advice and the services of the Company Secretary. In addition to these formal roles, the non-executive directors have access to senior management of the business either by telephone or via involvement at informal meetings. At least annually, our nominated advisor (NOMAD) is invited to a board meeting to provide training updates on directors’ duties and any legislative changes. Directors’ conﬂict of interests The Companies Act 2006 and the Company’s Articles of Association require the board to consider any potential conﬂicts of interest. The board has procedures for managing and, where appropriate, authorising actual or potential conﬂicts of interest. Under those procedures, directors are required to declare at board meetings all directorships or other appointments to organisations that are not part of the Group and which could result in actual or potential conﬂicts of interest, as well as other situations which could result in a potential conﬂict of interest. The board is required to review directors’ actual or potential conﬂicts of interest at least annually. Directors are required to disclose proposed new appointments to the Chairman before taking them on, to ensure that any potential conﬂicts of interest can be identiﬁed and addressed appropriately. Any potential conﬂicts of interest in relation to proposed directors are considered by the board prior to their appointment. In this ﬁnancial year there have been no declared conﬂicts of interest. Elections The Company’s Articles of Association provide that one third of the directors retire by rotation each year at the AGM. Relations with stakeholders As required under by Section 172 of the Companies Act 2006, directors preside over the Group for the beneﬁt of all stakeholders. Decisions taken by the board are always cognizant of the impact of each stakeholder group. Fundamentally, the goal is the long-term sustainable growth of the business, which will see returns to shareholders increasing, enable employees to realise their ambitions, and support customers in achieving their goals. The directors consider the key stakeholders of the Group to fall into the following categories: its employees, its shareholders, customers, suppliers and other business-related parties. 204709 Braime Group Text AR21 PRINT.indd 15 12/05/2022 08:00 Braime Group PLC Annual Report & Accounts 2021 16 Governance Corporate governance report (continued) Employees as stakeholders Employees are key internal stakeholders with signiﬁcant time and ﬁnancial investment in the business. The Group provides both formal and informal communications through letters and notices, as well as regular visits by the directors to sites to meet with employees. During the year overseas trips were curtailed as a result of the pandemic, however, the directors continued to communicate regularly using on-line video conferencing. The directors are committed to providing a working environment that promote employees’ wellbeing whilst facilitating their performance. Further details of employee engagement can be found in the Group Strategic Report. Shareholders as stakeholders The board recognises and values the importance of good communications with all shareholders. The Company engages with shareholders through the Group’s website and at the AGM. At the AGM, a presentation of the business activity and outlook is presented by the Chairman. The feedback from shareholders attending our AGM has been positive. Responsibility for shareholder liaison rests with the Chairman, and in his absence, with the Company Secretary. All reports and updates are made available on the Group’s website. The AGM provides all shareholders with the opportunity to develop further their understanding of the Company. It is the principal forum for all the directors to engage in dialogue with private investors. All shareholders are given the opportunity to raise questions on any matter at the meeting. The Group aims to send notices of Annual General Meetings to shareholders at least 21 clear days before the meeting. Notices of the AGM are available on the Group’s website. Following the AGM the voting results for each resolution are published and are available on the Group’s website. The Group’s website www. braimegroup.com/investor-information provides all historical RNS announcements, interim reports and annual reports. Customers and other stakeholders The directors ensure that stakeholder management plans are in place for key customers and key suppliers. Directors ensure that appropriate levels of management time is afforded to meet with customers to understand their needs and with key suppliers to forge a strong, mutually beneﬁcial partnership built on the principles of respect and long-term outlook. Maintaining a reputation for high standards of business conduct The board believes that the promotion of a corporate culture based on sound ethical values and behaviours is essential to maximise shareholder value. The companies in the Group maintain handbooks which include clear guidance on what is expected of every employee and ofﬁcer of the Company and further development of this guidance is being undertaken to continually strive for high standards. Staff matters are discussed at every board meeting and the board considers examples of behaviours that either aligns with or are at odds with the Group’s stated values. The directors believe that the Company’s culture encourages collaborative, ethical behaviour which Braime Group PLC Annual Report & Accounts 2021 Grain terminal, Port of Tilbury, London. beneﬁts employees, clients and stakeholders. It is committed to conducting business ethically and responsibly, treating employees, customers, suppliers and shareholders in a fair, open and honest manner. We aim to maintain healthy and safe working conditions on all our sites and measure our ability to keep employees and visitors safe. We encourage our employees to provide feedback on any issues they are concerned about and the directors maintain a culture of accessibility and fair play and travel extensively to keep in touch with all areas of the business. The directors believe that all employees and contractors have worked in line with the Group’s values during this ﬁnancial year. Fair, balanced and understandable The directors have also reviewed the ﬁnancial statements and taken as a whole consider them to be fair, balanced and understandable, and provide the information necessary for shareholders to assess the Company’s performance, business model and strategy and have considered the need to act fairly as between the members of the Company. 204709 Braime Group Text AR21 PRINT.indd 16 12/05/2022 08:00 Grain terminal, Port of Tilbury, London. Strategic Report Governance Financial Statements 17 Directors’ report The directors present their annual report and ﬁnancial statements for the year ended 31st December 2021. Results and dividends The proﬁt for the year after taxation and transferred to reserves was £750,000 (2020 – £854,000). No dividend is to be proposed at the Annual General Meeting, but the interim dividends will be conﬁrmed. Directors The directors who served during the year and their beneﬁcial interests in the shares of the Company are detailed below:: 31st December 2021 1st January 2021 Peter Alcock Ordinary shares ‘A’ Ordinary shares Alan Braime Ordinary shares Carl Braime Ordinary shares Nicholas Braime Ordinary shares Cielo Cartwright Ordinary shares Andrew Walker Ordinary shares ‘A’ Ordinary shares 1,000 5,000 1,000 5,000 35,175 35,175 35,175 35,175 143,400 143,400 – 100 300 – 100 300 In accordance with the Company’s Articles of Association C. O. Braime retires by rotation and, being eligible, offers himself for re-election. In accordance with the Company’s Articles of Association A. Q. Braime retires by rotation and, being eligible, offers himself for re-election. 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. The indemnity was in force throughout the tenure of each director during the year and is currently in force. The Company also maintains Directors’ and Ofﬁcers’ liability insurance in respect of itself and its directors. Substantial shareholdings The Company has been notiﬁed that as at 13th April 2022, apart from the directors, only the following persons are beneﬁcially interested in more than 3% of the Ordinary shares of the Company: CGWL Nominees Limited A/C GC1 Hargreaves Lansdown (Nominees) Limited A/C HLNOM Mrs P. V. Smith Ferlim Nominees Limited Des. POOLED W B Nominees Limited A/C ISAMAX Lion Nominees Limited A/C RB Ordinary shares held Percentage 72,500 15.10% 31,633 6.59% 27,500 5.73% 26,063 5.43% 21,600 4.50% 20,000 4.17% Mrs A. Barnes 16,655 3.47% 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. Section 172 statement The board states its compliance with s172(1) of the Companies Act 2006. Details as to how the directors have fulﬁlled their duties can be found in the Group Strategic Report and the Governance Report. Going concern As noted in its strategic report, the Group operates in a number of currencies other than sterling, its principal currency. The exchange rate between sterling, the US dollar and the euro and the price of raw materials creates inherent uncertainty over the future gross margin of the Group. The Group’s net cash ﬁgure decreased from an opening ﬁgure of £1,198,000 to £974,000 as at 31st December 2021. During the period the Group funding of working capital decreased by £314,000 principally arising from an increase in trade and other payables (including provisions) which were partially offset by increases in trade and other receivables. Inventories increased by £1,259,000. Overall cash derived from operating activities generated £1,876,000 (2020 – £2,686,000) net of the increased working capital funding. Braime Group PLC Annual Report & Accounts 2021 204709 Braime Group Text AR21 PRINT.indd 17 12/05/2022 08:00 18 Governance Directors’ report (continued) the directors’ remuneration report comply with the Companies Act 2006 and, as regards the Group ﬁnancial statements, Article 4 of the IAS Regulation. They are also responsible for safeguarding the assets of the Group and the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. 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/she has taken all the steps that he/she ought to have taken as a director in order to make himself or herself aware of any relevant audit information and to establish that the Company’s auditors are aware of that information. This conﬁrmation is given and should be interpreted in accordance with the provision of Section 418 of the Companies Act 2006. Subscriptions and donations Charitable donations amounting to £15,000 (2020 – £10,000) were paid during the year. There were no donations to political organisations. Streamlined Energy and Carbon Reporting (“SECR”) The directors are of the opinion that the disclosure required by the Companies (Directors’ Report) and Limited Liability Partnerships (Energy and Carbon Report) Regulations 2018 are not required because whilst the Group met two of the threshold criteria for the year ended 31st December 2021, it did not meet the threshold criteria for the year ended 31st December 2020. 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 Cielo Cartwright, Secretary 27th April 2022 At 31st December 2021, the available headroom within the Group’s borrowing facilities amounted to £3,348,000. 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. 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 UK 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. In preparing these ﬁnancial statements, the directors are required to: • select suitable accounting policies and then apply them consistently; • make judgements and accounting estimates that are reasonable and prudent; • state whether applicable United Kingdom Accounting Standards have been followed by the parent Company and applicable IFRSs as adopted by the UK 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 Braime Group PLC Annual Report & Accounts 2021 204709 Braime Group Text AR21 PRINT.indd 18 12/05/2022 08:00 Strategic Report Governance Financial Statements 19 Directors’ remuneration report INFORMATION NOT SUBJECT TO AUDIT The purpose of this report is to inform shareholders of the Company’s policy with regard to executive remuneration and to provide full details of the salary and other beneﬁts received by individual directors. The directors have adopted the principles of good governance as set out in the Combined Code and the Directors’ Remuneration Report Regulations 2002. However, following the Company’s move to AIM, compliance with this report is no longer mandatory. Remuneration committee As noted in the Corporate Governance report, Executive directors’ pay is subject to the decision of the whole board and not of a formal remuneration committee. The directors believe that this is adequate for a Group of this size. Statement of Company’s policy on directors’ remuneration The board’s policy is that the remuneration of the directors should reﬂect market rates applicable to a business of its size and complexity. This information is assessed by the board based on their commercial contacts within the industry and the local business community. It is intended that this policy will remain in place for the following ﬁnancial year and subsequent periods. There are no formal performance related elements, entitlements to share options or entitlements under long-term incentive plans in directors’ remuneration. All employees of the Group, including directors, may however receive a discretionary bonus which reﬂects the results of the Group. The only elements of directors’ remuneration that are pensionable are salaries. There are no performance conditions relating to the non- executive directors’ fees. Service contracts Other than Cielo Cartwright, 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. INFORMATION SUBJECT TO AUDIT Directors’ remuneration The remuneration of the individual directors who served during the period was as follows: Fees £’000 Salary £’000 Estimated taxable value of beneﬁts in kind £’000 Total 2021 £’000 Total 2020 £’000 Pension contributions 2021 £’000 Pension contributions 2020 £’000 Executive directors Nicholas Braime Alan Braime Carl Braime Cielo Cartwright Non-executive directors Peter Alcock Andrew Walker Paid by the Company – – – – 30 30 60 60 223 126 126 116 – – 591 465 9 2 2 1 – – 14 12 232 128 128 117 30 30 665 537 229 126 126 118 30 30 659 533 – 17 17 11 – – 45 28 – 17 17 11 – – 45 28 The estimated taxable value of beneﬁts-in-kind includes private medical cover. Pension contributions represent amounts paid to deﬁned contribution pension schemes. Cielo Cartwright is provided with an electric company car which carries a beneﬁt-in-kind in the current tax year of zero. Approval The directors’ remuneration report was approved by the board on 27th April 2022. Nicholas Braime, Director Braime Group PLC Annual Report & Accounts 2021 204709 Braime Group Text AR21 PRINT.indd 19 12/05/2022 08:00 20 Governance Independent auditors’ report to the members of Braime Group PLC Opinion on ﬁnancial statements of Braime Group PLC We have audited the ﬁnancial statements of Braime Group PLC (the ‘parent company’) and its subsidiaries (the ‘Group’) for the year ended 31 December 2021 which comprise the Consolidated income statement, the Consolidated statement of comprehensive income, the Consolidated and Company balance sheets, the Consolidated cash ﬂow statement, the Consolidated and Company statements of changes in equity and notes to the accounts, including a summary of signiﬁcant accounting policies. The ﬁnancial reporting framework that has been applied in the preparation of the Group ﬁnancial statements is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the UK. The ﬁnancial reporting framework that has been applied in the preparation of the parent company ﬁnancial statements is applicable law and United Kingdom Accounting Standards, including FRS102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland” (United Kingdom Generally Accepted Accounting Practice). In our opinion: • • • • the ﬁnancial statements give a true and fair view of the state of the Group’s and of the parent company’s affairs as at 31 December 2021 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 UK; 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. Basis for opinion We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the ﬁnancial statements section of our report. We are independent of the Group and parent company in accordance with the ethical requirements that are relevant to our audit of the ﬁnancial statements in the UK, including the FRC’s Ethical Standard and we have fulﬁlled our ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufﬁcient and appropriate to provide a basis for our opinion. Conclusions relating to going concern In auditing the ﬁnancial statements, we have concluded that the director’s use of the going concern basis of accounting in the preparation of the ﬁnancial statements is appropriate. Based on the work we have performed, we have not identiﬁed any material uncertainties relating to events or conditions that, individually or collectively, may cast signiﬁcant doubt about the group’s or parent company’s ability to continue as a going concern for a period of at least twelve months from when the ﬁnancial statements are authorised for issue. Our evaluation of the directors’ assessment of the entity’s ability to adopt the going concern basis of accounting included: • Obtaining the directors’ integrated proﬁt and loss account, balance sheet and cash ﬂow forecasts which are prepared for individual subsidiary undertakings and consolidated at group level for the period to 31 December 2023; • Understanding and evaluating the key assumptions to the forecast being forecasts of sales, gross proﬁt margin, administrative costs, level of capital expenditure, inventory, trade debtors and trade creditor days, anticipated new borrowings and repayment proﬁles of new and existing borrowings. The evaluation made reference to historic ﬁgures and the relative accuracy of past performance against past forecasts and based on our knowledge of the business the reasonableness of sales forecasts; • Checking the mathematical accuracy of the forecasts and calculations used in the forecast model such as inventory, debtor and creditor days and gross proﬁt margins; • Agreeing ﬁnancial facilities to facility letters or other appropriate evidence; • Assessing the level of headroom in available facilities throughout the whole forecast period; and • Assessing the sensitivity of forecasts to matters such as reductions in sales, and gross proﬁt margins and whether there would still be sufﬁcient headroom in facilities. Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report. Braime Group PLC Annual Report & Accounts 2021 204709 Braime Group Text AR21 PRINT.indd 20 12/05/2022 08:00 Strategic Report Governance Financial Statements 21 Key audit matters Key audit matters are those matters that, in our professional judgement, were of most signiﬁcance in our audit of the ﬁnancial statements of the current period and include the most signiﬁcant assessed risks of material misstatement (whether or not due to fraud) we identiﬁed, including those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit; and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the ﬁnancial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Carrying value of Inventories Risk description This risk concerns the carrying value of inventories of £10,124,000 (2020 – £8,864,000) as shown in note 11. Management judgement is applied to determining the cost of inventories in order to accurately reﬂect the manufacturing costs incurred in bringing them to their current location and physical condition in the manufacturing segment of the business. This primarily relates to the assessment of direct labour costs and manufacturing overheads to be absorbed and other relevant production costs. The total value of work-in-progress and ﬁnished goods inventory held by the manufacturing segment of the Group into which such costs would have been absorbed amounted to £481,000 (2020 – £371,000). As described in note 1.19 inventories are carried at the lower of cost and net realisable value. Establishing impairment provisions for slow-moving, obsolete and damaged inventories to reduce inventories to their net realisable value involves judgements and estimates to be made by management. The Group has consistently adopted a policy of making impairment provisions based upon the ageing of inventories. The income statement for the year ended 31 December 2021 includes an inventory impairment provision credit of £(72,000) (2020 – £283,000 charge) as disclosed in note 11. Given the level of judgement and estimation involved in determining cost and net realisable value this risk was identiﬁed by us as one of the most signiﬁcant risks of material misstatement. Our response We performed the following audit procedures: • on a sample basis agreed the cost of raw materials (manufacturing segment) and bought in components (distribution segment) to third party invoices and where these were denominated in foreign currencies reviewed the reasonableness of the exchange rates used to translate these invoices. • • • for manufactured work in progress and ﬁnished goods we have for a sample of items obtained the product costings and tested the underlying costs within each item selected. We also challenged the key assumptions concerning overhead absorption by assessing the appropriateness of costs included in the calculation. reviewed the overheads absorbed in the process of manufacturing to determine whether they were allowable under IAS 2 and appropriately recognised. We agreed the estimated overheads to actual overheads incurred in the year to assess whether they were materially different. assessed the net realisable value (NRV) of a sample of inventory items by agreeing their subsequent sales price to customer invoices to ensure that the items were being held at the lower of cost and net realisable value. • observed the condition of inventories when we and the ﬁrms we instructed to assist us attended stock counts. • gained an understanding of the movements in the inventory impairment provision year on year and assessed the scale of the provision in comparison to gross inventory value to determine whether there were any unusual movements. • performed procedures to ensure that inventory impairment provisions were calculated in line with the group’s inventory provisioning policy. Procedures included reviewing the provisions and verifying ageing data. • challenged the assumptions adopted by management in arriving at the group’s inventory provisioning policy by reviewing the sales activity of impaired and previously impaired lines of inventory. Key observations From the work performed we consider that the inventory shown in the Group ﬁnancial statements is appropriately valued and that the impairment provision in respect of inventories has been consistently applied and is appropriate. Braime Group PLC Annual Report & Accounts 2021 204709 Braime Group Text AR21 PRINT.indd 21 12/05/2022 08:00 22 Governance Independent auditors’ report to the members of Braime Group PLC (continued) Key audit matters (continued) Provision for building repair costs Risk description This risk concerns the determination and quantiﬁcation of the provision for liabilities of £1,054,000 as referred to in notes 3 and 17. Management judgement is applied in determining whether a provision is necessary in order to settle obligations created as a result of past events and the quantiﬁcation of the payments required to settle those obligations. At the point of approving the ﬁnancial statements those future payments cannot be fully quantiﬁed and therefore the provision and liabilities of £1,054,000 represents management’s best estimate based on all available information. As described in note 1.3 and note 17 management have carefully considered whether as a consequence of events within the period a present obligation has been created at the balance sheet date. Having established that certain legal and constructive obligations exist that give the company no realistic alternative but to settle those obligations then based on all available information management have made their best estimate of the total expected costs. The income statement for the year ended 31 December 2021 includes costs of £1,217,000 relating to the building restoration of which £1,054,000 is included in provisions for liabilities, as disclosed in notes 3 and 17. Given the level of judgement and estimation involved in determining whether a provision exists and the sums involved, this risk was identiﬁed by us as one of the most signiﬁcant risks of material misstatement. Our response We performed the following audit procedures: • reviewed the relevant events and conditions in order to establish whether appropriate considerations have been undertaken by management in determining whether a provision is necessary in order to settle obligations created as a result of past events, and whether the company has no realistic alternative but to settle them. • we have agreed the costs incurred to date, and the accounting treatment of those costs, and reviewed the contractual terms of the ongoing building development project, which having been delayed as a consequence of the events referred to in note 3, could see penalties levied against the company. • • critically reviewed the information used by management in quantifying the value of the provision required in order to settle the company’s obligations. checked that appropriate disclosures have been included within the ﬁnancial statements as required by IAS 37. Key observations From the work performed we consider that management have taken all necessary steps to consider that the company has no realistic alternative but to settle the obligations created as a result of past events and that the sums included within provisions for liabilities shown in the Group ﬁnancial statements represent management’s best estimate based on all available information and all required disclosures have been correctly included in the notes to the ﬁnancial statements. Our application of materiality The scope of our audit was inﬂuenced by our application of materiality. We set certain quantitative thresholds for materiality. These, together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures on the individual ﬁnancial statement line items and disclosures and in evaluating the effect of misstatements, both individually and on the ﬁnancial statements as a whole. We deﬁne materiality as the magnitude of misstatement in the ﬁnancial statements that makes it probable that the economic decisions of a reasonably knowledgeable person would be changed or inﬂuenced. We use materiality both in determining the nature, timing and extent of our audit work and in evaluating the results of that work. Based on our professional judgement, we determined materiality for the ﬁnancial statements as a whole as follows: Group materiality £364,000 (2020 – £328,000). Basis for determining materiality: 1% of Group turnover. Braime Group PLC Annual Report & Accounts 2021 204709 Braime Group Text AR21 PRINT.indd 22 12/05/2022 08:00 Strategic Report Governance Financial Statements 23 Group materiality £364,000 (2020 – £328,000). Rationale for benchmark applied: As a trading Group this reﬂects the level of activity. We believe that this measure and the percentage applied appropriately reﬂect both the size of the Group and the key driver behind its ﬁnancial performance. Component materiality: For each component in our audit scope, we allocated a materiality that is less than our overall Group materiality. The range of materiality across components ranged from £95,000 to £176,000. Certain components were audited to a local statutory audit materiality that was also less than our overall Group materiality. Performance materiality to drive the extent of our testing for each component in our audit scope was set at 75% of component materiality. We agreed with the Audit Committee that we would report to them misstatements identiﬁed during our audit above £13,650 (2020 – £12,300) as well as ‘clearly trivial’ misstatements below that amount that, in our view, warranted reporting for qualitative reasons. An overview of the scope of our audit Braime Group PLC, Braime Pressings Limited, 4B Elevator Components Limited and 4B Braime Components Limited are companies incorporated in England and Wales on which we are engaged to perform an audit under ISAs (UK). These components comprised 70.9% of Group turnover, 58.8% of Group proﬁt before tax and 68.4% of Group gross assets. 4B Africa Elevator Components (Proprietary) Limited, 4B Braime (Changzhou) Industrial Control Equipment Co. Ltd. and 4B Asia Paciﬁc Company Limited have had audits performed by component auditors in accordance with local legislation. These components were not individually signiﬁcant enough to require an audit for group reporting purposes, but a review was performed by us appropriate to the size and risk proﬁle of these components. This included obtaining and reviewing an audit procedures questionnaire for 4B Africa Elevator Components (Proprietary) Limited and analytical review procedures in relation to 4B Braime (Changzhou) Industrial Control Equipment Co. Ltd and 4B Asia Paciﬁc Company Limited. These components comprised 10.6% of group turnover, 7.3% of group proﬁt before tax and 13.3% of group gross assets. 4B Australia PTY Limited is not required by local legislation to have an audit performed. 4B France Sarl does have a statutory audit performed but this was not completed by the time the Group audit is signed off. We carried out our own detailed audit procedures on these components sufﬁcient to conclude that there were no signiﬁcant risks of material misstatement in the group ﬁnancial statements. These components comprised 18.5% of group turnover, 33.9% of group proﬁt before tax and 18.3% of group gross assets. We engaged a ﬁrm of CPAs in USA to attend a year-end inventory count of 4B Elevator Components Limited, a ﬁrm of Chartered Accountants in Australia to attend a year-end inventory count of 4B Australia PTY Limited and a Chartered Accountant in France to attend the year-end inventory count of 4B France Sarl. At the parent entity level we tested the consolidation process and carried out analytical procedures to conﬁrm our conclusion that there were no signiﬁcant risks of material misstatement of the aggregated ﬁnancial information of components that were not subject to audit by us. Other information The other information comprises the information included in the report and accounts set out on pages 1 to 6, 12 to 16, and 19 (except where indicated) and 66 to 69, other than the ﬁnancial statements and our auditor’s report thereon. The directors are responsible for the other information contained within the annual report. Our opinion on the ﬁnancial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the ﬁnancial statements or our knowledge obtained in the course of the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the ﬁnancial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information; we are required to report that fact. We have nothing to report in this regard. Opinions on other matters prescribed by the Companies Act 2006 In our opinion, based on the work undertaken in the course of the audit: • • the information given in the strategic report and the directors’ report for the ﬁnancial year for which the ﬁnancial statements are prepared is consistent with the ﬁnancial statements; and the strategic report and the directors’ report have been prepared in accordance with applicable legal requirements. Braime Group PLC Annual Report & Accounts 2021 204709 Braime Group Text AR21 PRINT.indd 23 12/05/2022 08:00 24 Governance Independent auditors’ report to the members of Braime Group PLC (continued) Matters on which we are required to report by exception In the light of the knowledge and understanding of the Group and the parent company and its environment obtained in the course of the audit, we have not identiﬁed material misstatements in the strategic report or the directors’ report. We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion: • • • adequate accounting records have not been kept, by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or the parent company ﬁnancial statements are not in agreement with the accounting records and returns; or certain disclosures of directors’ remuneration speciﬁed by law are not made; or • we have not received all the information and explanations we require for our audit. Responsibilities of directors As explained more fully in the statement of directors’ responsibilities set out on page 18, the directors are responsible for the preparation of the ﬁnancial statements and for being satisﬁed that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of ﬁnancial statements that are free from material misstatement, whether due to fraud or error. In preparing the ﬁnancial statements, the directors are responsible for assessing the group’s and the parent company’s ability to continue as a going concern, disclosing, as applicable, matters relating to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the company or to cease operations, or have no realistic alternative but to do so. Auditors’ responsibilities for the audit of the ﬁnancial statements Our objectives are to obtain reasonable assurance about whether the ﬁnancial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue Report of the Auditors that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in aggregate, they could reasonably be expected to inﬂuence the economic decisions of users taken on the basis of these ﬁnancial statements. Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery or intentional misrepresentations, or through collusion. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below. However, the primary responsibility for the prevention and detection of fraud rests with both those charged with governance of the entity and management. The extent to which the audit was considered capable of detecting irregularities including fraud Our approach to identifying and assessing the risks of material misstatement in respect of irregularities, including fraud and non- compliance with laws and regulations, was as follows: • The engagement partner ensured that the engagement team collectively had the appropriate competence, capabilities and skills to identify or recognise non-compliance with applicable laws and regulations; • We identiﬁed the laws and regulations applicable to the Group through discussions with directors and other management, and from our commercial knowledge and sector experience; • We focused on speciﬁc laws and regulations which we considered may have a direct material effect on the ﬁnancial statements or the operations of the group, including the Companies Act 2006 and taxation legislation. The Group is subject to many other laws and regulations where the consequences of non-compliance could have a material effect on the ﬁnancial statements, for instance through the imposition of ﬁnes, penalties or litigation such as health and safety law, in particular manual handling and power press regulations 1998 (PUWER), REACH regulations, waste disposal regulations, GDPR and employment law; • We assessed the extent of compliance with the laws and regulations identiﬁed above through making enquiries of management and inspecting legal correspondence; and • Identiﬁed laws and regulations were communicated within the audit team regularly and the team remained alert to instances of non-compliance throughout the audit. Braime Group PLC Annual Report & Accounts 2021 204709 Braime Group Text AR21 PRINT.indd 24 12/05/2022 08:00 Strategic Report Governance Financial Statements 25 Auditors’ responsibilities for the audit of the ﬁnancial statements (continued) We assessed the susceptibility of the Group and company’s ﬁnancial statements to material misstatement, including obtaining an understanding of how fraud might occur, by: • Making enquiries of management as to where they considered there was susceptibility to fraud, their knowledge of actual, suspected and alleged fraud; and To address the risk of fraud through management bias and override of controls, we: • • Performed analytical procedures to identify any unusual or unexpected relationships; Tested journal entries to identify unusual transactions; • Assessed whether judgements and assumptions made in determining the accounting estimates were indicative of potential bias; and • Investigated the rationale behind any signiﬁcant or unusual transactions. In response to the risk of irregularities and non-compliance with laws and regulations, we designed procedures which included, but were not limited to: • Agreeing ﬁnancial statement disclosures to underlying supporting documentation; • Reading the minutes of meetings of those charged with governance; • Enquiring of management as to actual and potential litigation and claims; • Reviewing any correspondence with HMRC, US tax authorities and relevant regulators websites for notices of any breaches; and • Review of relevant legal or professional costs within the accounting records for any evidence of previously un-detected or un-reported instances of non-compliance There are inherent limitations in our audit procedures described above. The more removed that laws and regulations are from ﬁnancial transactions, the less likely it is that we would become aware of non-compliance. Auditing standards also limit the audit procedures required to identify non-compliance with laws and regulations to enquiry of the directors and other management and the inspection of regulatory and legal correspondence, if any. Material misstatements that arise due to fraud can be harder to detect than those that arise from error as they may involve deliberate concealment or collusion. A further description of our responsibilities for the audit of the ﬁnancial statements is located on the Financial Reporting Council’s website at www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report. 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. Use of our report 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. Andrew Thomas 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 27th April 2022 204709 Braime Group Text AR21 PRINT.indd 25 12/05/2022 08:00 Braime Group PLC Annual Report & Accounts 2021 26 Financial Statements Consolidated income statement For the year ended 31st December 2021 Revenue Changes in inventories of ﬁnished goods and work in progress Raw materials and consumables used Employee beneﬁts costs Depreciation and amortisation expense Other expenses Other operating income Proﬁt from operations before exceptional item Exceptional item Proﬁt from operations Finance expense Finance income Proﬁt before tax Tax expense Proﬁt for the year Proﬁt attributable to: Owners of the parent Non–controlling interests Note 2021 £’000 2020 £’000 4 7 2 2 3 5 5 6 36,406 32,803 869 (19,656) (8,930) (1,334) (4,954) 88 (63) (17,428) (8,408) (1,280) (4,277) 30 2,489 1,377 (1,217) 1,272 (205) 3 1,070 (320) 750 665 85 750 – 1,377 (191) 9 1,195 (341) 854 823 31 854 Basic and diluted earnings per share 20 52.08p 59.31p The notes on pages 31 to 58 form part of these ﬁnancial statements. Braime Group PLC Annual Report & Accounts 2021 204709 Braime Group Text AR21 PRINT.indd 26 12/05/2022 08:00 Strategic Report Governance Financial Statements 27 Consolidated statement of comprehensive income For the year ended 31st December 2021 Proﬁt for the year Items that will not be reclassiﬁed subsequently to proﬁt or loss Net pension remeasurement gain on post employment beneﬁts Items that may be reclassiﬁed subsequently to proﬁt or loss Foreign exchange gain/(loss) on re-translation of overseas operations Other comprehensive income/(loss) for the year Total comprehensive income for the year Total comprehensive income attributable to: Owners of the parent Non–controlling interests Note 21.3 2021 £’000 750 90 87 177 927 817 110 927 2020 £’000 854 66 (133) (67) 787 744 43 787 204709 Braime Group Text AR21 PRINT.indd 27 12/05/2022 08:00 Braime Group PLC Annual Report & Accounts 2021 28 Financial Statements Consolidated balance sheet As at 31st December 2021 Assets Non-current assets Property, plant and equipment Intangible assets Right of use assets Total non-current assets Current assets Inventories Trade and other receivables 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 Provision for liabilities Total non-current liabilities Total liabilities Total net assets Share capital Capital reserve Foreign exchange reserve Retained earnings Total equity attributable to the shareholders of the parent Non-controlling interests Total equity Note 2021 £’000 2020 £’000 8 9 10 11 12 13 14 15 16 17 18 8,713 25 632 9,370 10,124 6,211 1,463 17,798 27,168 489 4,895 2,902 41 8,327 2,046 24 1,054 3,124 7,830 37 487 8,354 8,864 5,855 1,533 16,252 24,606 335 4,744 2,133 78 7,290 2,075 278 – 2,353 11,451 9,643 15,717 14,963 360 257 (89) 15,382 15,910 (193) 360 257 (151) 14,800 15,266 (303) 15,717 14,963 The ﬁnancial statements on pages 26 to 58 were approved and authorised for issue by the board of directors on 27th April 2022 and were signed on its behalf by: Nicholas Braime, Chairman Cielo Cartwright, Group Finance Director Company Registration Number 488001 The notes on pages 31 to 58 form part of these ﬁnancial statements. Braime Group PLC Annual Report & Accounts 2021 204709 Braime Group Text AR21 PRINT.indd 28 12/05/2022 08:00 Strategic Report Governance Financial Statements 29 Consolidated cash flow statement For the year ended 31st December 2021 Operating activities Net proﬁt Adjustments for: Depreciation and amortisation Foreign exchange gains/(losses) Finance income Finance expense (Gain)/loss on sale of land and buildings, plant, machinery and motor vehicles Adjustment in respect of deﬁned beneﬁt scheme Income tax expense Income taxes paid Operating proﬁt before changes in working capital and provisions Note 8, 9 & 10 5 5 6 Increase in trade and other receivables Increase in inventories Increase in trade and other payables Increase in provisions Cash generated from operations Investing activities Purchases of property, plant, machinery and motor vehicles and intangible assets Sale of land and buildings, plant, machinery and motor vehicles Interest received Financing activities Proceeds from long term borrowings Repayment of borrowings Repayment of hire purchase creditors Repayment of lease liabilities Bank interest paid Lease interest paid Hire purchase interest paid Dividends paid (Decrease)/increase in cash and cash equivalents Cash and cash equivalents, beginning of period Cash and cash equivalents, end of period The notes on pages 31 to 58 form part of these ﬁnancial statements. 22 2021 £’000 750 1,334 210 (3) 205 (38) 91 320 (679) 1,440 2,190 (288) (1,259) 179 1,054 (314) 1,876 (2,074) 73 2 (1,999) 1,145 (452) (182) (234) (124) (65) (16) (173) (101) (224) 1,198 974 2020 £’000 854 1,280 (170) (9) 191 1 71 341 (168) 1,537 2,391 (356) (291) 942 – 295 2,686 (2,057) 13 4 (2,040) 1,117 (419) (217) (228) (124) (38) (29) (173) (111) 535 663 1,198 204709 Braime Group Text AR21 PRINT.indd 29 12/05/2022 08:00 Braime Group PLC Annual Report & Accounts 2021 30 Financial Statements Consolidated statement of changes in equity For the year ended 31st December 2021 Share Capital £’000 Capital Reserve £’000 Note Foreign Exchange Reserve £’000 Retained Earnings £’000 Non- Controlling Interests £’000 Total £’000 Total Equity £’000 Balance at 1st January 2020 360 257 (6) 14,084 14,695 (346) 14,349 Comprehensive income Proﬁt Other comprehensive income Net pension remeasurement gain recognised directly in equity 21.3 Foreign exchange losses on re-translation of overseas subsidiaries consolidated operations Total other comprehensive income Total comprehensive income Transactions with owners Dividends 20 Total transactions with owners – – – – – – – – – – – – – – – – 823 823 31 854 66 66 – 66 (145) (145) (145) – 66 (145) (79) 889 744 – – (173) (173) (173) (173) 12 12 43 – – (133) (67) 787 (173) (173) Balance at 1st January 2021 360 257 (151) 14,800 15,266 (303) 14,963 Comprehensive income Proﬁt Other comprehensive income Net pension remeasurement gain recognised directly in equity 21.3 Foreign exchange gains on re-translation of overseas subsidiaries consolidated operations Total other comprehensive income Total comprehensive income Transactions with owners Dividends 20 Total transactions with owners – – – – – – – – – – – – – – – – 62 62 62 – – 665 665 85 750 90 90 – 90 – 90 62 152 25 25 87 177 755 817 110 927 (173) (173) (173) (173) – – (173) (173) Balance at 31st December 2021 360 257 (89) 15,382 15,910 (193) 15,717 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. Braime Group PLC Annual Report & Accounts 2021 204709 Braime Group Text AR21 PRINT.indd 30 12/05/2022 08:00 Strategic Report Governance Financial Statements 31 Notes to the accounts For the year ended 31st December 2021 1. ACCOUNTING POLICIES 1.1 General Company information Braime Group PLC (‘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, China, 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 27th April 2022. 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 UK (IFRSs as adopted by the UK), 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 59 to 65. 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: Inventory Inventories are stated at the lower of cost and net realisable value. The Group establishes an impairment provision for inventory estimated to realise a lower value than cost. When calculating the impairment provision, management considers the nature and condition of the inventory as well as applying assumptions around the saleability of stock and its estimated selling value less cost expected to be incurred and sell the item. The directors also consider the purchase history of the inventory items to assess whether the items remain in use. Cost of work in progress and ﬁnished goods The Group values the work in progress and ﬁnished goods inventory of its manufacturing segment at the cost of direct materials and labour plus attributable overheads and certain administrative costs based on normal levels of activity. When calculating overhead absorption rates, management considers the percentage of costs that are directly attributable to bringing inventory to its present location and condition, and estimated wastage based on historical experience and through knowledge of the business. Useful economic lives of property, plant and equipment The annual depreciation charge for property, plant and equipment is sensitive to changes in the estimated useful economic lives and residual values of the assets. The useful economic lives and residual values are re-assessed annually. They are amended when necessary to reﬂect current estimates, based on technological advancement, future investments, economic utilisation and the physical condition of the assets. Provisions A provision is raised where management consider a liability exists as a result of past events but where its timing and amount are uncertain. When considering whether a provision should be raised, the directors assess the probability that an outﬂow of cash or other economic resource will be required to settle the provision and whether the liability can be measured reliably. Liabilities which cannot be measured reliably or where settlement is not probable are not provided for. The directors make external enquiries and seek evidence that a legal obligation to settle the liability exists, or that actions of entities within the group have created an expectation that the Group will accept and discharge certain responsibilities and the Group has no alternative but to settle those obligations. They also consider the source of the information to determine if the evidence can provide a reliable measure of the liability. Braime Group PLC Annual Report & Accounts 2021 204709 Braime Group Text AR21 PRINT.indd 31 12/05/2022 08:00 32 Financial Statements Notes to the accounts For the year ended 31st December 2021 (continued) 1.3 Critical accounting estimates and assumptions (continued) Retirement beneﬁt obligations The Group operates a deﬁned beneﬁt pension scheme (note 21). 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. 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 2021: • Amendments to IFRS9, IAS39, IFRS7, IFRS4 and IFRS16 – Interest rate benchmarks – introduces practical expedient and exemptions from hedge accounting requirements – effective accounting periods beginning on or after 1st January 2021 • Amendments to IFRS16 – Covid-19 related rent concessions beyond 30th June 2021 – Extend the time period over which the practical expedient introduced by earlier amendments is available for use to 30th June 2022 – effective accounting period beginning on or after 1st April 2021 (b) New standards, amendments and interpretations issued but not effective for the ﬁnancial year beginning 1st January 2021 and not early adopted. • Annual improvements to IFRS Standards 2018-2020 cycle – Minor amendments to IFRS1, IFRS9 and IAS41 – effective accounting period beginning on or after 1st January 2022 • Amendments to IFRS3 – Reference to the Conceptual Framework – Updates certain references to the Conceptual Framework for ﬁnancial reporting without changing the accounting requirements for business combinations – effective accounting periods beginning on or after 1st January 2022 • Amendments to IAS16 – Property, plant and equipment: Proceeds before intended use – Requires amounts received from selling items produced while the company is preparing the asset for its intended use to be recognised in proﬁt or loss, and not as an adjustment to the cost of the asset – effective accounting periods beginning on or after 1st January 2022 • Amendment to IAS37 – Onerous contracts: Cost of fulﬁlling a contract – Speciﬁes which costs to include when assessing whether a contract will be loss-making – effective accounting periods beginning on or after 1st January 2022 • Amendments to IAS1 – Classiﬁcation of liabilities as current or non-current – Clariﬁes that the classiﬁcation of liabilities as current or non-current should be based on rights that exist at the end of the reporting period – effective accounting periods beginning on or after 1st January 2023 • Amendments to IAS1 and IFRS Practice Statement 2 – Disclosure of accounting policies – Changes requirements from disclosing ‘signiﬁcant’ to ‘material’ accounting policies and provides explanations and guidance on how to identify material accounting policies – effective accounting periods beginning on or after 1st January 2023 • Amendments to IAS8 – Deﬁnition of accounting estimates – Clariﬁes how to distinguish changes in accounting policies from changes in accounting estimates – effective accounting periods beginning on or after 1st January 2023 • Amendments to IAS12 – Deferred tax related to assets and liabilities arising from a single transaction – Introduces an exception to clarify that the ‘initial recognition exemption’ does not apply to transactions that give rise to equal taxable and deductible timing differences – effective accounting periods beginning on or after 1st January 2023 • IFRS17 Insurance contracts – Establishes new principles for the recognition, measurement, presentation and disclosure of insurance contracts issued, reinsurance contracts held and qualifying investment contracts with discretionary participation features issued – effective accounting periods beginning on or after 1st January 2023 The application and interpretations surrounding the new or amended 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. Braime Group PLC Annual Report & Accounts 2021 204709 Braime Group Text AR21 PRINT.indd 32 12/05/2022 08:00 Strategic Report Governance Financial Statements 33 1.5 Revenue recognition IFRS 15 ‘Revenue from Contracts with Customers’ establishes a comprehensive framework for determining whether, how much and when revenue is recognised. It replaced IAS 18 Revenue and related interpretations with effect from 1st January 2018. Under IFRS 15, revenue recognition is based on the principle that revenue is recognised when control of a good or service transfers to a customer. Where sale of goods occur, revenue is recognised at a point in time when goods are delivered to customers. For the Group, the transfer of control under IFRS 15 and satisfaction of performance obligations therefore remains consistent with the transfer of risks and rewards to the customer under IAS18. Revenue represents the fair value of consideration received or receivable for the sale of goods in the ordinary course of the Group’s activities, and is stated exclusive of VAT, similar taxes and after eliminating sales within the Group. Payment is typically due within 60 days. Interest receivable on bank deposits and other items such as rentals, insurance proceeds, and receipts to fund capital assets are not classed as revenue but included within ﬁnance income and other operating income respectively. The breakdown of revenue from ordinary activities used within the Group to assess the performance is presented, by operating segment, in the segment analysis (see note 4). 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 Braime Group PLC 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 acquiree over the fair value of the Group’s share of the identiﬁable net assets acquired is recorded as goodwill. If this is less than the fair value of the net assets of the subsidiary acquired in the case of a bargain purchase, the difference is recognised directly in 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 Braime Group PLC consolidated ﬁnancial statements are presented in sterling (£), which is also the functional currency of the 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. 204709 Braime Group Text AR21 PRINT.indd 33 12/05/2022 08:00 Braime Group PLC Annual Report & Accounts 2021 34 Financial Statements Notes to the accounts For the year ended 31st December 2021 (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 receivables) 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 and 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. Trade payables are recognised initially at their fair value and subsequently measured at amortised cost less settlement payments. 1.10 Cash and cash equivalents Cash and cash equivalents include cash at bank and in hand as well as short term highly liquid investments such as money market instruments and bank deposits. For the purposes of the cash ﬂow statement cash and cash equivalents include bank overdrafts. 1.11 Borrowing costs All borrowing costs are expensed as incurred. 1.12 Pension obligations and short term employee beneﬁts Pensions to employees are provided through a deﬁned beneﬁt plan as well as a deﬁned contribution plan. A deﬁned beneﬁt plan is a pension plan that deﬁnes an amount of pension beneﬁt that an employee will receive on retirement, usually dependent on one or more factors such as age, years of service and salary. The legal obligation for any beneﬁts from this kind of pension plan remains with the Group, even if the plan assets for funding the deﬁned beneﬁt plan have been acquired. Plan assets may include assets speciﬁcally designated to a long term beneﬁt fund as well as qualifying insurance policies. A deﬁned contribution plan is a pension plan under which the Group pays ﬁxed contributions into an independent entity. The Group has no legal or constructive obligations to pay further contributions after payment of the ﬁxed contribution. The asset or liability recognised in the balance sheet for deﬁned beneﬁt pension plans is the present value of the deﬁned beneﬁt obligation (DBO) at the balance sheet date less the fair value of plan assets, together with adjustments for past service costs. The DBO is calculated annually by independent actuaries using the projected unit credit method. The present value of the DBO is determined by discounting the estimated future cash outﬂows using interest rates of high quality corporate bonds that are denominated in the currency in which the beneﬁts will be paid and that have terms to maturity approximating to the terms of the related pension liability. Remeasurement gains and losses are recognised immediately and in full in other comprehensive income. Past service costs are Braime Group PLC Annual Report & Accounts 2021 204709 Braime Group Text AR21 PRINT.indd 34 12/05/2022 08:00 Strategic Report Governance Financial Statements 35 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. 1.13 Right of use assets and lease liabilities The Group as a lessee The Group makes the use of leasing arrangements principally for the provision of warehouses and related facilities, ofﬁce space, IT equipment, fork lift trucks, and motor vehicles. The rental contracts for warehouses and ofﬁces are typically negotiated for terms of between 3 and 5 years and some of these have extension terms. Lease terms for ofﬁce and IT equipment, fork lift trucks and motor vehicles typically have lease terms of between 1 and 6 years without any extension terms. The Group does not enter into sale and leaseback arrangements. All the leases are negotiated on an individual basis and contain a wide variety of different terms and conditions such as purchase options and escalation clauses. The Group assesses whether a contract is or contains a lease at inception of the contract. A lease conveys the right to direct the use and obtain substantially all of the economic beneﬁts of an identiﬁed asset for a period of time in exchange for consideration. Some lease contracts contain both lease and non-lease components. These non-lease components are usually associated with facilities management services at ofﬁces and servicing and repair contracts in respect of motor vehicles. The Group has elected to not separate its leases for ofﬁces into lease and non-lease components and instead accounts for these contracts as a single lease component. For its other leases, the lease components are split into their lease and non-lease components based on their relative stand-alone prices. Measurement and recognition of leases as a lessee At lease commencement date, the Group recognises a right-of-use asset and a lease liability in its consolidated balance sheet. The right-of-use asset is measured at cost, which is made up of the initial measurement of the lease liability The Group depreciates the right-of-use asset on a straight-line basis from the lease commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. At the commencement date, the Group measures the lease liability at the present value of the lease payments unpaid at that date, discounted using the Group’s incremental borrowing rate because as the lease contracts are negotiated with third parties it is not possible to determine the interest rate that is implicit in the lease. The incremental borrowing rate is the estimated rate that the Group would have to pay to borrow the same amount over a similar term, and with similar security to obtain an asset of equivalent value. This rate is adjusted should the lessee entity have a different risk proﬁle to that of the Group. Lease payments included in the measurement of the lease liability are made up of ﬁxed payments (including in substance ﬁxed), variable payments based on an index or rate, amounts expected to be payable under a residual value guarantee and payments arising from options reasonably certain to be exercised. Subsequent to initial measurement, the liability will be reduced by lease payments that are allocated between repayments of principal and ﬁnance costs. The ﬁnance cost is the amount that produces a constant periodic rate of interest on the remaining balance of the lease liability. The lease liability is reassessed when there is a change in the lease payments. Changes in lease payments arising from a change in the lease term or a change in the assessment of an option to purchase a leased asset. The revised lease payments are discounted using the Group’s incremental borrowing rate at the date of reassessment when the rate implicit in the lease cannot be readily determined. The amount of the remeasurement of the lease liability is reﬂected as an adjustment to the carrying amount of the right-of-use asset. The exception being when the carrying amount of the right-of-use asset has been reduced to zero then any excess is recognised in proﬁt or loss. 204709 Braime Group Text AR21 PRINT.indd 35 12/05/2022 08:00 Braime Group PLC Annual Report & Accounts 2021 36 Financial Statements Notes to the accounts For the year ended 31st December 2021 (continued) 1.13 Right of use assets and lease liabilities (continued) The Group has elected to account for short-term leases and leases of low-value assets using the practical expedients. These leases relate to items of ofﬁce equipment such as desks, chairs, and certain IT equipment. Instead of recognising a right-of-use asset and lease liability, the payments in relation to these are recognised as an expense in proﬁt or loss on a straight-line basis over the lease term. Where substantially all of the risks and rewards incidental to ownership of a lease asset have been transferred to the Group as is the case in a 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. Assets held under hire purchase contracts are classiﬁed as property, plant and equipment. 1.14 Impairment of non-ﬁnancial assets The Group’s non-current assets are subject to impairment testing. An asset is impaired where there is objective evidence that, as a result of one or more events that occurred after initial recognition, the estimated recoverable value of the asset has been reduced. Individual assets or cash-generating units with an indeﬁnite useful life or those not yet available for use are tested for impairment at least annually. All individual assets or cash-generating units are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s or cash-generating unit’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of fair value, reﬂecting market conditions less costs to sell and value in use, based on an internal discounted cash ﬂow evaluation. Impairment losses are charged pro-rata to the assets in the cash- generating unit. All assets are subsequently re-assessed for indications that an impairment loss previously recognised may no longer exist. 1.15 Research and development Costs associated with research activities are expensed in the consolidated income statement as they occur. 1.16 Income taxes Current income tax assets and/or liabilities comprise those obligations to, or claims from, ﬁscal authorities relating to the current or prior reporting period, that are unpaid at the balance sheet date. They are calculated according to the tax rates and tax laws applicable to the ﬁscal periods to which they relate, based on the taxable proﬁt for the year. All changes to current tax assets or liabilities are recognised as a component of tax expense in the consolidated income statement. 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 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. Braime Group PLC Annual Report & Accounts 2021 204709 Braime Group Text AR21 PRINT.indd 36 12/05/2022 08:00 Strategic Report Governance Financial Statements 37 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 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 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. 204709 Braime Group Text AR21 PRINT.indd 37 12/05/2022 08:00 Braime Group PLC Annual Report & Accounts 2021 38 Financial Statements Notes to the accounts For the year ended 31st December 2021 (continued) 2. PROFIT FROM OPERATIONS Proﬁt from operations before exceptional item has been arrived at after charging/ (crediting): Depreciation and amortisation Foreign exchange differences Research and development costs (Credit to)/write-down of inventory to net realisable value Inventory recognised as an expense Impairment of trade receivables 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 Fees payable to overseas auditors (Proﬁt)/loss on disposal of ﬁxed assets Other operating income Note 2021 £’000 2020 £’000 8, 9 & 10 11 12 1,334 468 64 (72) 18,859 (66) 19 61 – 20 (38) (50) 1,280 (144) 92 283 17,208 (12) 19 46 11 21 1 (30) EXCEPTIONAL COST 3. In the latter part of 2021, a series of structural faults were discovered along three of the supporting walls of the Group’s UK chain cell operations. As the property is Grade II listed, the walls and part of the rooﬁng have to be carefully dismantled, and the external wall will require careful restoration of its original heritage features, in line with conditions set by the local authority conservation ofﬁcers. The Group has already incurred £163,000 of expenditure of demolition and scaffolding costs in 2021. At the time of writing the directors have estimated the cost of rebuilding the area to be £850,000, which has been provided for in the accounts. The demolition of the wall has also impacted the completion of the adjacent warehouse construction resulting in extension of time costs of £204,000 which are included in the provision (see note 17). The total cost of the unforeseen and exceptional event is £1,217,000. 4. 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 2021. 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. Braime Group PLC Annual Report & Accounts 2021 204709 Braime Group Text AR21 PRINT.indd 38 12/05/2022 08:00 Strategic Report Governance Financial Statements 39 4. SEGMENTAL INFORMATION (CONTINUED) Central 2021 £’000 Manufacturing 2021 £’000 Distribution 2021 £’000 Revenue External Inter Company Total Proﬁt EBITDA Finance costs Finance income Depreciation and amortisation Tax expense (Loss)/proﬁt for the period Assets Total assets Additions to non current assets Liabilities Total liabilities 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 Total 2021 £’000 36,406 13,029 49,435 2,606 (205) 3 (1,334) (320) 750 Total 2020 £’000 32,803 9,999 42,802 2,657 (191) 9 (1280) (341) 854 14,927 1,298 27,168 2,528 6,817 11,451 Central 2020 £’000 Manufacturing 2020 £’000 Distribution 2020 £’000 31,240 6,704 37,944 2,539 (99) 2 (692) (494) 1,256 29,041 5,159 34,200 2,511 (55) 2 (660) (373) 1,425 – 2,038 2,038 (740) (69) – (608) 144 (1,273) 5,839 1,219 2,109 5,166 4,287 9,453 807 (37) 1 (34) 30 767 6,402 11 2,525 – 1,772 1,772 309 (105) – (592) 32 (356) 5,178 415 801 3,762 3,068 6,830 (163) (31) 7 (28) – (215) 4,200 54 2,025 15,228 2,020 24,606 2,489 6,817 9,643 204709 Braime Group Text AR21 PRINT.indd 39 12/05/2022 08:00 Braime Group PLC Annual Report & Accounts 2021 40 Financial Statements Notes to the accounts For the year ended 31st December 2021 (continued) SEGMENTAL INFORMATION (CONTINUED) 4. Geographical analysis The Group is domiciled in the UK. Analysis of revenues from external customers by continent is provided below: UK Rest of Europe Americas Africa Australia and Asia Revenue 2021 £’000 Non-current assets 2021 £’000 7,743 8,908 14,017 1,486 4,252 36,406 4,624 2,214 1,989 214 329 9,370 Revenue 2020 £’000 5,913 8,828 13,424 1,161 3,477 32,803 Non-current assets 2020 £’000 3,958 1,702 2,170 60 464 8,354 There was one Group customer of the manufacturing segment which accounted for 13% of the Group’s revenues. 5. FINANCE INCOME AND EXPENSE Finance expense Bank borrowings Lease interest Hire purchase interest Finance income Other interest received 2021 £’000 2020 £’000 124 65 16 205 3 3 124 38 29 191 9 9 Braime Group PLC Annual Report & Accounts 2021 204709 Braime Group Text AR21 PRINT.indd 40 12/05/2022 08:00 Strategic Report Governance Financial Statements 41 6. TAX EXPENSE Current tax expense UK corporation tax UK tax expense on proﬁts for the year Prior year adjustment Double tax relief Double tax relief (prior year) Foreign corporation tax Foreign tax expense on proﬁts for the year Prior year adjustment Current tax charge Deferred tax Origination and reversal of timing differences Adjustments in respect of prior periods Adjustments in respect of rate differences Total tax charge 2021 £’000 2020 £’000 209 8 (239) (8) (30) 573 (2) 571 541 (234) (30) 43 320 303 (9) (303) – (9) 508 (42) 466 457 (138) 10 12 341 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 19% (2020 – 19%) Expenses not deductible for tax purposes Non taxable income Tax credits on research and development Items charged to reserves Foreign tax Deferred tax not provided Deferred tax – prior year Deferred tax asset previously not recognised Prior year items Rate differences 2021 £’000 1,070 2020 £’000 1,195 203 1 – (11) 17 222 (14) (30) (72) (2) 6 320 227 14 (83) (23) 12 184 39 10 – (51) 12 341 Other than as shown in note 16, 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 £24,000, £nil and £nil respectively (2020 – £nil, £48,000 and £nil) calculated at a rate of 19% (2020 – 19%). 204709 Braime Group Text AR21 PRINT.indd 41 12/05/2022 08:00 Braime Group PLC Annual Report & Accounts 2021 42 Financial Statements Notes to the accounts For the year ended 31st December 2021 (continued) EMPLOYEES 7. The average number of employees of the Group during the year was made up as follows: Ofﬁce and management Sales and distribution Manufacturing Staff costs (including directors) comprise: Wages and salaries US paycheck protection program grant CJRS government grant Deﬁned contribution pension cost Deﬁned beneﬁt pension cost Other long-term employee beneﬁts Employer’s national insurance contributions and similar taxes The US PPP grant received in 2020 and the UK CJRS grant related to the Covid pandemic. Directors’ remuneration: Emoluments of qualifying services Company pension contributions to money purchase schemes Note 21.3 2021 No. 51 53 79 183 2021 £’000 7,710 – (15) 249 142 65 779 8,930 2020 No. 49 53 76 178 2020 £’000 7,578 (436) (46) 318 116 81 797 8,408 2021 £’000 2020 £’000 665 45 710 659 45 704 The number of directors for whom retirement beneﬁts accrued under money purchase pension schemes amounted to 3 (2020 – 3) and under deﬁned beneﬁt pension schemes amounted to nil (2020 – nil). Further details of directors remuneration are included in the remuneration report. Braime Group PLC Annual Report & Accounts 2021 204709 Braime Group Text AR21 PRINT.indd 42 12/05/2022 08:00 Strategic Report Governance Financial Statements 43 8. PROPERTY, PLANT AND EQUIPMENT At 31st December 2021 Cost Accumulated depreciation Net book value At 31st December 2020 Cost Accumulated depreciation Net book value Year ended 31st December 2021 Opening net book value Additions Disposals Depreciation Exchange differences Closing net book value Year ended 31st December 2020 Opening net book value Additions Disposals Depreciation Reclassiﬁcation Exchange differences Closing net book value Plant, machinery and motor vehicles £’000 Land and buildings £’000 Total £’000 6,076 (281) 5,795 4,746 (243) 4,503 4,503 1,453 – (47) (114) 5,795 2,956 1,489 – (2) 39 21 4,503 13,134 (10,216) 19,210 (10,497) 2,918 8,713 12,706 (9,379) 3,327 17,452 (9,622) 7,830 3,327 660 (36) (1,025) (8) 2,918 3,868 568 (14) (1,040) (39) (16) 3,327 7,830 2,113 (36) (1,072) (122) 8,713 6,824 2,057 (14) (1,042) – 5 7,830 The net book value of tangible ﬁxed assets includes an amount of £414,000 (2020 – £568,000) in respect of assets held under hire purchase contracts. The related depreciation charge on these assets for the year was £197,000 (2020 – £250,000). Additions include £58,000 (2020 – £31,000) of assets held under hire purchase contracts.. Assets in the course of construction which have not been depreciated total £1,206,000 (2020 – £2,225,000) of which £761,000 relates to the Hunslet Road warehouse construction. The total cost of non-depreciable assets included in freehold land and buildings was £3,165,000 (2020 – £3,024,000). 204709 Braime Group Text AR21 PRINT.indd 43 12/05/2022 08:00 Braime Group PLC Annual Report & Accounts 2021 44 Financial Statements Notes to the accounts For the year ended 31st December 2021 (continued) 9. INTANGIBLE ASSETS At 31st December 2021 Cost Accumulated amortisation Net book value At 31st December 2020 Cost Accumulated amortisation Net book value Year ended 31st December 2021 Opening net book value Additions Amortisation Exchange differences Closing net book value Year ended 31st December 2020 Opening net book value Additions Amortisation Reclassiﬁcations Closing net book value Intangible assets relate to purchased goodwill and software. Total £’000 149 (124) 25 155 (118) 37 37 – (12) – 25 48 – (12) 1 37 Braime Group PLC Annual Report & Accounts 2021 204709 Braime Group Text AR21 PRINT.indd 44 12/05/2022 08:00 Strategic Report Governance Financial Statements 45 10. RIGHT OF USE ASSETS At 31st December 2021 Cost Accumulated depreciation Net book value At 31st December 2020 Cost Accumulated depreciation Net book value Year ended 31st December 2021 Opening net book value Additions Depreciation Exchange differences Closing net book value Year ended 31st December 2020 Opening net book value Additions Depreciation Exchange differences Closing net book value Buildings £’000 IT Equipment £’000 Vehicles £’000 414 (167) 247 275 (62) 213 213 162 (111) (17) 247 154 186 (130) 3 213 163 (82) 81 142 (49) 93 93 33 (47) 2 81 20 101 (28) – 93 436 (132) 304 300 (119) 181 181 220 (92) (5) 304 104 145 (68) – 181 Total £’000 1,013 (381) 632 717 (230) 487 487 415 (250) (20) 632 278 432 (226) 3 487 Buildings include warehouses and ofﬁce leases. IT equipment include sundry IT and broadband ﬁbre leases. Vehicles include fork lift trucks and motor vehicles. With the exception of short-term leases and leases of low-value underlying assets, each lease is reﬂected in the Group accounts as a right-of-use (RoU) asset per note 10 above and a lease liability (see note 15b). 11. INVENTORIES Raw materials Work in progress Finished goods Goods in transit 2021 £’000 639 209 8,580 696 10,124 2020 £’000 382 126 7,794 562 8,864 During the twelve months ended 31st December 2021 the Group reduced charges against ﬁnished goods inventories of £72,000 (2020 – charge of £283,000) following reassessment of the saleability of certain stock items (note 2). 204709 Braime Group Text AR21 PRINT.indd 45 12/05/2022 08:00 Braime Group PLC Annual Report & Accounts 2021 46 Financial Statements Notes to the accounts For the year ended 31st December 2021 (continued) 12. TRADE AND OTHER RECEIVABLES Trade receivables Other receivables Prepayments 2021 £’000 5,465 478 268 6,211 2020 £’000 5,303 354 198 5,855 Included in other receivables is £120,000 (2020 – £19,000) of corporation tax repayable, £215,000 (2020 – £191,000) in relation to a VAT claim, and £nil (2020 – £32,000) in respect of a deferred tax asset. Where possible credit insurance is obtained and sales to customers kept within agreed credit limits. In general, 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. Trade receivables include a credit of £66,000 for provision written back (2020 – £12,000). 13. TRADE AND OTHER PAYABLES – CURRENT Trade payables Other taxes and social security costs Other payables Accruals 14. OTHER FINANCIAL LIABILITIES – CURRENT Bank loans – secured Lease liabilities Hire purchase creditors Other creditors 2021 £’000 3,395 248 62 1,190 4,895 2021 £’000 1,064 250 158 1,430 2,902 2020 £’000 3,391 166 62 1,125 4,744 2020 £’000 354 186 186 1,407 2,133 Note 15a 15b 15c An analysis of the interest rate payable on ﬁnancial liabilities and information about fair values is given in note 19. 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. 15. FINANCIAL LIABILITIES – NON-CURRENT Note 15a 15b 15c 2021 £’000 1,372 415 222 37 2,046 2020 £’000 1,388 318 337 32 2,075 Bank loans – secured Lease liabilities Hire purchase creditors Other creditors (non-current) Braime Group PLC Annual Report & Accounts 2021 204709 Braime Group Text AR21 PRINT.indd 46 12/05/2022 08:00 Strategic Report Governance Financial Statements 47 15a. Obligations under bank loan agreements comprise amounts payable as follows: Within one year One to two years Two to ﬁve years Over ﬁve years Terms and conditions of outstanding loans were as follows: Interest rate % Development loan US dollar bank loan US dollar term loan US dollar term loan EUR term loan 2.50% over Bank of England base rate 4.00% ﬁxed 2.25% over LIBOR 3.74% ﬁxed 1.31% ﬁxed Year of maturity 2022 2023 2023 2024 2034 2021 £’000 1,064 181 322 869 2,436 2021 £’000 614 217 133 117 1,354 2020 £’000 354 389 357 642 1,742 2020 £’000 – 383 231 157 971 The 4.00% and 3.74% ﬁxed US dollar bank loans are secured on speciﬁc plant and equipment held by 4B Elevator Components Limited. The US dollar term loans form part of the Group funding arrangements. The US LIBOR loan was repaid in February 2022 to avoid the cost of converting to a SOFR loan. These loans are secured by a ﬁxed and ﬂoating charge over certain assets of certain Group companies. The EUR term loan relates to the construction of the French warehouse and is secured against the property in France. The development loan relates to the construction of the Hunslet Road warehouse and will be converted to a 5 year term loan on completion of the warehouse. 15b. Lease liabilities: Minimum lease payment commitments in respect of RoU assets at the year end were as follows: Less than one year One to two years Two to ﬁve years Over ﬁve years Lease Payments £’000 Finance Charges £’000 Net Present Value £’000 310 217 223 40 790 (60) (32) (30) (3) (125) 250 185 193 37 665 At 31st December 2020 the minimum lease payment commitments in respect of RoU assets were as follows: Less than one year One to two years Two to ﬁve years £’000 £’000 £’000 231 204 145 580 (45) (24) (7) (76) 186 180 138 504 The lease liabilities are calculated from the present values of the lease rentals based on the Group’s estimated borrowing rate of 10%. A change of +/- 5% to the implied discount rate does not result in a material change to the estimates. Each lease generally imposes a restriction that, unless there is a contractual right for the Group to sublet the asset to another party, the right-of-use asset can only be used by the Group. Leases are either non-cancellable or may only be cancelled by incurring a substantive termination fee. Some leases contain an option to purchase the underlying leased asset outright at the end of the lease, or to extend the lease for a further term. The Group is prohibited from selling or pledging the underlying leased assets as security. For leases over ofﬁce buildings and factory premises the Group must keep those properties in a good state of repair and return the properties in their original condition at the end of the lease. Further, the Group must insure right-of-use assets and incur maintenance fees on such items in accordance with the lease contracts. Braime Group PLC Annual Report & Accounts 2021 204709 Braime Group Text AR21 PRINT.indd 47 12/05/2022 08:00 48 Financial Statements Notes to the accounts For the year ended 31st December 2021 (continued) 15b. Lease liabilities (continued): At 31st December 2021, the Group had 33 leased RoU assets by category as follows: Buildings: 4, IT equipment: 5, and Vehicles: 24. The average remaining lease commitments were: Buildings: 2 years, IT equipment: 1.4 years, and Vehicles: 2.8 years respectively. Lease payments not recognised as a liability The Group has elected not to recognise a lease liability for short term leases (leases with an expected term of 12 months or less) or for leases of low value assets. Payments made under such leases are expensed on a straight-line basis. In addition, certain variable lease payments are not permitted to be recognised as lease liabilities and are expensed as incurred. The total cash outﬂow for leases for the year ended 31st December 2021 was £299,000 (2020 – £266,000). At 31st December 2021 the Group had not committed to any new leases that had yet to commence. 15c. Hire purchase creditors: Hire purchase future payments, interest charges and liabilities as at 31st December 2021 were as follows: Within one year One to two years Two to ﬁve years Future Payments £’000 Interest Charges £’000 HP Creditor £’000 169 141 93 403 (11) (6) (6) (23) 158 135 87 380 Hire purchase payments, interest charges and liabilities as at 31st December 2020 were as follows: Within one year One to two years Two to ﬁve years 16. DEFERRED INCOME TAX LIABILITY Accelerated capital allowances in excess of depreciation Losses Rolled over capital gains Future Payments £’000 Interest Charges £’000 HP Creditor £’000 195 151 205 551 (9) (8) (11) (28) 2021 £’000 183 (222) 63 24 186 143 194 523 2020 £’000 292 (77) 63 278 The decrease in deferred tax liability relates primarily to the recognition of taxable losses available where they can be offset against accelerated capital allowances. Balance at 1st January 2021 Deferred tax asset as at 1st January 2021 Release to income statement during the year Balance at 31st December 2021 Deferred tax £’000 278 (32) (222) 24 Deferred tax has been recognised at a blended rate of 29% (2020 – 29%) on accelerated capital allowances in 4B Elevator Components Limited and 25% (2020 – 19%) in respect of the Company, 4B Braime Components Limited and Braime Pressings Limited. The Finance Act 2021 increased the UK tax rate to 25% from April 2023. This was substantially enacted at the balance sheet date and has been used to calculate the deferred tax balances. Braime Group PLC Annual Report & Accounts 2021 204709 Braime Group Text AR21 PRINT.indd 48 12/05/2022 08:00 Strategic Report Governance Financial Statements 49 17. PROVISION FOR LIABILITIES Provision for liabilities – chain cell repairs 2021 £’000 1,054 2020 £’000 – During the year, serious structural faults were discovered on the supporting walls of the chain cell area of our Hunslet Road property. This necessitated the emergency demolition of the external walls, dismantling of the roof over the chain cell operations and the temporary relocation of our chain cell operations. The building is Grade II listed and may only be lawfully altered with prior planning permission. Consent to demolish the walls was granted by the local authority on the condition that the Company restore the property per their requirements using appropriate materials and retaining its original features. Consequently, an obligation exists at the year end to carry out the repairs set out in the planning application. The directors have provided £850,000 for these repairs based on their assessment of the costs necessary to made good the demolished areas. Whilst some costs can be reasonably established, at the time of writing, there remains uncertainty over the type of materials that may be used as their speciﬁcations are awaiting the decision of the local authority conservation ofﬁcers. The type of material used has a direct bearing on the foundation depth of the walls being erected and hence the cost. The demolition of the wall has also impacted the completion of the adjacent warehouse construction resulting in extension of time costs of £204,000 which are included in the provision. The directors are working with the contractors of the warehouse extension to establish the most-cost effective way of achieving the restoration and reducing delays to completing the warehouse. The total provision represents the directors’ best estimate of the required cost of restoring the chain cell walls and the additional costs associated with the delays to the warehouse project and the directors have referred to benchmarks to arrive at the estimated cost. 18. 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 2021 £’000 2020 £’000 120 300 420 120 240 360 120 300 420 120 240 360 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. 19. FINANCIAL INSTRUMENTS The Group’s activities expose it to a variety of ﬁnancial risks: market risk (including currency risk and cash ﬂow interest rate risk), credit risk and liquidity risk. The Group holds ﬁnancial instruments in order to ﬁnance its operations and to manage the interest rate and currency risks arising from those operations. 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, 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 cost using the effective interest method. Whilst lease liabilities within note 14 and 15 are included within ﬁnancial liabilities they do not constitute a ﬁnancial instrument. Braime Group PLC Annual Report & Accounts 2021 204709 Braime Group Text AR21 PRINT.indd 49 12/05/2022 08:00 50 Financial Statements Notes to the accounts For the year ended 31st December 2021 (continued) 19. FINANCIAL INSTRUMENTS (CONTINUED) 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. The Group’s currency exposure at the year end was £2,714,000 (2020 – £1,422,000), primarily euros and US dollars to sterling. The Group’s policy is to ensure a balance of ﬁnancial instruments to meet its operating requirements. This has been achieved during the period. Unutilised committed borrowing facilities have been maintained in order to provide ﬂexibility in the management of liquidity. Fair values There is no material difference between the carrying value and the fair value of the Group’s ﬁnancial assets and liabilities. Financial instruments carried at fair value are required to be measured by reference to the following levels: Level 1 – quoted prices (unadjusted) in active markets for identical assets or liabilities; Level 2 – inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and Level 3 – inputs for the asset or liability that are not based on observable market data (unobservable inputs). The level within which the ﬁnancial asset or liability is classiﬁed is determined based on the lowest level of signiﬁcant input to one fair value measurement. The only 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 There were no forward currency contracts outstanding at 31st December 2021 (31st December 2020 – £nil). Fixed interest term loans Fixed interest term loans as at 31st December 2021 were US dollar term bank loans of £334,000 (2020 – £540,000) and euro bank term loans of £1,354,000 (2020 – £971,000) (see note 15a). Maturity analysis Other than is disclosed in note 15 regarding bank loans and lease liabilities all ﬁnancial instruments fall due within one year. In addition to the maturity analysis disclosed in note 15, the interest due on bank loans repayable within one year totals £36,000 (2020 – £34,000), the interest due on bank loans repayable after one year but not more than ﬁve years totals £58,000 (2020 – £40,000), and the interest due on bank loans repayable after more than ﬁve years totals £48,000 (2020 – £22,000). Interest due (ﬁnance charges) on RoU lease liabilities are shown in note 15b and interest due on hire purchase creditors are shown in note 15c. 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 2021 Sterling Euro US dollar Other Floating rate ﬁnancial assets £’000 Fixed rate ﬁnancial assets £’000 Financial assets Total £’000 (1,202) 466 1,380 819 1,463 – – – – – (1,202) 466 1,380 819 1,463 Braime Group PLC Annual Report & Accounts 2021 204709 Braime Group Text AR21 PRINT.indd 50 12/05/2022 08:00 Strategic Report Governance Financial Statements 51 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. Currency As at 31st December 2020 Sterling Euro US dollar Other Floating rate ﬁnancial assets £’000 Fixed rate ﬁnancial assets £’000 Financial assets Total £’000 (1,540) 678 1,891 504 1,533 – – – – – (1,540) 678 1,891 504 1,533 The currency and interest rate proﬁle of the Group’s interest bearing ﬁnancial liabilities is shown below: Currency As at 31st December 2021 Sterling Euro US dollar Other Currency As at 31st December 2020 Sterling Euro US dollar Other Floating rate ﬁnancial liabilities £’000 Fixed rate ﬁnancial liabilities £’000 Financial liabilities Total £’000 (2,484) (49) (134) – (2,667) (507) (1,506) (362) (358) (2,733) (2,991) (1,555) (496) (358) (5,400) Floating rate ﬁnancial liabilities £’000 Fixed rate ﬁnancial liabilities £’000 Financial liabilities Total £’000 (1,545) (197) (231) – (1,973) (644) (1,006) (543) (346) (2,539) (2,189) (1,203) (774) (346) (4,512) Floating rate ﬁnancial liabilities comprise bank borrowings and lease assets. Currency exposure The Group operates in a number of currencies and 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/(liabilities) Functional currency As at 31st December 2021 Sterling Euro US dollar Other Sterling £’000 Euro £’000 US dollar £’000 Other currencies £’000 – – (419) (1,034) (1,453) 797 – (2) (26) 769 249 – – (122) 127 2,866 – – – 2,866 Total £’000 3,912 – (421) (1,182) 2,309 Braime Group PLC Annual Report & Accounts 2021 204709 Braime Group Text AR21 PRINT.indd 51 12/05/2022 08:00 52 Financial Statements Notes to the accounts For the year ended 31st December 2021 (continued) 19. FINANCIAL INSTRUMENTS (CONTINUED) Non interest bearing ﬁnancial assets/(liabilities) (continued) Functional currency As at 31st December 2020 Sterling Euro US dollar Other Risk sensitivity Sterling £’000 Euro £’000 US dollar £’000 – – (517) (643) (1,160) 1,090 – (25) – 1,065 (1,778) – – 6 (1,772) Other currencies £’000 2,520 – – – 2,520 Total £’000 1,832 – (542) (637) 653 Interest rate sensitivity Based on the year end balance of ﬂoating rate assets and liabilities, a change in interest rates of 1% in the monetary assets and liabilities mentioned above invested or borrowed will not affect the income statement by a ﬁgure greater or less than £12,000 (2020 – £5,000). Currency rate sensitivity A weakening in the value of sterling by 10% will beneﬁt the operating proﬁt by a ﬁgure not exceeding £301,000 (2020 – £158,000). A strengthening of sterling by 10% will reduce the operating proﬁt by a ﬁgure not greater than £247,000 (2020 – £129,000). 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 2021 £’000 3,348 2020 £’000 3,186 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. 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 assess the costs of entering into a matching forward contract with a reputable bank. It is Group policy that transactions between Group entities are generally denominated in the selling entity’s functional currency thereby giving rise to foreign exchange risk in the income statement of both the purchasing entity and the Group. The exception to this are charges made by the UK, since it is deemed to control treasury risks. Although the selling 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. Braime Group PLC Annual Report & Accounts 2021 204709 Braime Group Text AR21 PRINT.indd 52 12/05/2022 08:00 Strategic Report Governance Financial Statements 53 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 maximise 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 12. 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. 20. EARNINGS PER SHARE AND DIVIDENDS Both the basic and diluted earnings per share have been calculated using the net results attributable to shareholders of Braime Group PLC as the numerator. The weighted average number of outstanding shares used for basic earnings per share amounted to 1,440,000 shares (2020 – 1,440,000). There are no potentially dilutive shares in issue. Dividends paid Equity shares Ordinary shares Interim of 7.80p (2020 – 8.00p) per share paid on 25th May 2021 Interim of 4.25p (2020 – 4.00p) per share paid on 14th October 2021 ‘A’ Ordinary shares Interim of 7.80p (2020 – 8.00p) per share paid on 25th May 2021 Interim of 4.25p (2020 – 4.00p) per share paid on 14th October 2021 Total dividends paid An interim dividend of 8.20p per Ordinary and ‘A’ Ordinary share will be paid on 8th June 2022. 2021 £’000 2020 £’000 37 20 57 75 41 116 173 38 19 57 77 39 116 173 204709 Braime Group Text AR21 PRINT.indd 53 12/05/2022 08:00 Braime Group PLC Annual Report & Accounts 2021 54 Financial Statements Notes to the accounts For the year ended 31st December 2021 (continued) 21. PENSION COSTS 21.1 Scheme summary The Group operates a number of deﬁned contribution schemes, the cost of which are disclosed in note 7. Additionally the Group operates a funded deﬁned beneﬁt pension scheme, the Braime Pressings Limited Retirement Beneﬁts Scheme (the Scheme). The Scheme provides beneﬁts based on ﬁnal salary and length of service on retirement, leaving service or death on behalf of certain companies in the Group. The Scheme is closed to new members. 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. The following disclosures refer only to the Scheme. The Scheme is managed by a board of trustees appointed in part by the Group and part from elections by members of the Scheme. 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. 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 2019. The market value of Scheme assets at 6th April 2019 was £9,463,000. The funding level at 6th April 2019 was 104% on an ongoing basis. The Statutory Funding Objective does not currently impact on the recognition of the Scheme in these accounts. The next valuation of the scheme is due as at 6th April 2022. 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 Group expects to pay contributions of around £50,000 during the year to 31st December 2022. The weighted average duration of the deﬁned beneﬁt obligation is approximately 16 years. 21.2 Risks The cost of the Scheme to the Group depend upon a number of assumptions about future events. Future contributions may be higher (or lower) than those currently agreed if the assumptions are not borne out in practice or if different assumptions are agreed in the future. • • • 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 and 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 some hedging 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. Braime Group PLC Annual Report & Accounts 2021 204709 Braime Group Text AR21 PRINT.indd 54 12/05/2022 08:00 Strategic Report Governance Financial Statements 55 21.3 Reconciliation of deﬁned beneﬁt obligation and fair value of scheme assets Deﬁned beneﬁt obligation Fair value of scheme assets Net deﬁned scheme liability 2021 £’000 2020 £’000 2021 £’000 2020 £’000 2021 £’000 2020 £’000 Balance at 1st January 10,328 9,300 (10,328) (9,300) Service cost – current Service cost – past Administration costs Interest cost/(income) Interest effect of asset ceiling Included in proﬁt or loss Effect of asset ceiling Remeasurement loss/(gain) a) Actuarial loss/(gain) from: – Financial assumptions – Demographic assumption – Adjustments (experience) b) Return on plan asset (excluding interest) Included in other comprehensive income Employers contributions Employees contributions Beneﬁts paid Other movements 83 – – 122 – 205 – (601) – – – (601) – 10 (324) (314) 76 1 – 183 – 260 – 1,081 – – – – 59 (123) – (64) 181 – – – – – 39 (188) – (149) (127) – – – – 330 (1,020) 1,081 – 10 (323) (313) 330 (51) (10) 324 263 (45) (10) 323 268 Balance at 31st December 9,618 10,328 (9,618) (10,328) Net remeasurement gain taken to other comprehensive income 601 (1,081) (511) 1,147 (1,020) (271) – 83 – 59 (1) – 141 181 (601) – – 330 (51) – – (51) – 90 – 76 1 39 (5) – 111 (127) 1,081 – – (1,020) 61 (45) – – (45) – 66 The asset ceiling arises as based on the assumptions adopted there is a net pension scheme asset of £282,000 at 31st December 2021 but as Braime Pressings Limited does not have an unconditional right to any surplus of the scheme, the surplus of £282,000 has not been recognised in the Group balance sheet and therefore assets have been reduced by £282,000 to £9,618,000 so as to equal scheme liabilities at that date. The effect of GMP equalisation has been allowed as a past service cost in 2021. Other than this, there were no plan amendments, curtailments or settlements during the period. Remeasurement gains and losses arising from experience adjustments and changes in actuarial assumptions are recognised within the consolidated statement of comprehensive income. Included in remeasurement losses are the effect of asset ceiling of £181,000 (2020 – £127,000 gain) but the interest effect of asset ceiling are recognised in the proﬁt for the year. 204709 Braime Group Text AR21 PRINT.indd 55 12/05/2022 08:00 Braime Group PLC Annual Report & Accounts 2021 56 Financial Statements Notes to the accounts For the year ended 31st December 2021 (continued) 21.4 Analysis of fair value of plan assets between asset categories Annuity policies in payment Equities – quoted – overseas Equities – quoted – UK Cash With proﬁt deferred annuities Asset ceiling Total The assets do not include any investment in shares of the Company. 21.5 Reconciliation of effect of asset ceiling Effect of asset ceiling at start Interest on effect of asset ceiling Actuarial losses/(gains) Effect of asset ceiling at end 21.6 Key assumptions and sensitivities The key actuarial assumptions at balance sheet date are shown below: 2021 % of total assets 2020 % of total assets 55.5% 16.4% 2.5% 1.1% 24.5% – 56.0% 12.4% 2.0% 1.8% 27.8% – 100.0% 100.0% 2021 £’000 5,495 1,624 248 109 2,424 (282) 9,618 2021 £’000 101 1 180 282 2021 1.80% 3.65% 3.65% 3.50% 2020 £’000 5,840 1,293 209 188 2,899 (101) 10,328 2020 £’000 228 5 (132) 101 2020 1.20% 3.20% 3.20% 3.10% Discount rate Inﬂation (RPI) Salary increases Pension increase (LP15) Post retirement mortality Commutation Zurich with-proﬁts deferred annuity policy 115% of the S3NA tables with CMI 2018 projections using a long-term improvement rate of 1.00% pa 115% of the S3NA tables with CMI 2018 projections using a long-term improvement rate of 1.00% pa No allowance has been made for members to take tax free cash No allowance has been made for members to take tax free cash 70% future income value, 30% market value 70% future income value, 30% market value Braime Group PLC Annual Report & Accounts 2021 204709 Braime Group Text AR21 PRINT.indd 56 12/05/2022 08:00 Strategic Report Governance Financial Statements 57 The impact on the deﬁned beneﬁt obligation to changes in the signiﬁcant principal assumptions are shown below. The 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 has been determined using the same method as per the calculation of liabilities for the balance sheet disclosures, but using assumptions adjusted as detailed below. 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 % With-proﬁt deferred annuities converted on retirement using guaranteed annuity rates Plus 10.00% (i.e. 80%) Minus 10.00% (i.e. 60%) 22. NOTES SUPPORTING CONSOLIDATED CASH FLOW STATEMENT Cash and cash equivalents Cash at bank and in hand Bank overdraft Approximate effect on liability £’000 192 (217) (327) 326 (76) 74 (52) 62 249 (249) 2021 £’000 2020 £’000 1,463 (489) 974 1,533 (335) 1,198 Major non-cash transaction During the year the Group acquired tangible assets of £58,000 (2020 – £31,000) subject to ﬁnance under hire purchase agreements of £39,000. 23. CAPITAL COMMITMENTS There were capital commitments of £634,000 (2020 – £568,000) which are contracted but not provided for in these ﬁnancial statements. 204709 Braime Group Text AR21 PRINT.indd 57 12/05/2022 08:00 Braime Group PLC Annual Report & Accounts 2021 58 Financial Statements Notes to the accounts For the year ended 31st December 2021 (continued) 24. SUBSIDIARIES Subsidiary Principal activity i Registered in and operating from Hunslet Road, Leeds, West Yorkshire, LS10 1JZ, England, UK: Proportion of shares held 2021 and 2020 Ordinary Shares Preference Shares Braime Pressings Limited Manufacture of metal presswork 4B Braime Components Limited Distribution of bulk material handling components T.F. & J.H. Braime (Holdings) P.L.C. Dormant 100% 100% 100% ii Registered as above and operating from 625 Erie Avenue, Morton, Illinois 61550, USA: 4B Elevator Components Limited Distribution of bulk material handling components 100% Incorporated in and operating from iii 35 Bis Rue du 8 Mai 1945, 80800 Villers-Bretonneux, France: 4B–France sarl Distribution of bulk material handling components 100% iv Incorporated in and operating from 899/1 Moo 20, Soi Chongsiri, Amphur Bangplee, Samutprakarn, 10540, Thailand: 4B Asia Paciﬁc Company Limited Distribution of bulk material handling components 48% v Incorporated in and operating from 14 Newport Business Park, Mica Drive, Kya Sand, Johannesburg 2163, South Africa: 4B Africa Elevator Components (Pty) Limited vi Incorporated in and operating from B1/41 Bellrick Street, Acacia Ridge, Queensland, 4110, Australia: Distribution of bulk material handling components 100% 4B Australia Pty Limited Distribution of bulk material handling components 100% vii Incorporated in and operating from 18 Xinya Road, Wujin State High & New Technology Development Zone, Changzhou, Jiangsu, China: 4B Braime (Changzhou) Industrial Control Equipment Company Limited Distribution of bulk material handling components 100% 100% – – – – – – – – While only 48% of the ordinary shares are held in 4B Asia Paciﬁc Company Limited the Company controls 89% of the voting rights. As a consequence no single investor directly controls the investee however, given the operational management that the company demonstrates, it has the ability to direct the relevant activities and the decision making process such that it has power over the investee. 25. RELATED PARTY TRANSACTIONS The total remuneration for key management personnel for the year including directors totalled £1,382,000 (2020 – £1,339,000). There were no other related party transactions during the year. 26. POST BALANCE SHEET EVENTS In April 2022, the Group entered into an exclusivity arrangement with one of its trading partners to expand Group sales distribution. The cost of the transaction to the Group is £725,000, payable in part in 2022 and in part in 2023. Braime Group PLC Annual Report & Accounts 2021 204709 Braime Group Text AR21 PRINT.indd 58 12/05/2022 08:00 Strategic Report Governance Financial Statements 59 Company balance sheet For the year ended 31st December 2021 Fixed assets Intangible assets Tangible ﬁxed assets Investments Current assets Debtors: due within one year Creditors: amounts falling due within one year Amounts owed to Group undertakings Other creditors falling due within one year Net current liabilities Total assets less current liabilities Creditors: amounts falling due after more than one year Provisions for liabilities Capital and reserves Called up share capital Revaluation reserve Capital redemption reserve Retained earnings Shareholders’ funds Company’s proﬁt for the ﬁnancial year Note 3 4 5 8 9 10 11 12 2021 £’000 5 7,126 1,978 9,109 1,753 1,753 4,165 1,824 5,989 (4,236) 4,873 187 1,172 3,514 360 85 180 2,889 3,514 505 2020 £’000 15 6,498 1,978 8,491 1,484 1,484 5,371 921 6,292 (4,808) 3,683 311 190 3,182 360 85 180 2,557 3,182 202 These ﬁnancial statements were approved and authorised for issue by the board of directors on 27th April 2022 and signed on its behalf by: Nicholas Braime, Chairman Cielo Cartwright, Group Finance Director The notes on pages 60 to 65 form part of these ﬁnancial statements Company statement of changes in equity For the year ended 31st December 2021 Called up Share Capital £’000 Revaluation Reserve £’000 Capital Redemption Reserve £’000 Retained Earnings £’000 Balance at 1st January 2020 Comprehensive income for the ﬁnancial year – proﬁt Dividends paid Balance at 31st December 2020 Comprehensive income for the ﬁnancial year – proﬁt Dividends paid Balance at 31st December 2021 360 – – 360 – – 360 85 – – 85 – – 85 180 – – 180 – – 180 2,528 202 (173) 2,557 505 (173) 2,889 Total £’000 3,153 202 (173) 3,182 505 (173) 3,514 The revaluation reserve represents the fair value uplift in the Company’s freehold property. The capital redemption reserve represents the nominal value of preference share capital repurchased by the Company. The retained earnings represent cumulative proﬁt or losses net of dividends and other adjustments. Included within retained earnings is a non-distributable amount of £71,000. Included in proﬁt for the year is a dividend received from the Company’s subsidiary 4B Elevator Components Limited. Braime Group PLC Annual Report & Accounts 2021 204709 Braime Group Text AR21 PRINT.indd 59 12/05/2022 08:00 60 Financial Statements Notes to the Company accounts For the year ended 31st December 2021 COMPANY INFORMATION 1. Braime Group PLC is a Company limited by shares, incorporated in England & Wales. Its registered ofﬁce is Hunslet Road, Leeds, LS10 1JZ. The Company is a holding company. Details of the Group’s activities are provided on page 7. 2. ACCOUNTING POLICIES 2.1 Accounting convention These ﬁnancial statements have been prepared in accordance with Financial Reporting Standard 102 March 2018 ‘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, as described below. As a consequence the Company has elected to measure freehold land and buildings leased to other group companies, previously measured at fair value, under the historical cost convention. The fair value at the date of transition has been used as its deemed cost at this date. Investment properties fair valued at 31st December 2016 of £4,533,000 have been redesignated as freehold property and the difference between the deemed cost and its historic cost treated as a revaluation reserve. As at 1st January 2016 this resulted in the creation of a revaluation reserve of £85,000, with a corresponding decrease in retained earnings. 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 Intangible assets Acquired bespoke software is included at cost and amortised in equal annual instalments over a period of 5 years which is its estimated useful economic life. Provision is made for any impairment. 2.4 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, at rates calculated to write off the cost less estimated residual value of each asset 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 • Motor vehicles 4 – 5 years on a straight line basis Depreciation has not been charged on freehold land and buildings in the year as the directors consider their residual value to be higher than their net book value. 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. . Braime Group PLC Annual Report & Accounts 2021 204709 Braime Group Text AR21 PRINT.indd 60 12/05/2022 08:00 Strategic Report Governance Financial Statements 61 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. 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. The following assets and liabilities are classiﬁed as basic ﬁnancial instruments – cash and bank balances, trade creditors, accruals, bank loans and inter-company balances. Cash and bank balances, trade creditors, accruals 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. 2.6 Impairment of assets Assets 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. 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. 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, except where a legal right of set off exists. 2.8 Investments 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. 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 the Company’s properties are 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. Braime Group PLC Annual Report & Accounts 2021 204709 Braime Group Text AR21 PRINT.indd 61 12/05/2022 08:00 62 Financial Statements Notes to the Company accounts For the year ended 31st December 2021 (continued) 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 lease 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. 2.12 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 Company 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 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 Company that do not yet meet the recognition criteria of an asset are considered contingent assets. 2.13 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: Carrying value of freehold land and buildings As described in notes 2.1 and 2.4 to the ﬁnancial statements the Company’s freehold land and buildings are now carried at deemed cost with reference to a previous independent valuation as at 31st December 2015. Having given consideration to current property values the directors have considered that the properties residual values exceed their net book values, hence no depreciation need be charged. Useful economic lives of plant and machinery The annual depreciation charge for plant and machinery is sensitive to changes in the estimated useful economic lives and residual values of the assets. The useful economic lives and residual values are re-assessed annually. They are amended when necessary to reﬂect current estimates, based on technological advancement, future investments, economic utilisation and the physical condition of the assets. Braime Group PLC Annual Report & Accounts 2021 204709 Braime Group Text AR21 PRINT.indd 62 12/05/2022 08:00 Strategic Report Governance Financial Statements 63 Provisions A provision is raised where management consider a liability exists as a result of a past event but where its timing and amount are uncertain. When considering whether a provision should be raised, the directors assess the probability that an outﬂow of cash or other economic resource will be required to settle the provision and whether the liability can be measured reliably. Liabilities which cannot be measured reliably or where settlement is not probable are not provided for. The directors make external enquiries and seek evidence that a legal obligation to settle the liability exists, or that actions of entities within the Group have created an expectation that the Company will accept and discharge certain responsibilities and the Company has no realistic alternatives but to settle those obligations. They also consider the source of the information to determine if the evidence can provide a reliable measure of the liability. 3. INTANGIBLE ASSETS Cost At 1st January 2021 Additions At 31st December 2021 Amortisation At 1st January 2021 Provided for the year At 31st December 2021 Net book value At 31st December 2021 At 31st December 2020 4. TANGIBLE FIXED ASSETS Cost At 1st January 2021 Additions Disposals At 31st December 2021 Depreciation At 1st January 2021 Provided for the year Disposals At 31st December 2021 Net book value At 31st December 2021 Software £’000 52 – 52 37 10 47 5 15 Total £’000 9,739 1,220 – 10,959 3,241 592 – 3,833 7,126 6,498 Freehold land and buildings £’000 Plant and machinery £’000 Fixtures and ﬁttings £’000 Motor vehicles £’000 4,323 954 – 5,277 10 – – 10 5,183 263 – 5,446 3,096 559 – 3,655 5,267 1,791 231 3 – 234 133 33 – 166 68 98 2 – – 2 2 – – 2 – – At 31st December 2020 4,313 2,087 The net book value of tangible ﬁxed assets includes an amount of £339,000 (2020 – £534,000) in respect of assets under ﬁnance leases and hire purchase contracts. The related depreciation on these assets for the year was £183,000 (2020 – £229,000). Assets in the course of construction which have not been depreciated total £1,206,000 (2020 – £736,000). The historical cost of the freehold land and buildings is £2,855,000. Braime Group PLC Annual Report & Accounts 2021 204709 Braime Group Text AR21 PRINT.indd 63 12/05/2022 08:00 64 Financial Statements Notes to the Company accounts For the year ended 31st December 2021 (continued) 5. INVESTMENTS Subsidiary undertakings At 1st January 2021 and 31st December 2021 The list of subsidiaries is disclosed in note 24 of the consolidated ﬁnancial statements. 6. EMPLOYEES Ofﬁce and management £’000 1,978 2020 No. 9 2020 £’000 2021 No. 9 2021 £’000 Directors’ remuneration Emoluments for qualifying service 565 561 Certain directors and the central administration team are paid directly by the Company. Further details of directors’ remuneration are included in the remuneration report. 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 Corporation tax debtor Other taxes Prepayments Amounts owed by Group undertakings 9. CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR Bank overdraft Bank loan – secured Corporation tax Trade creditors Accruals Hire purchase – secured 2021 £’000 – 102 8 1,643 1,753 2021 £’000 882 614 3 35 161 129 1,824 2020 £’000 10 31 20 1,423 1,484 2020 £’000 552 – – 12 182 175 921 Cross guarantees exist in respect of all Group company bank borrowings. At 31st December 2021 the borrowings guaranteed by the Company amounted to £nil (2020 – £nil). Braime Group PLC Annual Report & Accounts 2021 204709 Braime Group Text AR21 PRINT.indd 64 12/05/2022 08:00 Strategic Report Governance Financial Statements 65 10. CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR Hire purchase creditor – secured The hire purchase creditors are secured by ﬁxed charges over certain assets of the Company. 11. PROVISIONS FOR LIABILITIES Provision for liabilities – chain cell repair Deferred tax (see note 11a) The provision for chain cell repairs is disclosed further in note 17 of the Group ﬁnancial statements. 11a. Deferred tax liability Accelerated capital allowances Rolled over capital gains Property fair value adjustment Losses Balance at 1st January 2021 Credit to income statement during the year Balance at 31st December 2021 2021 £’000 187 187 2021 £’000 1,054 118 1,172 2021 £’000 129 63 149 (223) 118 2020 £’000 311 311 2020 £’000 – 190 190 2020 £’000 117 63 87 (77) 190 Deferred tax £’000 190 (72) 118 The Finance Act 2021 increased the UK tax rate to 25% from April 2023. This was substantially enacted at the balance sheet date and has been used to calculate the deferred tax balances. Deferred tax has therefore been recognised at a rate of 25% (2020 – 19%). 12. SHARE CAPITAL Authorised: 480,000 Ordinary shares of 25p each 1,200,000 ‘A’ Ordinary shares of 25p each Allotted, called up and fully paid: 480,000 Ordinary shares of 25p each 960,000 ‘A’ Ordinary shares of 25p each 2021 £’000 2020 £’000 120 300 420 120 240 360 120 300 420 120 240 360 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. Braime Group PLC Annual Report & Accounts 2021 204709 Braime Group Text AR21 PRINT.indd 65 12/05/2022 08:00 66 Financial Statements Five year record 2021 £’000 2020 £’000 2019 £’000 2018 £’000 2017 £’000 Turnover 36,406 32,803 33,433 35,718 31,449 Proﬁt from operations (before exceptional item) Proﬁt before tax Proﬁt after tax 2,489 1,070 750 1,377 1,195 854 2,221 1,746 1,349 3,242 3,017 2,229 2,341 2,201 1,580 Basic and diluted earnings per share 52.08p 59.31p 93.68p 154.79p 109.73p Braime Group PLC Annual Report & Accounts 2021 204709 Braime Group Text AR21 PRINT.indd 66 12/05/2022 08:00 Strategic Report Governance Financial Statements 67 Notice of meeting Notice is hereby given that the SEVENTY SECOND Annual General Meeting of the members of Braime Group PLC (the ‘Company’) will be held at the registered ofﬁce of the Company at Hunslet Road, Leeds, LS10 1JZ on 23rd June 2022 at 11.45am. The Company will take into account any Government guidance or legislation in force at the time of the AGM and will implement any measures it believes necessary to protect the health and safety of attendees. Any changes to the format of the AGM will be communicated to shareholders through the Company’s website and, where appropriate, by stock exchange announcement. 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 2021, and the report of the auditors thereon. 2. To conﬁrm the dividends paid on 14th October 2021 and 8th June 2022 on the Ordinary and ‘A’ Ordinary shares. 3. To re-appoint as a director C. O. Braime, who is retiring by rotation in accordance with the Company’s Articles of Association and, being eligible, offers himself for re-election. 4. To re-appoint as a director A. Q. Braime, who is retiring by rotation in accordance with the Company’s Articles of Association and, being eligible, offers himself for re-election. 5. 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. 6. To authorise the directors to set the remuneration of the auditors. By order of the board, Cielo Cartwright, Secretary Hunslet Road, Leeds, LS10 1JZ 27th April 2022 204709 Braime Group Text AR21 PRINT.indd 67 12/05/2022 08:00 Braime Group PLC Annual Report & Accounts 2021 68 Financial Statements Explanatory notes of resolutions ACCOMPANYING NOTES 1. A member entitled to vote at the meeting is entitled to appoint a proxy to attend and vote in his/her 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 11:45am on 21st June 2022. 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 2021 of all transactions of each director and, so far as he/she can reasonably ascertain, of his/her 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 11.45am on 21st June 2022. 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. Braime Group PLC Annual Report & Accounts 2021 204709 Braime Group Text AR21 PRINT.indd 68 12/05/2022 08:00 Braime Group PLC The Group is involved in the The Group is headquartered in manufacture of metal presswork Leeds, United Kingdom, but also and the distribution of bulk trades from locations in France, material handling components. South Africa, Australia, Thailand, Our electronics division specialises China and the United States. in level controls, intelligent sensors and safety control systems for bucket elevators and conveyors. OVER 130 YEARS OF ENGINEERING EXCELLENCE Strategic Report Governance Financial Statements 69 Explanatory notes of resolutions (continued) The following notes give an explanation of the proposed resolutions. Resolutions 1 to 6 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 2021 to the meeting. 2. Confirmation of dividends To confirm the interim dividend on the Ordinary and ‘A’ Ordinary shares of 4.25p per share paid on 14th October 2021 and 8.20p per share paid on 8th June 2022. 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. The following directors are retiring by rotation in accordance with the Company’s Articles of Association and, being eligible, offer themselves for re-election. 3. C. O. Braime 4. A. Q. Braime 5. 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. 6. Remuneration of auditors The resolution proposes the reappointment of the Company’s existing auditors, Kirk Newsholme, and authorises the directors to agree their remuneration. Directors and advisers Directors Nicholas Braime, MA (Oxon), MBIM (Chairman) Peter Alcock, B. Eng. (Non-executive director) Andrew Walker, MA (Cantab) (Non-executive director) Alan Braime, BA (Hons), FCA Carl Braime, BSc (Hons), MSc, MBA Cielo Cartwright, BSc (Hons), FCA Secretary Cielo Cartwright, BSc (Hons), FCA Registered office Hunslet Road, Leeds LS10 1JZ Independent auditors Bankers Kirk Newsholme Chartered Accountants and Statutory Auditors 4315 Park Approach, Thorpe Park, Leeds LS15 8GB HSBC Leeds City Branch 33 Park Row, Leeds LS1 1LD Stockbrokers W H Ireland 3rd Floor, Royal House, 28 Sovereign Street, Leeds LS1 4BJ Company registration Number 488001 (England and Wales) Front cover: Cement kiln elevator steel cord belt installation, Martinsburg, West Virginia, USA. Above: Inside the IE-Node: remote sensor monitoring interface for PLCs and automation systems. Designed and produced by corporateprm, Edinburgh and London www.corporateprm.co.uk 204709 Braime Group Cov AR21 PRINT.indd 2 204709 Braime Group Cov AR21 PRINT.indd 2 12/05/2022 08:03 12/05/2022 08:03 2021 Braime Group – a rich heritage dating back to 1888 The Group has a rich heritage, tracing back its origins to the 19th century, when oilcans made in a small workshop by Thomas Braime quickly gained a reputation for quality. Thomas, the eldest son of a veterinary surgeon, was apprenticed to McLaren, an engineering company manufacturing steam traction engines. After losing his thumb in an accident, he was inspired to look for effective ways to apply oil to machinery. In 1888, he set up production in Hunslet, Leeds, using the new pressings technology. His younger brother Harry, also a skilled engineer joined him as partner. The rise of the motor industry increased demand for metal pressings and larger premises were soon needed for the expanding business. The current Braime buildings, with its attractive red brick and terracotta frontage, was constructed between 1911 and 1914. During the First World War, the Company played an important role in armament provision, training women as skilled munition workers. The Group’s headquarters remains its listed buildings on Hunslet Road, the beautiful interiors are often used in film sets. However, today, the Group is truly international with subsidiaries in North America, Europe, China, South East Asia, Africa and Australia. B r a i m e G r o u p P L C | A n n u a l R e p o r t & A c c o u n t s 2 0 2 1 Braime Group PLC Hunslet Road Leeds LS10 1JZ England, UK www.braimegroup.com Annual Report & Accounts 2021 204709 Braime Group Cov AR21 PRINT.indd 1 204709 Braime Group Cov AR21 PRINT.indd 1 12/05/2022 08:03 12/05/2022 08:03

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