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2021 ReportHolders Technology plc Annual Report & Accounts 2015 Specialised PCB Materials, LED Components and Lighting Solutions Year in brief Holders Technology supplies specialty laminates and materials for printed circuit board manufacture (“PCB”), and operates as an LED solutions provider to the lighting and industrial markets. LED results showed good improvement during 2015 and this, despite disappointing PCB results, led to material improvement in the group operating result. Group revenue was reduced compared to 2014 due principally to sterling strengthening and the loss of a large PCB distributorship at the end of 2014. Gross margins improved and cash balances remained satisfactory. The directors propose to pay a final dividend of 0.25p per share. Highlights included: Statutory basis Like-for-like basis* Results compared to 2014: Group revenue PCB revenue LED revenue Group margins Operating loss before impairment and restructuring costs Cash balances £0.44 million. No debt. 11% lower 19% lower 24% higher 17% lower 25% lower 18% higher 1.3% higher £126,000 *Like-for-like basis assumes constant sterling exchange rate. Results are summarised below: 2015 £'000 2014 £'000 Revenue PCB LED Total Gross profit Gross margin Operating (loss) before impairment and restructuring costs Loss per share Dividend proposed/ paid Total cash Debt 8,304 2,891 11,195 11,025 2,453 13,478 2,799 25.0% 3,254 24.1% (126) (290) (9.16p) 0.50p (9.47p) 1.25p 446 Nil 634 Nil Contents STRATEGIC REPORT Chairman’s statement Operating review Financial review 1 2 4 Page BOARD REPORTS Company information Report of the directors Directors’ remuneration report Corporate governance Independent auditor’s report to the members of Holders Technology plc FINANCIAL STATEMENTS Group income statement Group statement of comprehensive income Statements of changes in equity Balance sheets Statements of cash flows Notes to the financial statements AGM Notice of annual general meeting Five year summary 6 7 10 11 13 14 14 15 16 17 18 43 46 STRATEGIC REPORT Chairman’s statement As noted in the Interim Report, 2015 revenues were materially reduced by sterling’s strengthening against the Euro, and reduced UK PCB sales as a result of a discontinued distribution contract. Overall group revenues decreased from £13.5m to £11.2m; however excluding the two above factors, 2015 group revenues showed a decline of 1.4% compared to 2014. Results for the year to 30 November 2015 were mixed; LED divisions made good progress whilst German PCB results were disappointing. The Group operating result before impairment and restructuring costs was a loss of £126,000 (2014: operating loss £290,000). The operating result after impairment and restructuring costs was a loss of £151,000 (2014: operating loss £357,000). The PCB market in 2015 continued to be demanding and the PCB divisions together recorded a small loss. The German operation, comprising 75% of Group PCB sales, suffered lower revenue as a result of sharply reduced customer demand. In addition, sales to a major customer were suspended due to a fire at one of their factories but since the year-end sales to this customer have recommenced. UK PCB operations were able partly to mitigate the impact of the discontinued distribution contract with increased sales of replacement products and cost reductions. The results achieved by our small Indian venture remained modest and this investment was sold in December 2015. Total PCB revenues were £8.3m (2014: £11.0m); with margins at 22.3% (2014: 23.1%). The LED divisions overall showed significant progress with an overall result for this division close to breakeven. The Holders Components divisions in the UK and Germany, aided by a number of new suppliers added during the year, achieved strong revenue growth and improvements both to margins and profitability. The smaller NRGstar and Opteon Germany also showed improved revenues and operating results. In total LED revenues amounted to £2.9m (2014: £2.5m); with a combined operating loss of £26,000 (2014: loss of £355,000). In October we announced an unforeseen taxation liability in respect of EU Cross Border Group Relief (“CBGR”) claims relating to our former Swedish and Dutch subsidiaries. The board considers the maximum potential liability to be up to £192,000 and has made a provision of this amount as at 30 November 2015, although the Board believes a lower amount may be payable at the final settlement. Since the announcement no further discussions have taken place with HMRC. Once again I would like to thank all our staff for their hard work and support throughout a demanding financial year. Given the board’s continuing belief in the Group’s future we consider it appropriate to recommend a final dividend for the past year of 0.25p per share. Shareholders can be assured that we will continue to evaluate all possible routes to returning the Group to satisfactory profitability. In the current year, given market conditions, it will be difficult for our PCB activities to make a positive contribution. The outlook for our LED operations is significantly more encouraging and we anticipate continued progress from this area of activity. R W Weinreich Executive Chairman 11 February 2016 Holders Technology plc | Annual Report & Accounts 2015 1 STRATEGIC REPORT Operating review Corporate strategy The board seeks to enhance shareholder value over the medium to long term, whilst maintaining a conservative Where an opportunity to increase its position is identified, this is addressed within the bounds of internally generated cash flow and bank facilities. framework. financial Product strategy Holders Technology plc (“Holders”) has operated for many years as a distributor of specialised materials and equipment to the printed circuit board (PCB) industry. The European PCB industry has strengths in the defence, aerospace, automotive and medical sectors, while the Far East in the production of consumer-related electronics. is dominant Holders continues to pursue its PCB strategy based on dual positioning: both as a low-cost source of standard products used throughout the industry; and as an exclusive supplier of technically sophisticated products to the PCB sector. In addition to the PCB industry, Holders operates as a LED solutions provider to the lighting and industrial markets. The product offering ranges from single LED components, through semi assembled light modules, to finished LED lighting products. Our LED strategy is to provide a competitive and complementary product range for our selected markets, supported by strong technical support and industry knowledge. In addition, Holders provides bespoke solutions fulfil customer in order requirements. to of LED lighting products across both the commercial and domestic markets. PCB operations UK UK trading operations are based in Galashiels, Scotland. The PCB industry in the UK is oriented towards the aerospace and defence industries, both of which require a broad range of products. The UK market remained challenging in 2015. As anticipated, total revenues were reduced by £1.2m due to a lost distributorship contract; however the continuing business increased revenue by £0.3m. Overall revenues reduced from £2.8m in 2014 to £1.9m in 2015. Germany The German PCB industry is dominated by demand from the automotive and industrial sectors. in sterling terms were adversely 2015 revenues impacted by sterling’s strength compared to 2014. Revenue was also reduced by an overall reduction in the local market, and a fire at a major customer’s premises. As a result of these factors revenues decreased to £6.4m (2014: £8.1m). India Holders Technology (India) Private Limited provides materials and services to the local PCB industry. The investment in this company was disposed of on 12 December 2015 as detailed in note 15. Economic Environment LED & Lighting solutions The overall PCB market in 2015 continued to be challenging, with reduced growth in China affecting market demand for PCB materials in the last quarter of the year. The LED industry in 2015 continued to grow, with the prices of LEDs continuing to decline. The reduction in prices coupled with the efficiencies available from LED technology is expected to lead to an increasing uptake UK In addition to its PCB business, Holders Technology UK has two LED trading divisions. Holders Components specialises in providing LED solutions to original equipment manufacturers (OEMs) in the general lighting market plus various specialist industrial segments. The division achieved good growth during 2015. Holders Technology plc | Annual Report & Accounts 2015 2 STRATEGIC REPORT Operating review (continued) During the year, the division has started to work with additional, complementary suppliers, enhancing the division’s product range and ability to provide complete solutions. The addition of these product ranges will continue to benefit the division in 2016. NRGstar offers a range of energy efficient lighting technologies targeted at the retail and commercial segments. While revenue was unchanged, 2015 saw an increasing focus on custom solutions along with a strengthening of the sales team. Continental Europe In Germany, Holders Technology GmbH has two LED trading divisions. Holders Components, which specialises in providing LED solutions to customers in continental Europe, achieved good growth in 2015. The division has also started working with additional suppliers. As a result of several ongoing projects the current year opened with a stronger order book than the preceding year. Opteon specialises in selling LED finished lighting products for commercial LED projects. Further growth was achieved during 2015. We look forward to a further increase in the LED businesses, as our product ranges continue to develop, leading to further specification of our products in on-going projects. Victoria Blaisdell Group Managing Director 11 February 2016 Holders Technology plc | Annual Report & Accounts 2015 3 STRATEGIC REPORT Financial review Key performance indicators The directors believe following key that performance indicators are of most significance to assessment of the Group’s performance and financial position: the level of turnover provides an Revenue The important indication of the strength of the Group’s product range and coverage. Profitability Profitability is largely a function of the gross margins achieved and management’s success in containing administrative expenses in relation to turnover. Liquidity The Group operates in a cyclical industry and the directors have consistently applied a conservative approach to financing the Group’s activities. The key measure is net liquid funds, which is described in more detail below. Revenue Group revenue from continuing operations decreased from £13.5m to £11.2m. Overall PCB revenue decreased by 25%, whilst LED revenue increased by 18%. reduced strengthening which The reduction in revenue had two principal causes: sterling Euro- denominated revenues by £0.9m; and the loss of the PCB distributorship in 2014 which reduced 2015 revenues by £1.2m. If these two factors are eliminated, the volume revenue movement on a constant currency basis, was a £0.2m reduction (1.4%). Profitability The operating result before non-trading items was a loss of £126,000 compared to a loss of £290,000 in 2014. The gross profit margin was 25.0% compared to 24.1% in 2014, largely due to improvements in LED margins. Total administrative expenses before exceptional items decreased by £515,000 compared to 2014, although the administration cost as a proportion of revenue increased from 23.5% in 2014 to 23.7% in 2015. Approximately £200,000 of this reduction was due to the weaker Euro. Exceptional costs comprise £25,000 of impairment Indian costs which relate operations. The operating result after exceptional items was a loss of £151,000. the disposal of to Taxation As announced in October 2015, the Group has a UK tax liability in respect of EU Cross Border Group Relief (“CBGR”) claims relating to its former Swedish and Dutch operations. The total liability, estimated at up to £192,000, has been fully provided for in the 2015 accounts, although the Board believes a lower amount may be payable at the final settlement. Post tax result The loss for the financial year after tax, attributable to equity shareholders was £0.4m (2014: loss of £0.4m). The basic loss per share from continuing business was 3.83p (2014: loss 9.06p per share) and the fully diluted loss per share was 3.83p (2014: loss per share 9.06p). Dividends The board proposes a final dividend of 0.25p per share to be paid on 24 May 2016 to shareholders on the register on 6 May 2016. Including the 0.25p interim dividend already paid on 5 October 2015 the total dividend for 2015 would be 0.50p (2014: 1.25p). Principal risks and uncertainties The directors believe that the following are the principal risks and uncertainties faced by the Group: Competition Both the PCB and LED sectors are highly competitive and the Group faces competition from a wide range of companies. The Group continually seeks the most cost-effective sources for its products in order to remain competitive. Customers The Group is exposed to the risk of bad debts. Within the major European markets, the Group uses credit analysis data to monitor customer risk levels and maintain appropriate credit Credit insurance is used for UK customers where it is available. limits. Holders Technology plc | Annual Report & Accounts 2015 4 STRATEGIC REPORT Financial review (continued) Suppliers As with any distribution business, the Group is dependent on maintaining supply. The Group has diversified its product range and sources in order not to be overly dependent on any single supplier. Cash flow, liquidity and financing Stock levels were reduced from £2.7m in 2014 to £2.5m in 2015. The reduction was achieved due to lower PCB revenues, although partly offset by additional stock holdings necessitated by new LED suppliers. The Group maintains overdraft and trade financing facilities with its banks to meet short term financing requirements during the year. At 30 November 2015, the Group had net cash of £0.4m compared with £0.6m at the previous year end. At 30 November 2015 the Group had net liquid funds (trade and other receivables plus cash minus current liabilities) of £1.0m compared to £1.3m in the preceding year. Net assets per ordinary share at 30 November 2015 were £0.98 compared with £1.08 in 2014. Derivatives and other financial instruments Operations are financed by a mixture of retained profits and overdrafts. The board’s current policy is to use variable rate overdraft facilities in order to maintain short term flexibility. The Group’s financial instruments, other than forward currency contracts, comprise borrowings, cash and items, such as trade receivables and payables that arise directly from its operations. The main purpose of these instruments is to raise finance for operations. It is, and has been throughout the period under review, the Group’s policy that no trading in financial instruments shall be undertaken. Currency risk and exposure The Group enters into derivatives transactions, in the form of forward currency contracts that are used to manage the currency risks arising from purchases from foreign suppliers where the products are sold in local currencies. The overseas sales operations during the year were in the European Community and India. The Group has currency exposures primarily in US dollars and Euros. Although day to day transactional exposures are regularly covered by forward contracts, the Group has an underlying exposure, particularly to the Euro. At the year-end forward USD purchase contracts with a contracted value of £27,000 were held as detailed in note 19. Conclusion The Group continues to operate a conservative financial policy, which leaves it well placed to benefit from future growth opportunities. Paul Geraghty Group Finance Director 11 February 2016 STRATEGIC REPORT The Strategic Report on pages 1-5 was approved by the Board on 11 February 2016 and signed on its behalf by Paul Geraghty Group Finance Director 11 February 2016 Holders Technology plc | Annual Report & Accounts 2015 5 BOARD REPORTS Company information Directors R W Weinreich, Executive Chairman V M Blaisdell, BSc, Group Managing Director P K I Geraghty BSc, FCA, Group Finance Director D A Mahony, BA (Econ), MSc, Non-Executive Director Secretary P K I Geraghty BSc, FCA Registered office 27-28 Eastcastle Street London W1W 8DH Website www.holdersgroup.com Registered number 1730535 Auditors Bankers Registrars Grant Thornton UK LLP Grant Thornton House 202 Silbury Boulevard Milton Keynes MK9 1LW HSBC City CBC 60 Queen Victoria Street London EC4N 4TR Neville Registrars Neville House 18 Laurel Lane Halesowen West Midlands B63 3DA Nominated Advisor and Broker Northland Capital Partners Limited 131 Finsbury Pavement London EC2A 1NT Holders Technology plc | Annual Report & Accounts 2015 6 BOARD REPORTS Report of the directors Business review and future developments A review of the year and likely developments is contained in the Strategic Report. Results and dividends The group made a loss after taxation for the financial year attributable to shareholders of £361,000 (2014: loss £373,000). Full details are contained in the group income statement on page 14. The directors have proposed a final dividend of 0.25p per share payable on 24 May 2016 to shareholders on the register at close of business on 6 May 2016. The total dividend for the year, including the interim dividend of 0.25p (2014: 0.25p) per share paid on 6 October 2015, amounts to £20,000 (2014: £49,000), which is equivalent to 0.50p (2014: 1.25p) per share. Financial risk management Details of the group’s financial risk management are contained in note 4 to the financial statements. Directors The directors currently holding office are listed on page 6, all of whom served throughout the year. The beneficial shareholdings of the directors at 30 November 2015 are set out in note 23 to the financial statements. Rudi Weinreich, aged 69, Chairman and Chief Executive, was born in Austria. He has been responsible for all aspects of the business since he started it in 1972, particularly the assessment of new products and distributorship agreements. Victoria Blaisdell, aged 43, joined the Group in 2004 and is now Group Managing Director. Prior to joining the group she worked in the IT industry for over 12 years and worked in several countries as a Senior Consultant for American Management Systems Inc. Paul Geraghty, aged 55, joined the Group in 2011 as Group Finance Director and Company Secretary. He previously held senior financial roles in engineering companies, including Elektron Components Limited and Protec plc. David Mahony, aged 72, is the Senior Non-executive Director, appointed in 1988. Substantial shareholdings At 9 February 2016 the company had been informed of the following interests, in addition to the interests of R W Weinreich, amounting to 3% or more in the issued ordinary share capital of the company, excluding treasury shares: Andre Marcou Armstrong Investments Limited Rath Dhu Limited Stockinvest Limited Hugh S Pearson Gregory Number % 471,000 275,000 235,000 171,500 138,290 11.96% 6.98% 5.97% 4.35% 3.51% Holders Technology plc | Annual Report & Accounts 2015 7 BOARD REPORTS Report of the directors (continued) Annual General Meeting The Annual General Meeting of the Company will be held at the offices of Grant Thornton UK LLP, Churchill House, 26-30 Upper Marlborough Road, St Albans, Hertfordshire AL1 3UU at 11.30 a.m. on 3 May 2016. Special business at the Annual General Meeting An ordinary resolution (set out as resolution 5 in the Notice of the Annual General Meeting) will be proposed to give the directors authority to allot 1,386,517 ordinary shares being approximately 33% of the issued ordinary share capital of the company as at the date of this report which includes 351,703 ordinary shares being the maximum number of shares the company may be obliged to issue under its employee share option scheme. The authority, when given, will expire at the conclusion of next year's annual general meeting. The directors have no present intention of exercising this authority. A special resolution (set out as resolution 6 in the Notice of Annual General Meeting) will be proposed to empower the directors to allot securities of the company up to a specified amount in connection with rights issues without having to obtain prior approval from shareholders on each occasion and also to allot a smaller number of these for cash without first being required to offer such shares to existing shareholders. The number of ordinary shares which may be issued for cash under the latter authority will not exceed 207,978 being approximately 5% of the issued ordinary share capital of the company as at the date of this report. The proposed power will expire at the conclusion of next year's Annual General Meeting. A special resolution (set out as resolution 7 in the Notice of Annual General Meeting) will be proposed to authorise the company to buy on the open market up to 393,955 ordinary shares of 10p each, representing 10% of the issued ordinary share capital of the company as at the date of this report, excluding treasury shares. The directors, in reaching any decision to purchase ordinary shares, will take into account the company’s cash resources, capital requirements and the effect of any purchase on earnings per share. Going Concern The company’s business activities, together with the factors likely to affect its future development, performance and position are set out in the Strategic Report on pages 1 to 5. The financial position of the company, its cash flows, liquidity position and borrowing facilities are described in the Financial Review on page 4. In addition, notes 2, 3, 4, 19 and 24 to the financial statements include the company’s objectives, policies and processes for managing its capital; its financial risk management objectives; details of its financial instruments and foreign exchange risk mitigation activities; and its exposures to credit risk and liquidity risk. Budgets and forecasts indicate a satisfactory going concern position. The company has good financial resources together with a number of customers and suppliers across different geographic areas and industries. Management have prepared budgets and forecasts covering the period to May 2017. As a consequence, the directors believe that the company is well placed to manage its business risks successfully despite the current uncertain economic outlook and therefore conclude it is appropriate to prepare the financial statements on a going concern basis. Holders Technology plc | Annual Report & Accounts 2015 8 BOARD REPORTS Report of the directors (continued) Statement of directors' responsibilities The directors are responsible for preparing the Strategic Report, Report of the Directors and the Financial Statements in accordance with applicable law and regulations. Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have elected to prepare the financial statements in accordance with International Financial Reporting Standards as adopted by the European Union (IFRSs). 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 and profit or loss of the company and group for that period. In preparing these financial statements, the directors are required to: make judgments and accounting estimates that are reasonable and prudent; state whether applicable IFRSs have been followed, subject to any material departures disclosed and explained in the financial statements; prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business. select suitable accounting policies and then apply them consistently; The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the company’s transactions and disclose with reasonable accuracy at any time the financial position of the company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. The directors confirm that: so far as each of the directors is aware, there is no relevant audit information of which the company’s auditors are unaware; and the directors have taken all steps that they ought to have taken as directors in order to make themselves aware of any relevant audit information and to establish that the auditors are aware of that information. The directors are responsible for the maintenance and integrity of the corporate and financial information included on the company’s website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. Directors’ indemnity arrangements The company has purchased and maintained throughout the year directors’ and officers’ liability insurance in respect of its directors. The directors also have the benefit of the indemnity provision contained in the company’s Articles of Association. These provisions, which are qualifying third party indemnity provisions as defined by the Companies Act, were in force since 30 April 2007, and are currently in force. Auditors The auditors, Grant Thornton UK LLP, are willing to continue in office as auditors of the company and a resolution to reappoint them will be proposed at the forthcoming Annual General Meeting. By order of the board Paul Geraghty Secretary 11 February 2016 Holders Technology plc | Annual Report & Accounts 2015 9 BOARD REPORTS Directors’ remuneration report The directors present the directors’ remuneration report for the financial year ended 30 November 2015. As the company is listed on AIM, it does not have to comply with the requirements of the remuneration report contained in the listing rules. Remuneration policy The company policy is to design prudent executive remuneration packages to attract, motivate and retain directors of a high calibre and to reward them for enhancing value to shareholders. The determination of the annual remuneration packages of the senior executive directors and key members of senior management are undertaken as set out in the corporate governance report on page 11. There are three main elements of the remuneration packages of the executive directors: Basic annual salary and benefits; Share option incentives; and Pension arrangements. The company believes that share option incentives encourage long term commitment to shareholder value and ensure that rewards for executive directors and senior managers are aligned with the interests of shareholders. There is no company pension scheme in place, apart from a legacy defined benefit scheme in relation to a former member of staff in Germany. Contributions are made to the personal pension schemes of certain directors. Executive directors may accept up to two external non-executive appointments, as long as these are not with competing companies and are not likely to lead to conflicts of interest. This policy is followed where such appointments would beneficially broaden experience and knowledge. Executive directors’ remuneration and terms of appointment Base salaries are reviewed annually and are set to reflect responsibilities, experience and marketability. Regard is also given to the level of rewards made in the year to staff. The mechanism for supervising the company share option scheme and the granting of options under it is as set out in the corporate governance report on page 11. None of the directors have service contracts with a notice period exceeding one year. Each director is entitled to contributions to personal pension schemes and benefits in kind, which include car allowance and private health insurance. Non-executive directors’ remuneration The fees paid to non-executive directors are determined by the board. Non-executive directors are normally appointed for an initial period of three years. Appointments are made subject to retirement by rotation or removal under the company’s articles of association. Non-executive directors do not participate in the company's option scheme. Details of the directors’ remuneration, pension entitlements, shareholdings and share options are included in note 23 to the financial statements. Holders Technology plc | Annual Report & Accounts 2015 10 BOARD REPORTS Corporate governance UK Corporate Governance Code We do not comply with the UK Corporate Governance Code. Instead, we have reported on our Corporate Governance arrangements drawing on best practice available, including those aspects of the UK Corporate Governance Code we consider to be relevant to the Group and best practice. Board composition and responsibility During the year the board comprised three executive directors and one non-executive director. None of the directors are independent. The appointment of another non-executive director will be considered when it is judged appropriate. All directors are required to retire and submit themselves for re- election at three yearly intervals. No director has a service agreement requiring more than twelve months’ notice of termination to be given. information All directors receive management in advance of board meetings, which are held monthly, and the board visits subsidiary companies as appropriate. There is a schedule of matters requiring board approval, strategy, acquisitions and disposals, key appointments and group funding strategy. All directors have access to the advice and services of the Company Secretary (and there are processes in place enabling directors to legal advice at the company’s take independent expense in the furtherance of their duties). corporate including The following table shows the number of scheduled board and board committee meetings held during the year ended 30 November 2015 and details of each director’s attendance. Number held R Weinreich V Blaisdell D Mahony P Geraghty Board 12 12 12 12 12 Audit 2 1 1 2 1 Remuneration 1 - - 1 - Audit Committee The Group Finance Director and the Non-executive Director act as the audit committee which is responsible for reviewing a range of financial matters, including final accounts, and monitoring the controls which are in force to ensure the integrity of the financial information reported to the shareholders. The committee reviews the need interim and the for internal audit on an annual basis and, due to the size of the company; the committee believes that the cost of introducing this function would outweigh any perceived benefits. The audit committee has met twice in the year. The Non-executive Director meets separately with the auditors as part of such meetings. Remuneration Committee During the year, the Non-executive Director has acted as the sole member of the remuneration committee. The principal function of the remuneration committee is to determine on behalf of the board the remuneration and other benefits of the executive directors, including pensions, share options, service contracts and compensation payments. The remuneration policy and key elements of the remuneration packages of the executive directors are included in the Directors’ Remuneration Report on page 10. the The principal objectives of remuneration committee in respect of executive directors and the board in respect of the company as a whole are to ensure that the company's senior management remuneration policies and practice facilitate the recruitment, retention and motivation of top quality personnel and to ensure that senior management remuneration operates on a best-practice basis, aligning, where practicable, the remuneration of executives with the interests of shareholders. Each of the company's executive directors is subject to an annual appraisal of their performance as executives which is conducted by the Non-executive Director. Board nominations The company has formal procedures for making appointments to the board and these would be applied to ensure that any new appointments that might be made meet the desired criteria. Shareholder relationships The objective of the board is to create increased shareholder value by growing the business in a manner that delivers sustainable improvement in earnings over the medium and long term. Holders Technology plc | Annual Report & Accounts 2015 11 BOARD REPORTS Corporate governance (continued) The board regards the annual general meeting as an important opportunity to communicate with private investors in particular. Directors make themselves available to shareholders both before and after the annual general meeting and at other times. Internal Control The system of internal controls established by the directors is intended to be comprehensive, although the limitations of any system of control is such that it is designed to manage rather than eliminate the risk of failure to achieve business objectives and to provide a reasonable, rather than absolute, level of assurance against material misstatement or loss. The directors acknowledge their responsibilities for the group’s system of internal control and for reviewing its effectiveness. The principal features of the system of internal financial controls are: budgetary control over all operating units, measuring performance against pre-determined targets on at least a monthly basis; regular forecasting and reviews covering trading performance, assets, liabilities and cash flows; delegated financial expenditure and recruitment; limits of authority covering key capital commitments including identification and management of key business risks. The board continually reviews the effectiveness of financial, other operational, risk management. compliance including controls, controls internal and Financial reporting A detailed formal budgeting process for all group businesses culminates in an annual group budget which is approved by the board. Results for the company and for its main constituent businesses are reported monthly to the board against this budget and revised forecasts for the year are prepared each quarter. Financial and accounting principles A comprehensive financial and accounting controls manual sets out the principles of and minimum standards required by the board for effective financial control. The manual sets out the financial and accounting policies and procedures to be applied throughout the group. Compliance with the policies and procedures set out in the manual is reviewed on a regular basis. Internal financial controls assurance In addition to the existing procedures, during the year senior executives have prepared detailed reports on the operation of those elements of the system for which they are responsible. Capital investment The group has clearly defined guidelines for include annual capital expenditure. budgets, review procedures, levels of authority and due diligence requirements where businesses are being acquired. These appraisals detailed and Risk assessment The group has implemented a process for identifying, reporting and assessing risk at each subsidiary. The board regularly reviews the subsidiaries’ risk assessments. The directors confirm that they have reviewed the effectiveness of the system of internal controls in operation during the year and the period to the date of the approval of the annual report and accounts. The board is committed to the principles of openness, integrity and accountability in dealing with the company's affairs. It believes it has always acted with probity in the best interests of the company, its employees and shareholders and fully intends to continue to do so in the future. Holders Technology plc | Annual Report & Accounts 2015 12 Independent auditor's report to the members of Holders Technology plc We have audited the financial statements of Holders Technology plc for the year ended 30 November 2015 which comprise the Group income statement, the Group statement of comprehensive income, Group and Company statements of changes in equity, group and company balance sheets, the group and company statements of cash flow, and the related notes. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union and, as regards the parent company financial statements, as applied in accordance with the provisions of the Companies Act 2006. 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 an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed. Respective Responsibilities of Directors and Auditors As explained more fully in the Directors’ Responsibilities Statement set out on page 9, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors. Scope of the Audit of the Financial Statements A description of the scope of an audit of financial statements is provided on the Financial Reporting Council's website at www.frc.org.uk/auditscopeukprivate. Opinion on Financial Statements In our opinion: the financial statements give a true and fair view of the state of the group's and of the parent company's affairs as at 30 November 2015 and of the group's loss for the year then ended; the group financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union; the parent company financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union; and the financial statements have been prepared in accordance with the requirements of the Companies Act 2006. Opinion on other matters prescribed by the Companies Act 2006 In our opinion the information given in the Strategic Report and the Report of the Directors for the financial year for which the financial statements are prepared is consistent with the financial statements. Matters on which we are required to report by exception We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion: adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or the parent company financial statements are not in agreement with the accounting records and returns; or certain disclosures of directors’ remuneration specified by law are not made; or we have not received all the information and explanations we require for our audit. Jeremy Read Senior Statutory Auditor for and on behalf of Grant Thornton UK LLP Statutory Auditor, Chartered Accountants Milton Keynes 11 February 2016 Holders Technology plc | Annual Report & Accounts 2015 13 FINANCIAL STATEMENTS Group income statement for the year ended 30 November 2015 Revenue Cost of sales Gross profit Distribution costs Administrative expenses Restructuring costs Impairment costs Other operating income Operating loss Finance income Finance expenses Loss before taxation Tax expense Loss for the financial year Basic loss per share Diluted loss per share Total loss per share Note 5 7 15 6 6 8 10 10 10 2015 £’000 11,195 (8,396) 2,799 (364) (2,652) - (25) 91 (151) 1 (16) (166) (195) (361) 2014 £’000 13,478 (10,224) 3,254 (414) (3,167) (67) - 37 (357) 2 (7) (362) (11) (373) (9.16p) (9.16p) (9.16p) (9.47p) (9.47p) (9.47p) Group statement of comprehensive income for the year ended 30 November 2015 Loss for the year Items that may be reclassified subsequently to profit or loss: Exchange differences on translating foreign operations Total comprehensive income and expense for the year 2015 £’000 (361) (246) (607) 2014 £’000 (373) (112) (485) Holders Technology plc | Annual Report & Accounts 2015 14 FINANCIAL STATEMENTS Statements of changes in equity for the year ended 30 November 2015 Group Share capital Share premium Capital redemption reserve Translation reserve Retained earnings £'000 £'000 £'000 Balance at 30 November 2013 416 1,531 Dividends Employee share-based payment options Transactions with owners (Loss) for the year Reclassification adjustment related to terminated foreign operations Exchange differences on translating foreign operations Total comprehensive income for the year Balance at 30 November 2014 Dividends Employee share-based payment options Transactions with owners (Loss) for the year Exchange differences on translating foreign operations Total comprehensive income for the year Balance at 30 November 2015 Company - - - - - - - - - - - - - - 416 1,531 - - - - - - - - - - - - 416 1,531 Balance at 30 November 2013 Profit and total comprehensive income for the year Dividends Share-based payment charge Balance at 1 December 2014 Profit and total comprehensive income for the year Dividends Share-based payment charge Balance at 30 November 2015 Total equity £'000 5,049 (79) 9 (70) (373) - (112) (485) 4,494 (20) 3 Non- controlling interest £'000 (4) - - - - 4 - 4 - - - - - - - - £'000 169 - - - - (23) £'000 2,936 (79) 9 (70) (373) 19 (112) - (135) (354) 34 2,512 - - - - (246) (20) 3 (17) (361) - (246) (361) (212) 2,134 1 - - - - - - - 1 - - - - - - 1 Share capital £'000 416 - - - 416 - - - 416 Share premium £'000 1,531 - - - 1,531 - - - 1,531 Capital redemption reserve £'000 Retained earnings £'000 1 - - - 1 - - - 1 42 79 (79) 9 51 138 (20) 3 172 (17) (361) (246) (607) 3,870 Total equity £'000 1,990 79 (79) 9 1,999 138 (20) 3 2,120 Holders Technology plc | Annual Report & Accounts 2015 15 FINANCIAL STATEMENTS Balance sheets at 30 November 2015 Company number: 1730535 Assets Non-current assets Goodwill Property, plant and equipment Investments in subsidiaries Investment in joint venture Deferred tax assets Current assets Inventories Trade and other receivables Current tax assets Cash and cash equivalents Liabilities Current liabilities Trade and other payables Current tax liabilities Net current assets Non-current liabilities Retirement benefit liability Deferred tax liabilities Shareholders’ equity Share capital Share premium account Capital redemption reserve Retained earnings Cumulative translation adjustment reserve Note Group 2015 £’000 2014 £’000 Company 2015 £’000 2014 £’000 12 13 14 15 21 16 17 18 20 21 22 316 327 - - 16 659 2,533 1,556 59 443 4,591 (975) (213) (1,188) 3,403 (181) (11) (192) 3,870 416 1,531 1 2,134 (212) 3,870 318 274 - - 35 627 2,742 1,945 72 634 5,393 (1,257) (48) (1,305) 4,088 (201) (20) (221) 4,494 416 1,531 1 2,512 34 4,494 - 4 2,291 15 - 2,310 - 433 - 25 458 (627) (21) (648) (190) - - - 2,120 416 1,531 1 172 - 2,120 - 8 2,291 15 - 2,314 - 250 - 45 295 (562) (47) (609) (314) - (1) (1) 1,999 416 1,531 1 51 - 1,999 The financial statements were approved by the Board on 11 February 2016 and signed on its behalf by: R W Weinreich Director Holders Technology plc | Annual Report & Accounts 2015 16 FINANCIAL STATEMENTS Statements of cash flows for the year ended 30 November 2015 Cash flows from operating activities Operating (loss)/ profit Share-based payment charge/ (credit) Depreciation Impairment costs (increase)/ decrease in inventories (Increase)/ decrease in trade and other receivables (Decrease)/ increase in trade and other payables Cash generated from/ (used in) operations Corporation tax paid Net cash generated from/ (used in) operations Cash flows from investing activities Purchase of property, plant and equipment Proceeds from sale of property, plant and equipment Proceeds from sale of subsidiary Dividends received from group undertakings Interest received Net cash (used in)/generated from investing activities Cash flows from financing activities Interest paid Loan repayments Settlement of contingent consideration Equity dividends paid Net cash used in financing activities Net change in cash and cash equivalents Cash and cash equivalents at start of period Effect of foreign exchange rates Cash and cash equivalents at end of period Group Company 2015 £’000 2014 £’000 2015 £’000 2014 £’000 (151) 3 86 - (102) 295 (86) 45 (7) 38 (161) 3 - - 1 (157) (16) - - (20) (36) (155) 634 (36) 443 (357) 9 108 (32) 5 (36) (188) (491) (39) (530) (74) 3 32 - 2 (37) (7) - - (79) (86) (653) 1,290 (3) 634 (92) 3 8 - - 17 65 1 (1) - (4) - - - 4 - - - - (20) (20) (20) 45 - 25 76 9 8 17 - (25) (457) (372) - (372) - - - 13 3 16 - - - (79) (79) (435) 480 - 45 Holders Technology plc | Annual Report & Accounts 2015 17 FINANCIAL STATEMENTS Notes to the financial statements 1. General information Holders Technology plc is incorporated in the United Kingdom under the Companies Act. These consolidated financial statements are presented in pounds sterling and all information has been rounded to the nearest thousand. Foreign operations are consolidated in accordance with the policies set out in note 2 below. 2. Accounting policies Basis of preparation The group and parent company financial statements have been prepared in accordance with EU endorsed International Financial Reporting Standards (IFRS), International Financial Reporting Interpretations Committee (IFRIC) interpretations and with those parts of the Companies Act applicable to companies reporting under IFRS. All accounting standards and interpretations issued and adopted by the EU by the International Accounting Standards Board and the International Financial Reporting Interpretations Committee effective at the time of preparing these financial statements have been applied. The group and parent company financial statements have been prepared under the historical cost convention with the exception of forward currency contracts which are carried at fair value. A summary of the significant group accounting policies adopted in the preparation of the financial statements is set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. Change in accounting policies The group adopted IFRS 10, 'Consolidated financial statements', IFRS12, 'Disclosure of interests in other entities' and IAS 27, 'Separate financial statements’ on 1 December 2014. This resulted in the group changing its accounting policy for the basis of consolidated and definition of control but has had no further impact on the 2015 financial statements. Going concern The company’s business activities, together with the factors likely to affect its future development, performance and position are set out in the Strategic Report on pages 1 to 5. The financial position of the company, its cash flows, liquidity position and borrowing facilities are described in the Financial Review on page 4. In addition, notes 2, 3, 4, 19 and 24 to the financial statements include the company’s objectives, policies and processes for managing its capital; its financial risk management objectives; details of its financial instruments and foreign exchange risk mitigation activities; and its exposures to credit risk and liquidity risk. The company has strong financial resources together with a number of customers and suppliers across different geographic areas and industries. The Board pursues a cautious strategy, combined with effective cost control in order to maintain a strong working capital position. Budgets and forecasts indicate a satisfactory going concern position. As a consequence, the directors believe that the company is well placed to manage its business risks successfully despite the current uncertain economic outlook and therefore conclude it is appropriate to prepare the financial statements on a going concern basis. Standards and Interpretations to Standards not yet effective The following Standards and Interpretations have been issued, but are not yet effective and have not been early adopted by the group: IFRS 9 Financial Instruments (IASB effective date 1 January 2018) IFRS 14 Regulatory Deferral Accounts (effective 1 January 2016) Clarification of Acceptable Methods of Depreciation and Amortisation – Amendments to IAS 16 and IAS 38 (IASB effective date 1 January 2016) Annual Improvements to IFRSs 2010-2012 Cycle (effective date 1 February 2015) Holders Technology plc | Annual Report & Accounts 2015 18 FINANCIAL STATEMENTS Notes to the financial statements (continued) 2. Accounting policies (continued) Annual Improvements to IFRSs 2012-2014 Cycle (effective 1 January 2016) Disclosure Initiative: Amendments to IAS 1 Presentation of Financial Statements (effective 1 January 2016) IFRS 16 Leases (IASB effective date 1 January 2019, not yet endorsed by the EU) The directors anticipate that the adoption of these standards and interpretations in future periods will have no material impact on the financial statements of the group except for additional disclosures when the relevant standard comes into effect. Use of estimates The preparation of financial statements in conformity with IFRS requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. Critical judgements and key estimates and assumptions are disclosed in note 3. Principles of consolidation The consolidated financial statements incorporate the financial statements of the company and all its subsidiaries. Intra-group transactions, including sales, profits, receivables and payables, have been eliminated in the group consolidation. Control is achieved where the Group is exposed or has rights to variable returns from its involvement with the investee and has the ability to affect those returns through the power over the investee. Subsidiaries Subsidiaries are entities controlled by the company. Control is achieved where the group is exposed or has rights to variable returns from its involvement with the investee and has the ability to affect those returns through the power over the investee. The financial statements of subsidiaries are included from the date that control commences until the date that control ceases. In the parent company accounts investments and long term loans to subsidiaries are initially recorded at cost. The investment value is subsequently recorded at cost less any impairment value. Goodwill and business combinations The results of subsidiaries acquired in the period are included in the income statement from the date they are acquired. On acquisition, all of the subsidiaries’ assets and liabilities that exist at the date of acquisition are recorded at their fair values reflecting their condition at that date. For business combinations occurring since 1 December 2009, the requirements of IFRS 3R have been applied. The consideration transferred by the group to obtain control of a subsidiary is calculated as the sum of the acquisition-date fair values of assets transferred, liabilities incurred and the equity interests issued by the group, which includes the fair value of any asset or liability arising from a contingent consideration arrangement. Acquisition costs are expensed as incurred. The group recognises identifiable assets acquired and liabilities assumed in a business combination regardless of whether they have been previously recognised in the acquiree's financial statements prior to the acquisition. Assets acquired and liabilities assumed are measured at their acquisition-date fair values. Goodwill is stated after separate recognition of identifiable intangible assets. It is calculated as the excess of the sum of a) fair value of consideration transferred, b) the recognised amount of any non-controlling interest in the acquiree and Holders Technology plc | Annual Report & Accounts 2015 19 FINANCIAL STATEMENTS Notes to the financial statements (continued) 2. Accounting policies (continued) c) acquisition-date fair value of any existing equity interest in the acquiree, over the acquisition-date fair values of identifiable net assets. If the fair values of identifiable net assets exceed the sum calculated above, the excess amount (i.e. gain on a bargain purchase) is recognised in profit or loss immediately. As permitted by IFRS 1, goodwill arising on acquisitions before 1 December 2005 (date of transition to IFRS) has been frozen at the UK GAAP amounts subject to being tested for impairment at that date. Impairment charges The company considers at each reporting date whether there is any indication that assets are impaired. If there is such an indication, the company carries out an impairment test by measuring an asset’s recoverable amount, which is the higher of its fair value less costs to sell and its value in use. Goodwill, which is allocated to individual cash generating units, is reviewed annually for impairment. Value in use represents the present value of the future cash flows expected to be derived from the cash generating unit. The present value is discounted using a pre-tax rate that reflects current market assessments of the time value of money and of the risks specific to the cash generating unit for which future cash flow estimates have not been adjusted. If the recoverable amount is less than the carrying amount an impairment loss is recognised, and the asset is written down to its recoverable amount. Revenue recognition Revenue comprises the value of sales of goods and services to third party customers occurring in the period, stated exclusive of value added tax and net of trade discounts and rebates. Revenue is measured at the fair value of the consideration received or receivable. Revenue on the sale of goods is recognised when substantially all of the risks and rewards in the product have passed to the customer, which is usually upon delivery to the customer. Revenue is recognised to the extent that it is probable that the economic benefits associated with the transaction will flow into the company. Exceptional Items Exceptional items are those significant items which are separately disclosed by virtue of their size or incidence to enable a full understanding of the financial performance. Cash and cash equivalents Cash and cash equivalents comprise cash balances and call deposits. The company considers all highly liquid investments with original maturity dates of three months or less to be cash equivalents. Bank overdrafts that are repayable on demand and form an integral part of the group’s cash management system are included as a component of cash and cash equivalents for the purpose of the statement of cash flows. Trade and other receivables Trade and other receivables do not carry interest and are initially stated at fair value and subsequently measured at amortised cost using the effective interest rate, as reduced by appropriate allowances for estimated irrecoverable amounts. A provision for impairment of trade receivables is established when there is evidence that the group will not be able to collect all amounts due according to the original terms of these receivables. The amount of the provision is the difference between the carrying value and the present value of estimated future cash flows, discounted at the effective interest rate. Impairment losses are recognised in the income statement. Trade and other payables Trade and other payables are not interest bearing and are initially stated at fair value and subsequently measured at amortised cost using the effective interest rate. Holders Technology plc | Annual Report & Accounts 2015 20 FINANCIAL STATEMENTS Notes to the financial statements (continued) 2. Accounting policies (continued) Inventory Inventory is stated at the lower of cost and net realisable value. Cost is determined on a first-in-first-out basis. Net realisable value is based on the estimated sales price after allowing for all further costs of completion and disposal. Where necessary, provision is made for obsolete, slow-moving and defective inventory. Property, plant and equipment The cost of items of property, plant and equipment is its purchase cost, together with any incidental costs of acquisition. Depreciation is calculated to write off assets over their expected useful lives. Where there is evidence of impairment, property, plant and equipment is written down to the recoverable amount. Depreciation is calculated at the following rates: Leasehold building improvements Motor vehicles Plant and machinery Office equipment Over the period of the lease 20% on either cost or written down value 20% - 33% on either cost or written down value 25% on cost Methods of depreciation, recoverable amounts and useful lives are reviewed and adjusted, if appropriate, at each balance sheet date. Provision is made against the carrying value of items of property, plant and equipment where impairment in value is deemed to have occurred. Leased assets Leases are classified as operating leases when a significant portion of the risks and rewards of ownership are retained by the lessor. Rentals payable under operating leases are charged to the income statement on a straight line basis over the periods of the leases. Foreign currencies Transactions in foreign currencies are translated at the exchange rate ruling at the date of each transaction. Foreign currency monetary assets and liabilities are retranslated using the exchange rates at the balance sheet date. Gains and losses arising from changes in exchange rates after the date of the transaction are recognised in the income statement. Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated at the exchange rate at the date of the original transaction. In the consolidated financial statements, the net assets of the group’s foreign operations are translated at the rate of exchange at the balance sheet date. Income and expense items are translated at the average rates for the period where these rates approximate to actual rates. Otherwise actual rates are used. The resulting exchange differences are charged/ credited to other comprehensive income and recognised in the currency translation reserve in equity. Such translation differences are recognised in the income statement on the disposal of the foreign operation. All other currency differences are taken to the income statement. Profit and losses on holding foreign currency balances are treated as a finance cost. Derivative financial instruments The group uses derivative financial instruments to mitigate its exposure to foreign exchange risks arising from operational, financing and investment activities. In accordance with its treasury policy, the group does not hold or issue derivative financial instruments for trading purposes. Holders Technology plc | Annual Report & Accounts 2015 21 FINANCIAL STATEMENTS Notes to the financial statements (continued) 2. Accounting policies (continued) Derivative financial instruments are recognised initially at cost. Subsequent to initial recognition, derivative financial instruments are stated at fair value. The gain or loss on re-measurement to fair value is recognised immediately in the income statement. Equity instruments An equity instrument is any contract that evidences a residual interest in the assets of the group after deducting all its liabilities. Equity instruments issued by the company are recorded at the proceeds received, net of directly attributable issue costs. Taxes Current tax, including UK corporation tax and foreign tax, is provided at amounts expected to be paid (or recovered) using the tax rates that have been enacted or substantively enacted by the balance sheet date. Deferred tax is provided using the balance sheet liability method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is measured using the tax rates that have been enacted or substantively enacted by the balance sheet date and are expected to apply when the asset is realised or the liability settled. Deferred tax is not discounted. Provision is not made for deferred tax on the unremitted earnings of foreign subsidiaries where such remittances are not considered probable as the group’s policy is to reinvest profits to fund growth locally. Provision is made where it is likely that dividends will be remitted within the foreseeable future. A deferred tax asset is recognised only when it is probable that suitable taxable profits will be available in the foreseeable future from which the reversal of the temporary differences can be deducted. Employee share option scheme The fair value of employee share plans is calculated using an appropriate actuarial model. In accordance with IFRS 2 the resulting cost is charged to the income statement over the vesting period of the plans, with a corresponding credit to retained earnings. The value of the charge is adjusted to reflect the expected and the actual levels of options vesting. IFRS 2 has been applied to all grants of equity instruments after 7 November 2002 that were unvested as of 1 December 2005, in accordance with the transitional arrangements of IFRS 1. The proceeds received, net of any directly attributable transaction costs, are credited to share capital and share premium when the options are exercised. Pension contributions The group does not operate a pension scheme. Pension costs relate to group contributions to the personal pension schemes of certain directors and employees. The contributions are recognised as an employee benefit expense when they are due. There is also a retirement benefit liability arising from an asset purchase of Cimatec GmbH as disclosed in note 20. The liability in respect of defined benefit pension plans is the present value of the defined benefit obligation at the end of the accounting period less the fair value of plan assets, together with adjustments for past-service costs. The defined benefit obligation is calculated annually by independent actuaries. Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or credited to equity in other comprehensive income in the period in which they arise. Holders Technology plc | Annual Report & Accounts 2015 22 FINANCIAL STATEMENTS Notes to the financial statements (continued) 2. Accounting policies (continued) Dividends payable Distributions to equity holders are disclosed as a component of the movement in shareholders’ equity. A liability is recorded for a final dividend when the dividend is approved by the company’s shareholders, and, for an interim dividend, when the dividend is paid. Provisions A provision is recognised in the balance sheet when the group has a present legal or constructive obligation as a result of a past event, and it is probable that an outflow of economic benefits will be required to settle the obligation. Treasury shares When the company purchases its own equity share capital (treasury shares), the consideration paid, including any directly attributable incremental costs (net of tax), is deducted from equity attributable to the company’s equity holders until the shares are cancelled, reissued or disposed of. Where such shares are subsequently sold or reissued, any consideration received, net of any directly attributable incremental transaction costs and the related tax effects, is included in equity attributable to the company’s equity holders. Profit or loss from discontinued operations A discontinued operation is a component of the Group that either has been disposed of, or is classified as held for sale, and: represents a separate major line of business or geographical area of operations or is part of a single co-ordinated plan to dispose of a separate major line of business or geographical area of operations or is a subsidiary acquired exclusively with a view to resale. 3. Critical accounting judgements and key sources of estimation uncertainty Critical judgement in applying the group’s accounting policies Income taxes The determination of the group’s tax liabilities requires the interpretation of tax law. The group obtains appropriate professional advice from its tax advisors in relation to all significant tax matters. The directors believe that the judgements made in determining the group’s tax liabilities are reasonable and appropriate; however, actual experience may differ and materially affect future tax charges. Estimation uncertainty Impairment testing Impairment testing of goodwill involves comparing the carrying value of an asset with its value in use, based upon a discounted cash flow model. This model involves making assumptions involving future revenues and profits as well as long-term growth rates and the appropriate discount rate. Further details are set out in note 12. Holders Technology plc | Annual Report & Accounts 2015 23 FINANCIAL STATEMENTS Notes to the financial statements (continued) 4. Financial risk management Treasury management Group treasury policies are reviewed and approved by the board. The objectives of group treasury policies are to ensure that adequate financial resources are available for development of the business while at the same time managing financial risks. Derivative financial instruments are used to reduce financial risk exposures arising from the group’s business activities and not for speculative purposes. The group’s treasury activities are managed by the Group Finance Director. The Group Finance Director reports to the board on the implementation of group treasury policy. The group’s business activities expose it to a variety of financial risks that include: Liquidity risk; • • Credit risk; • Cash flow interest rate risk; and • Currency risk. The policies for managing these risks are described below: Liquidity risk The group finances its operations through a combination of bank borrowings, finance leases and cash generated from operations. The group’s treasury policy aims to ensure that there are sufficient funds available to meet the projected cash flow requirements in the business plan. The group’s principal source of funding is cash generated from operations. Liquidity is maintained through committed bank credit facilities (note 19). Credit risk Credit risk on trade receivables is managed by monitoring the amount and duration of exposures to individual customers depending on their credit rating. Where possible, trade receivables are insured. The amounts of trade receivables presented in the balance sheet are net of allowances for doubtful accounts estimated by management based on prior experience and their assessment of the current economic environment. The credit risk on liquid funds and derivative financial instruments is limited because the counterparties are high credit quality financial institutions. The group has no significant concentration of credit risk, with exposure spread over a large number of customers and counterparties. Currency risk The group is exposed to currency risk through movements in exchange rates on its purchases and sales that are not denominated in the local functional currencies. The group uses forward foreign exchange contracts to mitigate the currency risk associated with these transactions, where material exposure exists. The contracts are denominated primarily in US dollars and Euros. Such contracts are accounted for in accordance with the policies set out in note 2. At the year-end forward purchase contracts totalling £27,000 were held as described in note 19. Holders Technology plc | Annual Report & Accounts 2015 24 FINANCIAL STATEMENTS Notes to the financial statements (continued) 4. Financial risk management (continued) Cash flow interest rate risk The group is exposed to cash flow interest rate risk on bank borrowings, which are arranged at floating rates. The board monitors the overall level of bank debt and interest costs to limit any adverse effects on the financial performance of the group. The group does not use interest rate swaps to reduce its exposure to interest rate fluctuations at the present time. Fair value estimation The fair values of cash and cash equivalents, receivables, payables and borrowings with a maturity of less than one year approximate their book values. 5. Segment reporting Management currently identifies two operating segments: PCB, which distributes materials, equipment and supplies to the PCB industry. This includes the following operations: UK PCB, Germany PCB and India PCB. LED, which distributes LED-related components, lighting products and lighting solutions. This includes Holders Components UK and Germany, NRGstar UK, and Opteon Germany. These operating segments are monitored and strategic decisions are made on the basis of segment operating results. Segment information can be analysed as follows for the reporting periods under review: PCB LED Other Total 2015 £’000 8,304 6,451 1,853 (272) (1,707) Revenue Cost of sales Gross profit Distribution costs Administrative expenses Restructuring costs Impairment costs Other operating income/(expenses) Segment operating profit/ (loss) Other segmental information Depreciation (Note 13) Segment assets Segment liabilities - - 98 (28) 73 6,509 (1,970) 2014 £’000 11,025 (8,479) 2,546 (333) (2,182) 2015 £’000 2,891 (1,945) 946 (92) (904) 2014 £’000 2,453 (1,745) 708 (81) (980) - - 45 76 - - - - 24 (26) (2) (355) 2015 £’000 2014 £’000 (41) - (25) (31) (97) (5) (67) - (6) (78) 2015 £’000 11,195 (8,396) 2,799 (364) (2,652) - (25) 91 (151) 2014 £’000 13,478 (10,224) 3,254 (414) (3,234) (67) - 37 (357) 93 5 7 8 8 86 108 7,314 (1,841) 1,427 (2,172) 1,488 (2,282) (2,686) 2,762 (2,782) 2,597 5,250 (1,380) 6,020 (1,526) “Other” amounts relate to central group activities, which are not identifiable to the operating segments. Holders Technology plc | Annual Report & Accounts 2015 25 FINANCIAL STATEMENTS Notes to the financial statements (continued) 5. Segment reporting (continued) Analysis of external revenue by geographic region UK 2015 £’000 2014 £’000 Rest of Europe 2015 £’000 2014 £’000 Asia 2015 £’000 2014 £’000 Total 2015 £’000 2014 £’000 Revenue - PCB - LED 1,886 1,509 3,395 221 2,843 1,217 4,060 217 6,269 1,382 7,651 443 8,108 1,234 9,342 413 149 - 149 (5) Non-current assets External revenue is allocated to regions based on where it originates from. No customer contributed more than 10% of external revenue. 6. Finance income and expenses Interest on bank deposits Interest on loans, overdrafts and pension liability 7. Profit for the year The following items have been included in arriving at the profit for the year: Costs of inventories recognised as an expense Write-down of inventory to net realisable value Depreciation of property, plant and equipment (note 13) (Gain)/ loss on sale of property, plant and equipment Fees payable to the company’s auditors for the audit of the financial statements Fees payable to the company’s auditors for other services: - Audit of the financial statements of the company’s subsidiaries pursuant to legislation - Other services relating to taxation Operating leases - land and buildings Operating leases - plant and machinery Exchange (profit)/loss Exceptional costs consist of the following: Restructuring costs Impairment of investment in Joint Venture 74 2 76 (3) 8,304 2,891 11,195 659 11,025 2,453 13,478 627 2015 £’000 1 (16) 2015 £’000 8,049 49 86 - 12 32 10 123 57 (83) 2015 £’000 - 25 2014 £’000 2 (7) 2014 £’000 9,127 118 108 2 12 45 20 136 36 (48) 2014 £’000 67 - Holders Technology plc | Annual Report & Accounts 2015 26 FINANCIAL STATEMENTS Notes to the financial statements (continued) 8. Taxation Analysis of the charge in the period Current tax - Current period - Adjustments in respect of prior periods Deferred tax (note 21) Total tax 2015 £’000 6 179 185 10 195 2014 £’000 (1) 14 13 (2) 11 Tax reconciliation The tax for the period is higher (2014: higher) than the standard rate of corporation tax in the UK, effectively 20.00% (2014: 20.00%) for the company’s financial year. The differences are explained below: Loss before taxation Loss before taxation multiplied by the rate of corporation tax in the UK of 20.00% (2014: 20.00%) Effects of: Differences between capital allowances and depreciation Different overseas tax rates Adjustments in respect of prior years Taxation losses Other temporary differences Taxation 2015 £’000 (166) (33) 4 - 176 35 13 195 2014 £’000 (362) (77) (3) 2 16 - 73 11 9. Profit/ (loss) of the parent company for the financial year The result for the financial year dealt with in the accounts of the parent company was a profit of £138,000 (2014 profit: £79,000). As permitted by Section 408 of the Companies Act 2006, no separate income statement is presented in respect of the parent company. 10. Earnings per share Basic earnings per share is calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the period. The weighted average number of treasury shares is deducted from the number of shares issued in arriving at the weighted average number of shares outstanding during the period. For diluted earnings per share the weighted average number of ordinary shares in issue is adjusted to assume conversion of all potentially dilutive ordinary shares. Potentially dilutive ordinary shares are those share options granted to employees where the exercise price is less than the average market price of the company’s ordinary shares during the period, and where exercise would decrease earnings per share or increase loss per share from continuing operations. There was no earnings dilution calculated in 2015 or 2014 as losses were recorded by the group. Reconciliations of the earnings and weighted average number of shares used in the calculations are set out below: Holders Technology plc | Annual Report & Accounts 2015 27 FINANCIAL STATEMENTS Notes to the financial statements (continued) 10. Earnings per share (continued) Reconciliations of the earnings and weighted average number of shares used in the calculations are set out below: Weighted average number of ordinary shares Dilutive effect of share options Fully diluted weighted average number of ordinary shares Basic (loss)/ earnings per share: Diluted (loss)/ earnings per share: 11. Ordinary dividends Final dividend for the year ended 30 November 2014 of 0.25p (year ended 30 November 2013 final dividend: 1.0p) Interim dividend paid in respect of the year of 0.25p (2014: 1.0p) Amounts recognised as distributions to equity holders 2015 Number 3,939,551 - 3,939,551 2014 Number 3,939,551 - 3,939,551 2015 Pence per share (9.16) (9.16) 2014 Pence per share (9.47) (9.47) 2015 £’000 10 10 20 2014 £’000 39 40 79 The directors propose a final dividend in respect of the year ended 30 November 2015 of 0.25p per share. If approved by shareholders, it will be paid on 24 May 2016 to shareholders registered on 6 May 2016. 12. Goodwill Group Cost At 1 December Currency translation At 30 November Analysis by cash generating unit PCB LED 2015 £’000 318 (2) 316 £’000 144 172 316 2014 £’000 320 (2) 318 £’000 146 172 318 As permitted by IFRS 1, goodwill arising on acquisitions before 1 December 2005 (date of transition to IFRS) has been frozen at the UK GAAP amounts subject to being tested for impairment at that date, the results of which assessment indicated no such impairment. Under UK GAAP, goodwill of £239,000 arising on acquisitions prior to 1 July 1998 was eliminated directly against reserves. The gain or loss on the disposal of a previously acquired business reflects the attributable amount of purchased goodwill in respect of that business. As the group has opted not to restate business combinations Holders Technology plc | Annual Report & Accounts 2015 28 FINANCIAL STATEMENTS Notes to the financial statements (continued) 12. Goodwill (continued) prior to the date of transition, the goodwill written off to reserves under UK GAAP has been frozen and remains in reserves. Goodwill previously written off to reserves is not written back to the income statement on subsequent disposal. The recoverable amount of a cash-generating unit is based on its value-in-use. Value-in-use is the present value of the projected cash flows of the cash-generating unit (CGU). The key assumptions regarding the value-in-use calculations are those regarding the discount rates and growth rates. Management estimates discount rates using pre-tax rates that reflect current market assessments of a number of factors that impact on the time value of money and any risk specific to the CGU. The rate includes management’s assessment of a normal level of debt: equity ratio within similar companies in its sector and reflects the risks specific to the relevant business segment. The group prepares cash flow forecasts based on the most recent financial budgets approved by management, which cover a two year period. Cash flows for 10 years beyond the budgeted periods are extrapolated using a growth rate approximating the long term average growth rates for the product sectors concerned. The growth rates were assessed at 1.5% for Holders Technology Germany (PCB) and 2.5% for Holders Components UK (LED). The discount rate applied for each CGU was 10.0%. 13. Property, plant and equipment Group Motor vehicles, plant and machinery and office equipment £’000 2,006 (108) 161 (45) 2,014 1,732 (89) 86 (42) 1,687 327 274 Short leasehold land and buildings £’000 92 - - - 92 92 - - - 92 - - Company Office equipment £’000 Total £’000 53 - 4 - 57 45 - 8 - 53 4 8 53 - 4 - 57 45 - 8 - 53 4 8 Total £’000 2,098 (108) 161 (45) 2,106 1,824 (89) 86 (42) 1,779 327 274 Cost At 30 November 2014 Currency translation Additions Disposals At 30 November 2015 Depreciation At 30 November 2014 Currency translation Provided in year Disposals At 30 November 2015 Net book value At 30 November 2015 At 30 November 2014 Holders Technology plc | Annual Report & Accounts 2015 29 FINANCIAL STATEMENTS Notes to the financial statements (continued) 14. Investments in subsidiaries Cost At 1 December 2013 Impairment provision Disposal At 1 December 2014 At 30 November 2015 Shares £’000 788 (17) 771 771 Loans £’000 1,520 - 1,520 1,520 Total £’000 2,308 (17) 2,291 2,291 The following were subsidiary undertakings at the end of the year and have all been included in the consolidated financial statements. Name Holders Technology GmbH Country of incorporation and operation Germany Holders Technology UK Limited Holders Components Limited England and Wales England and Wales Opteon Limited England and Wales Nature of business Specialised materials and components Specialised materials and components Dormant Dormant Interest in ordinary shares and voting rights 100% 100% 100% 100% 15. Investment in Joint Venture In April 2007, the company formed a joint venture called Holders Technology (India) Private Limited, based in Mysore, India to service the Indian market. At 30 November 2015, Holders Technology plc owned 60% of the Joint Venture. Cost Investment at 30 November Company 2015 £’000 15 2014 £’000 15 The Indian investment was disposed of on 12 December 2015. Disposal proceeds were INR5,000,000 (approximately £50,000) and the net assets at that time were £75,000, leading to a loss on disposal of £25,000. Accordingly, an impairment charge of £25,000 has been recognised in the group accounts at 30 November 2015. 16. Inventories Raw materials and consumables Goods for resale Group Company 2015 £’000 1,164 1,369 2,533 2014 £’000 1,416 1,326 2,742 2015 £’000 - - - 2014 £’000 - - - Holders Technology plc | Annual Report & Accounts 2015 30 FINANCIAL STATEMENTS Notes to the financial statements (continued) 17. Trade and other receivables Trade receivables Less: provision for impairment Net trade receivables Amounts due from group undertakings Other receivables Prepayments and accrued income Group Company 2015 £’000 1,339 (24) 1,315 - 84 157 1,556 2014 £’000 1,711 (53) 1,658 - 44 243 1,945 2015 £’000 - - - 188 229 16 433 2014 £’000 - - - 215 20 15 250 All trade receivables that are more than 365 days overdue have been provided for except where monies have been received after the reporting date. The group also provides for all other specifically identified amounts that are less than 365 days overdue based on known impairment indicators including known trading difficulties. The table below shows the movements in the provision for impairment of trade receivables: Group Impairment at 1 December Currency translation Impairment losses recognised Amounts written off as irrecoverable Amounts recovered Impairment losses reversed Balance 30 November Ageing of past due unimpaired debt: Past due 0-30 days Past due 31-60 days Past due 61-90 days Past due 91-365 days Past due > 365 days 18. Trade and other payables Trade payables Amounts due to group undertakings Other taxation and social security Other payables Accruals 2015 £’000 53 (3) 7 - - (33) 24 2015 £’000 270 28 8 8 - 314 Group Company 2015 £’000 310 - 185 70 410 975 2014 £’000 623 - 186 69 379 1,257 2015 £’000 5 573 - - 49 627 2014 £’000 209 (1) 28 (183) - - 53 2014 £’000 601 133 - 10 - 744 2014 £’000 11 515 - - 36 562 Holders Technology plc | Annual Report & Accounts 2015 31 FINANCIAL STATEMENTS Notes to the financial statements (continued) 19. Financial instruments a) The carrying amount and fair value of financial assets and liabilities at 30 November Financial assets Cash and cash equivalents Trade and other receivables Loans and receivables Financial liabilities Trade and other payables Financial liabilities at amortised cost Derivatives Liabilities at fair value through profit and loss Total liabilities Group 2015 £’000 443 1,399 1,842 790 790 - - 1,052 2014 £’000 634 1,702 2,336 1,071 1,071 - - 1,071 Company 2015 £’000 2014 £’000 25 217 242 54 54 - - 188 45 235 280 562 562 - - 562 The carrying value of the group’s financial assets and liabilities are considered to approximate their respective fair values. b) Interest rate and currency profile of financial assets and liabilities Currency profiles of the group’s financial assets and liabilities are set out below: Group Financial liabilities £’000 225 389 167 9 790 248 598 220 5 1,071 Net financial assets / (liabilities) £’000 696 335 (33) 54 1,052 823 449 (41) 34 1,265 Company Financial liabilities £’000 52 2 - - 54 562 - - - 562 Net financial assets / (liabilities) £’000 (36) 224 - - 188 (523) 240 1 - (282) Financial assets £’000 16 226 - - 242 39 240 1 - 280 Financial assets £’000 921 724 134 63 1,842 1,071 1,047 179 39 2,336 Sterling Euro US dollar Indian rupee At 30 November 2015 Sterling Euro US dollar Indian rupee At 30 November 2014 All the group’s financial assets and liabilities are non-interest bearing or have floating interest rates. There are no fixed rate financial assets. Floating rate financial assets earn interest at rates based on local bank deposit rates. Floating rate financial liabilities bear interest at rates based on the Bank of England Base Rate or relevant national equivalents. Holders Technology plc | Annual Report & Accounts 2015 32 FINANCIAL STATEMENTS Notes to the financial statements (continued) 19. Financial instruments (continued) c) Currency profile of net foreign currency monetary assets and liabilities The table below shows the net monetary assets/(liabilities) of the group that are not denominated in the functional currency of the operating unit and which therefore give rise to exchange gains and losses in the income statement. Group Company US dollar Indian rupee Euro Total Euro US dollar £’000 £’000 £’000 £’000 £’000 £’000 335 335 449 449 (33) (33) (41) (41) 54 54 34 34 356 356 442 442 224 224 240 240 - - 1 1 Total £’000 224 224 241 241 Sterling At 30 November 2015 Sterling At 30 November 2014 d) Market risk: objectives, policies and strategies The group’s interest rate risks, liquidity risks and currency risks are managed centrally within policies approved by the board. No mitigation of interest rates using interest rate swaps has been undertaken. The net interest receivable for the year was nil compared to nil receivable last year. No speculative transactions are undertaken. At present there is no policy to mitigate the group’s currency exposures arising from the profit translation or the effect of exchange rate movements on the group’s overseas net assets. e) Market risk: sensitivities A sensitivity analysis for financial assets and liabilities affected by market risk is set out below. Each risk is analysed separately and shows the sensitivity of financial assets and liabilities when a certain parameter is changed. The sensitivity analysis has been performed on balances at 30 November each year and therefore is not representative of transactions throughout the year. The rates used are based on historical trends and, where relevant, projected forecasts. (i) Currencies The group is exposed to currency risk in relation to the value of its financial assets and liabilities that are denominated in currencies other than sterling (see note 19(b) above), arising from fluctuations in exchange rates. The table below shows the impact on the value of the group’s reported net financial assets at 30 November of exchange rates either strengthening or weakening by 10 per cent against sterling and the impact this would have on the reported profit or loss and equity. The group’s reported profit is not materially impacted by the effect of changes in exchange rates on the value of its net financial assets, but equity would be £174,000 lower if sterling strengthened by 10 per cent and £174,000 higher if sterling weakened by 10 per cent. Holders Technology plc | Annual Report & Accounts 2015 33 FINANCIAL STATEMENTS Notes to the financial statements (continued) 19. Financial instruments (continued) Group 2015 Effect of sterling strengthening by 10% Net financial assets/(liabilities) Denominated in sterling Not denominated in sterling Net financial assets As reported £’000 696 356 1,052 Rate +10% £’000 - (32) (32) Profit £’000 - 10 10 Equity £’000 - (174) (174) Rate -10% £’000 - 40 40 Effect of sterling weakening by 10% Profit £’000 - (10) (10) Equity £’000 - 174 174 Effect of sterling strengthening by 10% Effect of sterling weakening by 10% 2014 Net financial assets/(liabilities) Denominated in sterling Not denominated in sterling Net financial assets As reported £’000 823 442 1,265 Rate +10% £’000 - (40) (40) Profit £’000 - 43 43 Equity £’000 - (248) (248) Rate -10% £’000 - 49 49 Profit £’000 - (43) (43) Equity £’000 - 248 248 Company 2015 Effect of sterling strengthening by 10% Effect of sterling weakening by 10% Net financial assets/(liabilities) As reported £’000 Rate +10% £’000 Profit £’000 Equity £’000 Denominated in sterling Not denominated in sterling Net financial assets (36) 224 188 - (20) (20) - (20) (20) - - - Rate -10% £’000 - (25) (25) Profit £’000 Equity £’000 - (25) (25) - - - Effect of sterling strengthening by Effect of sterling weakening by 2014 Net financial assets/(liabilities) Denominated in sterling Not denominated in sterling Net financial assets As reported £’000 (523) 241 (282) Rate +10% £’000 - (22) (22) 10% Profit £’000 - (22) (22) Equity £’000 - - - Rate -10% £’000 - 27 27 10% Profit £’000 - 27 27 Equity £’000 - - - Holders Technology plc | Annual Report & Accounts 2015 34 FINANCIAL STATEMENTS Notes to the financial statements (continued) 19. Financial instruments (continued) (ii) Interest rates Changes in market interest rates expose the group to the risk of fluctuations in the cash flow relating to its financial assets and liabilities that attract interest at floating rates (see note 20(b)). Based upon the interest rate profile of the group’s financial assets and liabilities as at both 30 November 2015 and 30 November 2014, there would be no material impact of a one percentage point change in the market interest rates on the group’s profit and equity. f) Liquidity risk The group monitors its liquidity to maintain a sufficient level of undrawn debt facilities together with central management of the group’s cash resources to minimise liquidity risk. All the trade and other payables at 30 November 2015 amounting to £790,000 (2014: £1,071,000) are payable within three months. Borrowing facilities The group has various borrowing facilities available to it. The unutilised portion of the facilities at 30 November 2015 amounted to £100,000 (2014: £150,000). g) Credit risk Group policies are aimed at minimising losses due to customer payment default. Deferred payment terms are only granted to those customers who satisfy creditworthiness criteria and individual exposures to customers are monitored. Where possible, operations purchase credit insurance. The maximum exposure to credit risk for trade and other receivables at the reporting date by geographic region is as follows: UK Rest of Europe Asia At 30 November Group Company 2015 £’000 715 283 54 1,052 2014 £’000 954 730 18 1,702 2015 £’000 188 - - 188 2014 £’000 235 - - 235 Holders Technology plc | Annual Report & Accounts 2015 35 FINANCIAL STATEMENTS Notes to the financial statements (continued) 19. Financial instruments (continued) h) Capital risk The group’s primary objective is to ensure its continued ability to provide a consistent return for its equity shareholders through a combination of capital growth and proposed dividend policy. It aims to minimise any capital risk by maintaining a conservative financing structure. The board’s current policy is to use the group’s cash resources for any capital requirements and, where necessary, by adjustment to the amount of dividends paid to shareholders. i) Exchange rate instruments The group held forward exchange contracts with a contracted value of £27,000 at 30 November 2015 (2014: £1,262,000). When appropriate during the year, contracts were taken out to mitigate trade payables denominated in foreign currencies. The fair value of these instruments was nil. 20. Retirement benefit liability Group At 1 December 2013 Currency translation Charged to the income statement Utilised At 1 December 2014 Currency translation Change in actuarial assumptions Utilised At 30 November 2015 Retirement benefit liability £’000 205 4 4 (12) 201 (14) (16) 10 181 The retirement benefit liability arose from the 2002 acquisition of assets by Holders Technology GmbH from Cimatec GmbH. Following the bankruptcy of Cimatec GmbH, a German court determined that Cimatec’s pension obligation to one former Cimatec employee must be met by Holders Technology GmbH. The provision represents the estimated net present value of the liability to pay an annuity to that employee upon retirement, which began in 2008. No other Holders Technology employees have any retirement benefit rights from their previous employment at Cimatec. Holders Technology plc | Annual Report & Accounts 2015 36 FINANCIAL STATEMENTS Notes to the financial statements (continued) 21. Deferred tax Deferred tax is calculated in full on temporary differences under the liability method using tax rates of 20.0% to 30.0% (2014: 20.0% to 30.0%). The movement on the deferred tax asset account is as shown below: At 1 December – deferred tax assets Income statement credit/(charge) Transfer to deferred tax liabilities At 30 November Group Company 2015 £’000 15 (10) - 5 2014 £’000 19 (4) - 15 2015 £’000 - - - - 2014 £’000 - - - - The movements in deferred tax assets and liabilities (prior to the offsetting of balances within the same jurisdiction as permitted by IAS 12) during the period are shown below: Deferred tax assets Group At 1 December 2013 (Charged)/credited to income statement Transfer to deferred tax liabilities At 30 November 2014 (Charged)/credited to income statement Transfer to deferred tax liabilities At 30 November 2015 Accelerated capital allowances £’000 - - - - - - - Pension liability £’000 41 (6) - 35 (19) - 16 Total £’000 41 (6) - 35 (19) - 16 At the year end the amount of temporary differences associated with the undistributed earnings of overseas subsidiaries for which deferred tax liabilities had not been recognised was insignificant. Deferred tax assets are only recognised where in the Directors’ opinion there is a reasonable expectation of the tax asset being realised. Assets are recognised based on business forecasts and the local tax environment. Holders Technology plc | Annual Report & Accounts 2015 37 FINANCIAL STATEMENTS Notes to the financial statements (continued) 21. Deferred tax (continued) Deferred tax liabilities Group At 1 December 2013 Transfer from income statement Transfer from deferred tax assets At 30 November 2014 Transfer from income statement Transfer from deferred tax assets At 30 November 2015 Deferred tax liabilities Company At 1 December 2013 Credited to income statement At 30 November 2014 Charged to income statement At 30 November 2015 The Company had no deferred tax assets. 22. Share Capital Accelerated capital allowances £’000 22 (2) - 20 (9) - 11 Accelerated capital allowances £’000 3 (2) 1 (1) - Authorised 6,000,000 ordinary shares of 10p each (2014: 6,000,000) Allotted and fully paid ordinary shares of 10p each At 30 November 2014 and 30 November 2015 2015 £’000 600 2014 £’000 600 Number of shares Number of shares 4,159,551 4,159,551 220,000 (2014: 220,000) 10p ordinary shares with an aggregate nominal value of £22,000 (2014: £22,000) are held in treasury and are available for issue upon the exercise of options under the company’s employee share option scheme. Holders Technology plc | Annual Report & Accounts 2015 38 FINANCIAL STATEMENTS Notes to the financial statements (continued) 23. Employees and staff costs Group Company Wages and salaries Social security costs Other pension costs Share based payments 2015 £’000 1,788 295 79 (17) 2,145 2014 £’000 2,206 315 70 9 2,600 Average monthly number of permanent employees, including executive directors: Group Administration and sales Service and fabrication Part-time 2015 £’000 250 20 59 (17) 312 2015 Number 38 36 74 4 78 2014 £’000 350 31 44 9 434 2014 Number 41 36 77 7 84 Directors’ remuneration Directors’ remuneration for the year was as follows: Company Basic salary fees, bonuses and expenses Benefits in kind Total emoluments R W Weinreich (Chairman) V M Blaisdell D A Mahony P K I Geraghty £’000 23 70 23 64 180 £’000 4 - - 1 5 2015 £’000 27 70 23 65 185 Pension entitlement Directors are entitled to receive their remuneration either as salary or as pension contributions. Pension contributions to directors’ personal pension schemes are as follows: Pension Contributions V M Blaisdell P K I Geraghty 2015 £’000 22 26 48 2014 £’000 29 100 26 95 250 2014 £’000 23 9 32 Holders Technology plc | Annual Report & Accounts 2015 39 FINANCIAL STATEMENTS Notes to the financial statements (continued) 23. Employees and staff costs (continued) Directors’ shareholdings The shareholdings of those serving at the end of the year were as follows: R W Weinreich D A Mahony V M Blaisdell Ordinary shares 2015 1,851,202 20,000 34,102 2014 1,851,202 20,000 34,102 The shareholdings are all beneficial and have not changed between 30 November 2015 and 11 February 2016. Directors’ interests in share options At start of year or on date of appointment 12,500 12,500 25,000 46,598 38,444 47,000 37,500 219,542 No. of options granted / (exercised) during year - - - - - - - - At end of year Exercise price - 12,500 25,000 46,598 38,444 47,000 37,500 207,042 68.5p 93.5p 123.18p 10.0p 10.0p 10.0p 10.0p V M Blaisdell V M Blaisdell V M Blaisdell V M Blaisdell P K I Geraghty V M Blaisdell P K I Geraghty Date from which exercisable 28/07/12 28/05/13 21/07/14 26/03/15 26/03/15 02/05/16 02/05/16 Expiry date 27/07/15 27/05/16 21/07/17 26/03/16 26/03/16 02/05/17 02/05/17 The share price at 30 November 2015 was 30.0p (2014: 41.5p) whilst during the year the high and low prices were 40.0p and 30.0p. In respect of the options first exercisable up to 21 July 2014, no option may be exercised unless there is (as shown by the audited accounts) an increase in the fully diluted earnings per share for the financial year immediately prior to the date of exercise compared with the highest earnings per share figure for the three preceding years unless the board in its absolute discretion decides otherwise. For options first exercisable on 26 March 2015, no option may be exercised unless the share price exceeds 70.0p after 3 years. For options first exercisable on 2 May 2016, no option may be exercised unless the share price exceeds 127.0p after 3 years. Key management compensation Group Short-term employee benefits Post-employment benefits Termination benefits Share-based payments Key management includes Directors and senior executives. 2015 £’000 546 61 - 3 610 2014 £’000 611 46 - 9 666 Holders Technology plc | Annual Report & Accounts 2015 40 FINANCIAL STATEMENTS Notes to the financial statements (continued) 23. Employees and staff costs (continued) Total share options in issue Total options in issue 1 December Issued during year Lapsed Forfeited Leavers Total options in issue 30 November 2015 No 364,375 - (32,500) - - 331,875 2014 No 349,203 30,172 (15,000) - - 364,375 At the year-end 217,203 share options were exercisable and 114,672 share options were outstanding. 24. Financial commitments Capital commitments There were no capital expenditure commitments at 30 November 2015 (2014: nil). Operating lease commitments The group leases various offices and warehouses under non-cancellable operating lease agreements. The lease terms are between 1 and 5 years. The majority of lease agreements are renewable at the end of the lease period at market rate. Total aggregate minimum lease payments under non-cancellable operating leases were: Land and buildings - No later than one year - Later than one year and no later than five years - Later than 5 years Motor vehicles, plant and machinery - No later than one year - Later than one year and no later than five years Other equipment - No later than one year - Later than one year and no later than five years 25. Share based payments 2015 £’000 2014 £’000 161 618 10 20 35 - - 197 36 - 26 31 - - The Company operates a share option scheme under which options are exercisable at a price equal to the average quotation of a share as derived from the AIM appendix of the Daily Official List of the London Stock Exchange for the five dealing days immediately preceding the date of grant, subject to relevant performance criteria, as described in note 23, being satisfied. The normal minimum vesting period is three years. Options to subscribe for ordinary shares of 10p each are as follows: Subscription Price 68.5p 93.5p 123.18p 117.15p 70.0p 63.8p 28 July 2012 to 27 July 2015 28 May 2013 to 27 May 2016 21 July 2014 to 20 July 2017 26 Mar 2015 to 25 Mar 2016 2 May 2016 to 1 May 2017 28 March 2017 to 27 March 2018 2015 - 12,500 25,000 179,703 84,500 30,172 2014 32,500 12,500 25,000 179,703 84,500 30,172 Dates when exercisable Number of shares Holders Technology plc | Annual Report & Accounts 2015 41 FINANCIAL STATEMENTS Notes to the financial statements (continued) 25. Share based payments (continued) The estimated fair values were calculated using the option pricing model with the following inputs: Grant date Share price at date of grant Exercise price No. of employees Shares under option Vesting period (years) Expected volatility Option life (years) Expected life (years) Risk free rates Expected dividends Possibility of ceasing employment before vesting Expectations of meeting performance criteria Fair value of option 28 March 2014 58.00 63.80 1 17,500 3 22% 3 3.5 0.62% 4.0% 27.0% 75% 7p 2 May 2013 70.00 77.00 2 84,500 3 22% 3 3.5 1.03% 4.8% 25.0% 75% 13p 26 March 2012 106.50 117.15 8 179,703 3 22% 1 3.5 0.76% 4.0% 11.0% 75% 13p The expected volatility is based on historical volatility over the expected life period. The expected life is the average expected period to exercise based on historical experience and the terms of the scheme. The risk free return is the yield on zero-coupon UK government bonds of a term consistent with the assumed option life. The group recognised a total charge of £3,000 (2014: charge of £9,000) related to equity-settled share-based payment transactions during the year. 26. Related party transactions Group Transactions between the company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed. Dividends were paid to directors as follows: R W Weinreich D A Mahony V M Blaisdell 2015 £’000 9 - - 9 Company The company carried out the following transactions with its subsidiaries and joint venture: Consultancy fees charged to subsidiaries and joint venture Interest on short term loans 2015 £’000 452 13 2014 £’000 37 1 1 39 2014 £’000 515 13 Holders Technology plc | Annual Report & Accounts 2015 42 AGM Notice of annual general meeting Notice is hereby given that the Annual General Meeting of Holders Technology plc (the "Company") will be held at the offices of Grant Thornton UK LLP, Churchill House, 26-30 Upper Marlborough Street, St. Albans, Hertfordshire AL1 3UU on 3 May 2016 at 11.30 a.m. for the following purposes: Ordinary business 1. 2. 3. 4. To receive and adopt the accounts of the Company together with the directors’ and auditors’ reports thereon for the year ended 30 November 2015. To declare a final dividend in respect of the year ended 30 November 2015. To re-elect R Weinreich as a director. To re-appoint Grant Thornton UK LLP as auditors and to authorise the directors to fix their remuneration. Special business To consider and, if thought fit, pass the following resolution as an Ordinary Resolution: 5. That, in substitution for any equivalent authorities and powers granted to the directors prior to the passing of this resolution, the directors be and they are generally and unconditionally authorised pursuant to Section 551 of the Act to exercise all powers of the Company to allot shares in the Company, and grant rights to subscribe for or to convert any security into shares of the Company (such shares, and rights to subscribe for or to convert any security into shares of the Company being "relevant securities") up to an aggregate nominal amount of £138,651.70, provided that, unless previously revoked, varied or extended, this authority shall expire on the conclusion of the Annual General Meeting of the Company to be held in 2017, except that the Company may at any time before such expiry make an offer or agreement which would or might require relevant securities to be allotted after such expiry and the directors may allot relevant securities in pursuance of such an offer or agreement as if this authority had not expired. To consider and, if thought fit, pass the following resolutions as Special Resolutions: 6. That the directors be and they are empowered pursuant to Section 570(1) of the Act to allot equity securities (as defined in Section 560(1) of the Act) of the Company wholly for cash pursuant to the authority of the directors under Section 551 of the Act conferred by resolution 6 above, and/or by way of a sale of treasury shares (by virtue of Section 573 of the Act), in each case as if Section 561(1) of the Act did not apply to such allotment, provided that: (a) the power conferred by this resolution shall be limited to: (i) the allotment of equity securities in connection with an offer of equity securities to the holders of ordinary shares in the capital of the Company in proportion as nearly as practicable to their respective holdings of such shares, but subject to such exclusions or other arrangements as the directors may deem necessary or expedient to deal with fractional entitlements or legal or practical problems arising under the laws or requirements of any overseas territory or by virtue of shares being represented by depository receipts or the requirements of any regulatory body or stock exchange or any other matter whatsoever; and Holders Technology plc | Annual Report & Accounts 2015 43 AGM Notice of annual general meeting (continued) (ii) the allotment, otherwise than pursuant to sub-paragraph (i) above, of equity securities up to an aggregate nominal value equal to £20,797.80; and (b) unless previously revoked, varied or extended, this power shall expire on the conclusion of the Annual General Meeting of the Company to be held in 2017 except that the Company may before the expiry of this power make an offer or agreement which would or might require equity securities to be allotted after such expiry and the directors may allot equity securities in pursuance of such an offer or agreement as if this power had not expired. 7. That the Company be and it is hereby generally and unconditionally authorised to make market purchases (within the meaning of Section 693(4) of the Act) of Ordinary Shares of 10p each in the capital of the Company (“Ordinary Shares”) provided that: (a) the maximum number of Ordinary Shares hereby authorised to be purchased is 393,955 (representing 10 per cent of the issued share capital of the Company, excluding treasury shares); (b) the minimum price which may be paid for each Ordinary Share is 10p (nominal value); (c) (d) (e) the maximum price which may be paid for each ordinary share is an amount equal to 105 per cent of the average of the middle market quotations for an ordinary share as derived from The London Stock Exchange for the five business days immediately preceding the day on which the Ordinary Shares are purchased; the authority hereby conferred shall expire at the conclusion of the next Annual General Meeting of the Company to be held in 2017, unless such authority is renewed prior to such time; and the Company may make a contract to purchase its ordinary shares under the authority hereby conferred prior to the expiry of such authority, which will or may be executed wholly or partially after the expiry of such authority, and may purchase its Ordinary Shares in pursuance of any such contract. By order of the board Paul Geraghty Secretary 11 February 2016 Registered Office: 27-28 Eastcastle Street, London W1W 8DH Holders Technology plc | Annual Report & Accounts 2015 44 AGM Notice of annual general meeting (continued) Notes 1. 2. 3. 4. 5. 6. A member who is entitled to attend, speak and vote may appoint a proxy to attend, speak and vote instead of him. A proxy need not also be a member of the Company but must attend the meeting in order to represent his appointer. A member may appoint more than one proxy provided each proxy is appointed to exercise rights attached to different shares (so a member must have more than one share to be able to appoint more than one proxy). A form of proxy will shortly be sent to all members. The notes to the form of proxy include instructions on how to appoint the Chairman of the meeting or another person as proxy. To be effective, forms of proxy must be duly completed and returned so as to reach Neville Registrars, New Issue Department, Neville House, 18 Laurel Lane, Halesowen, West Midlands, B63 3DA not less than 48 hours before the time appointed for the meeting, or adjourned meeting, as the case may be. Only those shareholders registered in the register of members of the Company as at 6 p.m. on Wednesday 29 April 2016 shall be entitled to attend and vote at the meeting in respect of the number of shares registered in their name at that time. Changes to entries on the relevant register of securities after 6 p.m. on Wednesday 29 April 2016 shall be disregarded in determining the rights of any person to attend and vote at the meeting. As at 10 February 2016 (being the latest practicable date prior to the publication of this notice of annual general meeting) the Company’s issued share capital consists of 4,159,551 ordinary shares carrying one vote each. There are currently 220,000 ordinary shares held in treasury which currently do not carry the right to vote. Therefore the total voting rights in the Company as at 10 February 2016 are 3,939,551. To appoint a proxy or to amend an instruction to a previously appointed proxy via the CREST system, the CREST message must be received by the issuer's agent (ID 7RA11) by 11.30 a.m. on Friday 29 April 2016. For this purpose, the time of receipt will be taken to be the time (as determined by the timestamp applied to the message by the CREST Applications Host) from which the issuer's agent is able to retrieve the message. After this time any change of instructions to a proxy appointed through CREST should be communicated to the proxy by other means. CREST should be communicated to the proxy by other means. CREST Personal Members or other CREST sponsor or voting service provider(s) should contact their CREST sponsor or voting service provider(s) for assistance with appointing proxies via CREST. For further information on CREST procedures, limitations and system timings, please refer to the CREST Manual. We may treat as invalid a proxy appointment sent by CREST in the circumstances set out in Regulation 35(5)(a) of the Uncertificated Securities Regulations 2001. The following documents are available for inspection at the registered office of the Company during the usual business hours on any weekday (Saturday, Sunday or public holidays excluded) from the date of this notice until the conclusion of the annual general meeting and will also be available for inspection at the place of the meeting from 11.15 a.m. on the day of the meeting until its conclusion: copies of the executive directors' service contracts with the Company and any of its subsidiary undertakings and letters of appointment of the non-executive directors. Holders Technology plc | Annual Report & Accounts 2015 45 AGM Five year summary Group revenue - continuing Group revenue – discontinued Gross profit Distribution costs Administrative expenses Exceptional items Other operating income/(expense) Group operating profit/ (loss) Finance income Finance expenses 2015 2014 2013 £’000 11,195 £’000 13,478 2,799 (364) (2,652) (25) 91 (151) 1 (16) 3,254 (414) (3,167) (67) 37 (357) 2 (7) £’000 14,265 990 3,467 (381) (3,049) - 68 105 4 (12) 2012 Restated £’000 13,631 1,974 2011 £'000 19,636 3,584 (376) (3,275) - 11 4,509 (404) (3,828) - 98 (56) 1 (13) 375 - (12) Profit/ (loss) before taxation (166) (362) 97 (68) 363 Taxation (195) (11) (24) (43) (123) Profit after tax (361) (373) 73 (111) 240 Earnings per share – continuing business Earnings per share – basic Earnings per share - diluted Dividends per share in respect of each year Equity attributable to shareholders of the parent (9.16p) (9.16p) (9.47p) (9.47p) 1.85p 1.78p (2.82p) (2.82p) 6.70p 6.63p 0.50p 1.25p 2.0p 2.0p 5.35p 3,870 4,494 5,053 5,192 5,941 Holders Technology plc | Annual Report & Accounts 2015 46
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