Holders Technology plc
Annual Report 2016

Plain-text annual report

Holders Technology plc Annual Report & Accounts 2016 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. PCB and LED segments achieved modest revenue growth in the year, and margins were maintained. PCB overheads were reduced, while LED overheads increased due to additional sales recruitment. The result before restructuring and impairment costs was somewhat behind 2015. During the year, PCB divisions were restructured and costs reduced, and the LED Opteon Germany division was closed. The restructuring costs are shown below. The directors propose to pay a final dividend of 0.25p per share. Highlights included:  Results compared to 2015: Group revenue PCB revenue LED revenue Group gross margins 1.7% higher 0.4% higher 5.3% higher Unchanged  Operating loss before impairment and restructuring costs  Operating loss  Cash balances Results are summarised below: £191,000 £374,000 £781,000 (£338,000 higher than 2015) Revenue PCB LED Total Gross profit Gross margin Operating loss before impairment and restructuring costs Operating loss 2016 £'000 8,336 3,044 11,380 2,841 25.0% (191) (374) 2015 £'000 8,304 2,891 11,195 2,799 25.0% (126) (151) Loss per share Dividend proposed and paid (9.72p) 0.50p (9.16p) 0.50p Total cash Debt 781 Nil 443 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 to In my statement accompanying the 2015 Annual Report and Accounts I stated that the board was evaluating various options return Holders Technology Group (“The Group”) to profitability. As a result of this review some changes to our management team were made, coupled with a significant restructuring programme and the closure of an unprofitable division. A number of sales staff have been changed and investments made to enhance our plant and machinery. Inevitably changes of this nature impose a major short term cost but we believe they are essential to achieving our goal of restored profitability. The overall Group result, excluding restructuring costs, was broadly similar to the preceding year with revenue increasing by 1.7% from £11.2 to £11.4m. The 2016 year did not include any revenue from our former Indian joint venture which we exited in 2015 but the impact of the stronger Euro following the EU referendum in June had a significant offsetting impact on the 2016 result. The impact of the referendum result is explained in more detail in the Financial Review. Total LED revenues amounted to £3.0m (2015: £2.9m). Combined operating losses before restructuring costs of £67,000 totalled £275,000 (2015: loss of £26,000). The LED divisions made an operating loss after restructuring costs of £342,000 (2015: £26,000). The various LED elements of our business had very mixed results but taken together they were behind our expectations. While the UK division, Holders Components, achieved growth in both revenue and profitability and Holders Germany maintained its position, NRGstar saw a marked decline as did Opteon Germany. Action has been taken to change the sales teams in a number of these entities and Opteon Germany has been closed. Last year I reported that the Group faced a potential EU Cross Border Group Relief claim totalling £192,000 and that we had fully provided for this amount in that year’s accounts. While some of the claim has been agreed a balance of £126,000 is still subject to further discussion. 2016 was a difficult year for the Group but our staff showed commitment and support throughout the year for which we thank them. The Group operating result before impairment and restructuring costs was a loss of £191,000 (2015: operating and restructuring costs increased the operating loss to £374,000 (2015: £151,000). loss £126,000). Impairment The PCB divisions together had revenues of £8.3m (2015: £8.3m) and achieved an operating profit of £115,000 (2015: loss £3,000) before restructuring costs of £116,000. Including restructuring and impairment costs, the PCB divisions made an operating loss of £1,000 (2015: loss £28,000). Our German operations remain the predominant element of the Group’s PCB sales, the second half of the year saw some benefit from the restructuring programme and the operations were profitable. The UK PCB operations, as anticipated, saw a reduction in revenue but the major changes made within this entity enabled it to achieve a small positive contribution for the year. it confronts. The Board has a continuing belief in the Group’s ability to overcome the difficulties is heartened by the improved PCB performance, and by the customer interest in the new “smart lighting” products added into the LED divisions. Given this belief the Board considers it appropriate to recommend a final dividend of 0.25p for the 2016 year. initial signs of It R W Weinreich Executive Chairman 16 February 2017 Holders Technology plc | Annual Report & Accounts 2016 1 STRATEGIC REPORT Operating review Corporate strategy long financial The board seeks to enhance shareholder value over the term, whilst maintaining a medium to Where an conservative is opportunity to identified, this is addressed within the bounds of internally generated cash flow and bank facilities. increase the Group’s position framework. 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 is dominant in the production of consumer-related electronics. Holders continues to pursue a 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 premium product range for our selected markets, supported by strong technical support and industry knowledge. In addition, Holders fulfil customer provides bespoke solutions requirements. to Market Overview The overall PCB market in 2016 remained challenging. Our market position in Germany remains strong, and is stable in the UK. With the acceptance of LEDs in the marketplace and an understanding of the energy saving benefits, the market has moved to developing solutions for Smart Lighting and incorporating lighting within the ‘Internet of Things’. Holders is well placed in offering solutions which incorporate this smart, wireless technology and are working with several suppliers, one of which was awarded ‘Smart Controls Product of 2016’. PCB operations PCB Strategic Review During the year, a strategic review of the PCB businesses was undertaken in view of their reduced profitability. As a result of the review, both businesses were restructured to improve efficiency. This led to one-off costs of £116,000 during the year. Excluding these one-off costs, PCB segment profitability improved by £143,000 compared to 2015. 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. UK revenues reduced from £1.9m in 2015 to £1.4m in 2016. Germany The German PCB industry is dominated by demand from the automotive and industrial sectors. 2016 revenues in sterling terms increased from £6.4m to £7.0m, mainly due to the strengthening Euro. LED & Lighting solutions 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. During 2016, the division benefited from an improved product range, and achieved good growth. Holders Technology plc | Annual Report & Accounts 2016 2 STRATEGIC REPORT Operating review (continued) NRGstar offers a range of energy efficient lighting technologies targeted at the retail and commercial segments. Results for 2016 were disappointing; revenue fell compared to 2015. In the second half, the sales team was strengthened and new products introduced. 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 similar revenue in 2016 compared to 2015. The sales team was strengthened during the year and the benefits of this are expected to accrue in 2017. The Opteon division sold finished goods predominantly to the wholesale market. Revenue decreased significantly during the year and the business was closed at the year end. Closure costs totalled £67,000. We look forward to an increase in growth in the LED businesses, as our expanded sales forces benefit from increasing specification of products in repeating projects. Victoria Blaisdell Group Managing Director 16 February 2017 Holders Technology plc | Annual Report & Accounts 2016 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 increased from £11.2m to £11.4m. Overall PCB revenue increased by 0.4%, and LED revenue increased by 5.3%. 2016 revenue included the impact of the stronger Euro/ sterling exchange rate which added £0.8m to Group revenue. 2015 revenue, however, included £0.1m of revenue from the India Joint Venture which ceased at the end of 2015. If these two factors are eliminated, the volume revenue movement on a constant currency basis, was a £0.4m reduction (4.0%). Profitability The operating result before non-trading items was a loss of £191,000 compared to a loss of £126,000 in 2015. The gross profit margin was 25.0% compared to 25.0% in 2015. Total administrative expenses before restructuring and impairment costs increased by £97,000 compared to 2015, however this figures includes a £167,000 increase arising from the stronger Euro. If this is eliminated the movement was a reduction of £70,000. On a like for like basis, the administration cost as a proportion of revenue increased from 23.7% in 2015 to 24.3% in 2016. Additionally, there were £183,000 of restructuring costs relating to terminated employment contracts, stock provisions and legal costs. The operating result after these items was a loss of £374,000. Taxation As announced in October 2015, the Group has a potential UK tax liability in respect of EU Cross Border Group Relief (“CBGR”) claims relating to its former Swedish and Dutch operations. The remaining liability, estimated at up to £126,000, was fully provided for in the 2015 accounts, although the Board believes a lower amount may be payable when a final settlement is agreed. Post tax result The loss for the financial year after tax, attributable to equity shareholders was £0.4m (2015: loss of £0.4m). The basic loss per share from continuing business was 9.72p (2015: loss 9.16p per share) and the fully diluted loss per share was 9.72p (2015: loss per share 9.16p). Dividends The board proposes a final dividend of 0.25p per share to be paid on 23 May 2017 to shareholders on the register on 5 May 2017. Including the 0.25p interim dividend already paid on 11 October 2016 the total dividend for 2016 will be 0.50p (2015: 0.50p). 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 limits. Credit insurance is used for UK and European customers where it is available. Holders Technology plc | Annual Report & Accounts 2016 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 £2.5m in 2015 to £2.4m in 2016. The Group maintains overdraft and trade financing facilities with its banks to meet short term financing requirements during the year. At 30 November 2016, the Group had net cash of £0.8m compared with £0.4m at the previous year end. At 30 November 2016 the Group had net liquid funds (trade and other receivables plus cash minus current liabilities) of £1.1m compared to £1.0m in the preceding year. Net assets per ordinary share at 30 November 2016 were £0.93 compared with £0.93 in 2015. 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. 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 £943,000 were held as detailed in note 19. in a The EU Referendum decision has resulted strengthening of the Euro against sterling. German operations (roughly 70% of Group revenue and 50% of Group assets), being Euro-based, have become more valuable in sterling terms. The UK operations (roughly 30% of Group revenue and 50% of Group assets) have import costs due to weaker experienced higher are sterling. However, our UK predominantly in the same currency position so that the UK competitive position has been unaffected. competitors Share Capital During the year, a total of 220,000 ordinary shares were allotted from the Treasury shareholding to Rudi Weinreich and Thomas Bray for total proceeds of £58,700. Net assets Net assets at the 2016 year-end were almost unchanged at £3,860,000 (2015: £3,870,000). In addition to the investment above, the Group benefited from £346,000 of exchange differences from Euro- based foreign operations, which eliminated most of the trading loss. 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 16 February 2017 STRATEGIC REPORT The Strategic Report on pages 1-5 was approved by the Board on 16 February 2017 and signed on its behalf by Paul Geraghty Group Finance Director 16 February 2017 Holders Technology plc | Annual Report & Accounts 2016 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 60 Gresham Street London EC2V 7BB Holders Technology plc | Annual Report & Accounts 2016 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 £395,000 (2015: loss £361,000). 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 23 May 2017 to shareholders on the register at close of business on 5 May 2017. The total dividend for the year, including the interim dividend of 0.25p (2015: 0.25p) per share paid on 11 October 2016, amounts to £20,000 (2015: £20,000), which is equivalent to 0.50p (2015: 0.50p) 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 2016 are set out in note 23 to the financial statements. Rudi Weinreich, aged 70, 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 44, 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 a large American telecom consulting company. Paul Geraghty, aged 56, 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 73, is the Senior Non-Executive Director, appointed in 1988. Substantial shareholdings At 13 February 2017 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 Thomas Bray Stockinvest Limited Hugh S Pearson Gregory Number % 520,000 275,000 235,000 200,000 171,500 161,290 12.50% 6.61% 5.65% 4.81% 4.12% 3.88% Holders Technology plc | Annual Report & Accounts 2016 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 24 April 2017. 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 139,672 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 415,955 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 2018. 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 2016 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 16 February 2017 Holders Technology plc | Annual Report & Accounts 2016 9 BOARD REPORTS Directors’ remuneration report The directors present the directors’ remuneration report for the financial year ended 30 November 2016. 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. Contributions are made to the 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 2016 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. independent. Board composition and responsibility During the year, the board comprised three executive directors and one non-executive director. None of the directors are 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 take independent legal advice at the company’s 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 2016 and details of each director’s attendance. Number held R Weinreich V Blaisdell D Mahony P Geraghty Board 11 11 11 11 11 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 2016 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 limits of authority covering key financial commitments including capital expenditure and recruitment;  identification and management of key business risks. The board continually reviews the effectiveness of other internal controls, including financial, operational, compliance controls and risk management. 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 capital expenditure. include annual budgets, detailed appraisals and review procedures, levels of authority and due diligence requirements where businesses are being acquired. These 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 2016 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 2016 which comprise the Group income statement, the Group statement of comprehensive income, the Group and Company statements of changes in equity, the 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 2016 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 16 February 2017 Holders Technology plc | Annual Report & Accounts 2016 13 FINANCIAL STATEMENTS Group income statement for the year ended 30 November 2016 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 2016 £’000 11,380 (8,539) 2,841 (399) (2,749) (183) - 116 (374) 3 (7) (378) (17) (395) 2015 £’000 11,195 (8,396) 2,799 (364) (2,652) - (25) 91 (151) 1 (16) (166) (195) (361) (9.72p) (9.72p) (9.72p) (9.16p) (9.16p) (9.16p) Group statement of comprehensive income for the year ended 30 November 2016 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 2016 £’000 (395) 346 (49) 2015 £’000 (361) (246) (607) Holders Technology plc | Annual Report & Accounts 2016 14 FINANCIAL STATEMENTS Statements of changes in equity for the year ended 30 November 2016 Group 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 Dividends Shares issued Transactions with owners Loss for the year Exchange differences on translating foreign operations Total comprehensive income for the year Balance at 30 November 2016 Share capital Share premium £'000 416 £'000 1,531 - - - - - - - - - - - - 416 1,531 - - - - - - - 59 59 - - - 416 1,590 Capital redemption reserve £'000 1 - - - - - - 1 - - - - - - 1 Translation reserve Retained earnings Total equity £'000 34 - - - - (246) £'000 2,512 (20) 3 (17) (361) - £'000 4,494 (20) 3 (17) (361) (246) (246) (361) (607) (212) 2,134 3,870 - - - - 346 346 134 (20) - (20) (395) - (395) (20) 59 39 (395) 346 (49) 1,719 3,860 Company Balance at 30 November 2014 Profit and total comprehensive income for the year Dividends Share-based payment charge Balance at 1 December 2015 Profit and total comprehensive income for the year Dividends Shares issued Share-based payment charge Balance at 30 November 2016 Share capital Share premium £'000 416 £'000 1,531 - - - 416 - - - - 416 - - - 1,531 - - 59 - 1,590 Capital redemption reserve £'000 Retained earnings £'000 1 - - - 1 - - - - 1 51 138 (20) 3 172 437 (20) - - 589 Total equity £'000 1,999 138 (20) 3 2,120 437 (20) 59 - 2,596 Holders Technology plc | Annual Report & Accounts 2016 15 FINANCIAL STATEMENTS Balance sheets at 30 November 2016 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 2016 £’000 2015 £’000 Company 2016 £’000 2015 £’000 12 13 14 15 21 16 17 18 20 21 22 318 400 - - 9 727 2,365 1,790 - 781 4,936 (1,457) (122) (1,579) 3,357 (219) (5) (224) 3,860 416 1,590 1 1,719 134 3,860 316 327 - - 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 - 6 2,291 - - 2,297 - 592 - 318 910 (611) - (611) 299 - - - 2,596 416 1,590 1 589 - 2,596 - 4 2,291 15 - 2,310 - 433 - 25 458 (627) (21) (648) (190) - - - 2,120 416 1,531 1 172 - 2,120 The financial statements were approved by the Board on 16 February 2017 and signed on its behalf by: R W Weinreich Director Holders Technology plc | Annual Report & Accounts 2016 16 FINANCIAL STATEMENTS Statements of cash flows for the year ended 30 November 2016 Cash flows from operating activities Operating loss Share-based payment charge Depreciation Decrease/ (Increase) in inventories (Increase)/ decrease in trade and other receivables (Decrease)/ increase in trade and other payables Cash generated from operations Corporation tax paid Net cash generated from operations Cash flows from investing activities Purchase of property, plant, and equipment Proceeds from sale of property, plant, and equipment Proceeds from sale of joint venture Dividends received from Group undertakings Interest received Net cash (used in)/generated from investing activities Cash flows from financing activities Interest paid Proceeds from sale of shares Equity dividends paid Net cash generated from/ (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 2016 £’000 2015 £’000 Company 2016 £’000 2015 £’000 (374) - 74 192 (298) 824 418 (48) 370 (110) - 22 - 3 (85) (7) 59 (20) 32 317 443 21 781 (151) 3 86 (102) 295 (86) 45 (7) 38 (161) 3 - - 1 (157) (16) - (20) (36) (155) 634 (36) 443 (24) - 2 - 41 (16) 3 (1) 2 (4) - 50 200 6 252 - 59 (20) 39 293 25 - 318 (92) 3 8 - 17 65 1 (1) - (4) - - - 4 - - - (20) (20) (20) 45 - 25 Holders Technology plc | Annual Report & Accounts 2016 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 has not adopted any new standards or amendments that have a significant impact on the Group’s results or financial position. 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 (EU effective date 1 January 2018) IFRS 15 Revenue from contracts with customers including amendments to IFRS 15 (EU effective date 1 January 2018) IFRS 16 Leases (Not yet endorsed by EU) Holders Technology plc | Annual Report & Accounts 2016 18 FINANCIAL STATEMENTS Notes to the financial statements (continued) 2. Accounting policies (continued)      Amendments to IAS 12: Recognition of Deferred Tax Assets for Unrealised Losses (Not yet endorsed by EU) Amendments to IAS 7: Disclosure Initiative (Not yet endorsed by EU ) Clarifications to IFRS 15 Revenue from Contracts with Customers (Not yet endorsed by EU) Amendments to IFRS 2: Classification and Measurement of Share-Based Payments Transactions (Not yet endorsed by EU) Annual Improvements to IFRS 2016-16 Cycle Relating to IFRS 12 Disclosure of Interest in other entities (Not yet endorsed by 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. Holders Technology plc | Annual Report & Accounts 2016 19 FINANCIAL STATEMENTS Notes to the financial statements (continued) 2. Accounting policies (continued) 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 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 2016 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 2016 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. Independent actuaries annually calculate the defined benefit obligation. 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 2016 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 and investment in subsidiaries 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 2016 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 Finance Director manages the Group’s treasury activities. 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 £943,000 were held as described in note 19. Holders Technology plc | Annual Report & Accounts 2016 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 (discontinued in 2015).  LED, which distributes LED-related components, lighting products and lighting solutions. This includes Holders Components UK and Germany, NRGstar UK, and Opteon Germany (closed in 2016). These operating segments are monitored and strategic decisions are made based on segment operating results. Segment information can be analysed as follows for the reporting periods under review: PCB LED Other Total 2016 £’000 8,336 (6,484) 1,852 (288) (1,498) Revenue Cost of sales Gross profit Distribution costs Administrative expenses Restructuring costs Impairment costs Other operating income/(expenses) Segment operating loss Other segmental information Depreciation (Note 13) Segment assets Segment liabilities 7,669 (3,126) (116) - 49 (1) 66 2016 £’000 2015 £’000 2015 £’000 2,891 (1,945) 946 (92) (904) - - 2015 £’000 8,304 (6,451) 1,853 (272) (1,707) - - 98 (28) 2016 £’000 3,044 (2,055) 989 (111) (1,161) (67) - 8 (342) - - - - (90) - - 24 (26) 59 (31) 2016 £’000 11,380 (8,539) 2,841 (399) (2,749) (183) - 116 (374) 2015 £’000 11,195 (8,396) 2,799 (364) (2,652) - (25) 91 (151) - - - - (41) - (25) (31) (97) 73 6 5 2 8 74 86 6,509 (1,970) 2,389 (3,677) 1,427 (2,172) (4,395) 5,000 (2,686) 2,762 5,663 (1,803) 5,250 (1,380) “Other” amounts relate to central Group activities, which are not identifiable to the operating segments. Holders Technology plc | Annual Report & Accounts 2016 25 FINANCIAL STATEMENTS Notes to the financial statements (continued) 5. Segment reporting (continued) Analysis of external revenue by geographic region UK 2016 £’000 2015 £’000 Rest of Europe 2016 £’000 2015 £’000 Asia 2016 £’000 2015 £’000 Total 2016 £’000 2015 £’000 Revenue - PCB - LED - - - - Non-current assets External revenue is allocated to regions based on where it originates from. No customer contributed more than 10% of external revenue. 6,269 1,382 7,651 443 6,942 1,257 8,199 187 1,394 1,787 3,181 540 1,886 1,509 3,395 221 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) 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 - Audit related assurance services - Tax compliance services - Tax advisory services Operating leases - land and buildings Operating leases – motor vehicles Exchange profit Restructuring costs Impairment of investment in Joint Venture 149 - 149 (5) 8,336 3,044 11,380 727 8,304 2,891 11,195 659 2016 £’000 3 (7) 2016 £’000 8,255 79 74 18 27 2 8 9 136 26 (94) 183 - 2015 £’000 1 (16) 2015 £’000 8,049 49 86 12 32 - 10 - 123 57 (83) - 25 Holders Technology plc | Annual Report & Accounts 2016 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 2016 £’000 - 17 17 - 17 2015 £’000 6 179 185 10 195 Tax reconciliation The tax for the period is higher (2015: higher) than the standard rate of corporation tax in the UK, effectively 20.00% (2015: 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% (2015: 20.00%) Effects of: Differences between capital allowances and depreciation Adjustments in respect of prior years Taxation losses Other temporary differences Taxation 2016 £’000 (378) (76) - 17 64 12 17 2015 £’000 (166) (33) 4 176 35 13 195 9. Profit 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 £17,000 (2015 profit: £138,000). 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 2016 or 2015 as losses were recorded by the Group. Holders Technology plc | Annual Report & Accounts 2016 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 2015 of 0.25p (year ended 30 November 2014 final dividend: 0.25p) Interim dividend paid in respect of the year of 0.25p (2015: 0.25p) Amounts recognised as distributions to equity holders 2016 Number 4,063,813 - 4,063,813 2015 Number 3,939,551 - 3,939,551 2016 Pence per share (9.72) (9.72) 2015 Pence per share (9.16) (9.16) 2016 £’000 10 10 20 2015 £’000 10 10 20 The directors propose a final dividend in respect of the year ended 30 November 2016 of 0.25p per share. If approved by shareholders, it will be paid on 23 May 2017 to shareholders registered on 5 May 2017. 12. Goodwill Group Cost At 1 December Currency translation At 30 November Analysis by cash generating unit PCB LED 2016 £’000 316 2 318 £’000 146 172 318 2015 £’000 318 (2) 316 £’000 144 172 316 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 2016 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 2,014 193 110 (77) 2,240 1,687 146 74 (67) 1,840 400 327 Short leasehold land and buildings £’000 92 - - - 92 92 - - - 92 - - Company Office equipment £’000 Total £’000 57 - 4 - 61 53 - 2 - 55 6 4 57 - 4 - 61 53 - 2 - 55 6 4 Total £’000 2,106 193 110 (77) 2,332 1,779 146 74 (67) 1,932 400 327 Cost At 30 November 2015 Currency translation Additions Disposals At 30 November 2016 Depreciation At 30 November 2015 Currency translation Provided in year Disposals At 30 November 2016 Net book value At 30 November 2016 At 30 November 2015 Holders Technology plc | Annual Report & Accounts 2016 29 FINANCIAL STATEMENTS Notes to the financial statements (continued) 14. Investments in subsidiaries Cost At 1 December 2014 At 1 December 2015 At 30 November 2016 Shares £’000 771 771 771 Loans £’000 1,520 1,520 1,520 Total £’000 2,291 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. 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. An impairment charge of £25,000 was recognised in the Group accounts at 30 November 2015. Cost Investment at 30 November 16. Inventories Raw materials and consumables Goods for resale Company 2016 £’000 - 2015 £’000 15 Group Company 2016 £’000 1,076 1,289 2,365 2015 £’000 1,164 1,369 2,533 2016 £’000 - - - 2015 £’000 - - - Holders Technology plc | Annual Report & Accounts 2016 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 2016 £’000 1,417 (9) 1,408 - 163 219 1,790 2015 £’000 1,339 (24) 1,315 - 84 157 1,556 2016 £’000 - - - 561 19 12 592 2015 £’000 - - - 188 229 16 433 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 2016 £’000 24 - 14 (11) - (18) 9 2016 £’000 299 56 33 3 - 391 Group Company 2016 £’000 600 - 239 111 507 1,457 2015 £’000 310 - 185 70 410 975 2016 £’000 14 558 - - 39 611 2015 £’000 53 (3) 7 - - (33) 24 2015 £’000 270 28 8 8 - 314 2015 £’000 5 573 - - 49 627 Holders Technology plc | Annual Report & Accounts 2016 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 at fair value Financial liabilities Trade and other payables Financial liabilities at amortised cost Derivatives Liabilities at fair value through profit and loss Net financial assets Group 2016 £’000 781 1,571 2,352 1,218 1,218 - - 1,134 2015 £’000 443 1,399 1,842 790 790 - - 1,052 Company 2016 £’000 2015 £’000 318 180 498 53 53 - - 445 25 217 242 54 54 - - 188 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 £’000 283 694 241 1,218 225 389 167 9 790 Net financial assets / (liabilities) £’000 726 342 66 1,134 696 335 (33) 54 1,052 Company Financial liabilities £’000 47 6 - 53 52 2 - - 54 Net financial assets / (liabilities) £’000 248 197 - 445 (36) 224 - - 188 Financial assets £’000 295 203 - 498 16 226 - - 242 Financial assets £’000 1,009 1,036 307 2,352 921 724 134 63 1,842 Sterling Euro US dollar At 30 November 2016 Sterling Euro US dollar Indian rupee At 30 November 2015 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 2016 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 Euro US dollar Indian rupee Total Euro US dollar £’000 £’000 £’000 £’000 £’000 £’000 Sterling At 30 November 2016 Sterling 342 66 - 408 289 At 30 November 2015 335 (33) 54 356 224 - - Total £’000 289 224 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 £191,000 lower if sterling strengthened by 10 per cent and £191,000 higher if sterling weakened by 10 per cent. Holders Technology plc | Annual Report & Accounts 2016 33 FINANCIAL STATEMENTS Notes to the financial statements (continued) 19. Financial instruments (continued) Group 2016 Effect of sterling strengthening by 10% Net financial assets/(liabilities) Denominated in sterling Not denominated in sterling Net financial assets As reported £’000 726 413 1,139 Rate +10% £’000 - (37) (37) Profit £’000 - 34 34 Equity £’000 - (191) (191) Rate -10% £’000 - 45 45 Effect of sterling weakening by 10% Profit £’000 - (34) (34) Equity £’000 - 191 191 Effect of sterling strengthening by 10% Effect of sterling weakening by 10% 2015 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 Profit £’000 - (10) (10) Equity £’000 - 174 174 Company 2016 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 289 156 445 - (26) (26) - (26) (26) - - - Rate -10% £’000 - (32) (32) Profit £’000 Equity £’000 - (32) (32) - - - Effect of sterling strengthening by Effect of sterling weakening by 2015 Net financial assets/(liabilities) Denominated in sterling Not denominated in sterling Net financial assets As reported £’000 (36) 224 188 Rate +10% £’000 - (20) (20) 10% Profit £’000 - (20) (20) Equity £’000 - - - Rate -10% £’000 - (25) (25) 10% Profit £’000 - (25) (25) Equity £’000 - - - Holders Technology plc | Annual Report & Accounts 2016 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 2016 and 30 November 2015, 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 2016 amounting to £1,218,000 (2015: £790,000) 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 2016 amounted to £100,000 (2015: £100,000). 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 2016 £’000 752 819 - 1,580 2015 £’000 709 679 35 1,423 2016 £’000 400 161 - 561 2015 £’000 188 - - 188 Holders Technology plc | Annual Report & Accounts 2016 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 £943,000 at 30 November 2016 (2015: £27,000). When appropriate during the year, contracts were taken out to mitigate trade payables denominated in foreign currencies. The fair value of these instruments was minus £1,000 (2015: £nil). 20. Retirement benefit liability Group At 1 December 2014 Currency translation Change in actuarial assumptions Utilised At 1 December 2015 Currency translation Change in actuarial assumptions Utilised At 30 November 2016 Retirement benefit liability £’000 201 (14) (16) 10 181 24 20 (6) 219 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 2016 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% (2015: 20.0% to 30.0%). The movement on the deferred tax asset account is as shown below: At 1 December – net deferred tax assets Income statement credit/(charge) At 30 November Group Company 2016 £’000 5 (1) 4 2015 £’000 15 (10) 5 2016 £’000 - - - 2015 £’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 2014 (Charged)/credited to income statement At 30 November 2015 (Charged)/credited to income statement At 30 November 2016 Pension liability £’000 35 (19) 16 (7) 9 Total £’000 35 (19) 16 (7) 9 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 2016 37 FINANCIAL STATEMENTS Notes to the financial statements (continued) 21. Deferred tax (continued) Deferred tax liabilities Group At 1 December 2014 Transfer from income statement At 30 November 2015 Transfer from income statement At 30 November 2016 Deferred tax liabilities Company At 1 December 2014 Credited to income statement At 30 November 2015 At 30 November 2016 The Company had no deferred tax assets. 22. Share Capital Accelerated capital allowances £’000 20 (9) 11 (6) 5 Accelerated capital allowances £’000 1 (1) - - Authorised 6,000,000 ordinary shares of 10p each (2015: 6,000,000) Allotted and fully paid ordinary shares of 10p each At 30 November 2015 and 30 November 2016 2016 £’000 600 2015 £’000 600 Number of shares Number of shares 4,159,551 4,159,551 Holders Technology plc | Annual Report & Accounts 2016 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 2016 £’000 1,960 336 69 - 2,365 2015 £’000 1,788 295 79 (17) 2,145 Average monthly number of permanent employees, including executive directors: Group Administration and sales Service and fabrication Part-time 2016 £’000 172 17 50 - 239 2016 Number 34 29 63 5 68 2015 £’000 250 20 59 (17) 312 2015 Number 38 36 74 4 78 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 15 78 17 70 180 £’000 4 - - 2 6 2016 £’000 19 78 17 72 186 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 2016 £’000 22 28 50 2015 £’000 27 70 23 65 185 2015 £’000 22 26 48 Holders Technology plc | Annual Report & Accounts 2016 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 2016 1,871,202 20,000 34,102 2015 1,851,202 20,000 34,102 The shareholdings are all beneficial. Mr R. Weinreich purchased 20,000 ordinary shares on 20 May 2016. Directors’ interests in share options At start of year or on date of appointment 12,500 25,000 46,598 38,444 47,000 37,500 207,042 No. of options granted / (exercised) during year - - - - - - - V M Blaisdell V M Blaisdell V M Blaisdell P K I Geraghty V M Blaisdell P K I Geraghty No. of options lapsed during the year At end of year Exercise price Expiry date Date from which exercisable 12,500 - 46,598 38,444 - - 97,542 - 25,000 - - 47,000 37,500 109,500 93.5p 123.18p 10.0p 10.0p 10.0p 10.0p 28/05/13 21/07/14 26/03/15 26/03/15 02/05/16 02/05/16 27/05/16 21/07/17 26/03/16 26/03/16 02/05/17 02/05/17 The share price at 30 November 2016 was 32.5p (2015: 30.0p) whilst during the year the high and low prices were 33.5p and 22.5p. 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 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. 2016 £’000 548 63 - - 611 2015 £’000 546 61 - 3 610 Holders Technology plc | Annual Report & Accounts 2016 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 2016 No 331,875 - (192,203) - - 139,672 2015 No 364,375 - (32,500) - - 331,875 At the year-end 109,500 share options were exercisable and 30,172 share options were outstanding. 24. Financial commitments Capital commitments There were no capital expenditure commitments at 30 November 2016 (2015: 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 2016 £’000 2015 £’000 185 673 - 14 27 - - 161 618 10 20 35 - - 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 93.5p 123.18p 117.15p 70.0p 63.8p 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 2016 - 25,000 - 84,500 30,172 Dates when exercisable Number of shares Holders Technology plc | Annual Report & Accounts 2016 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 30,172 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 21 July 2011 123.18 135.5 1 25,000 3 22% 3 3.5 1.03% 4.8% 25.0% 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 nil charge (2015: charge of £3,000) 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 2016 £’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 2016 £’000 284 14 2015 £’000 9 - - 9 2015 £’000 452 13 Holders Technology plc | Annual Report & Accounts 2016 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 24 April 2017 at 11.30 a.m. for the following purposes: Ordinary business 1. 2. 3. 4. 5. 6. To receive and adopt the accounts of the Company together with the directors’ and auditors’ reports thereon for the year ended 30 November 2016. To declare a final dividend in respect of the year ended 30 November 2016. To re-elect V Blaisdell as a director. To re-elect D Mahony as a director. To appoint T Bray 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: 7. 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 2018, 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: 8. 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 2016 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 2018 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. 9. 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 415,955 (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 2018, 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 16 February 2017 Registered Office: 27-28 Eastcastle Street, London W1W 8DH Holders Technology plc | Annual Report & Accounts 2016 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, Neville House, 18 Laurel Lane, Halesowen, West Midlands, B63 3DA not less than 48 hours (excluding non-working days) 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 Thursday 20 April 2017 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 Thursday 20 April 2017 shall be disregarded in determining the rights of any person to attend and vote at the meeting. As at 16 February 2017 (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. The total voting rights in the Company as at 16 February 2017 are 4,159,551. 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 Thursday 20 April 2017. For this purpose, the time of receipt will be taken to be the time (as determined by the timestamp applied to the message by the CREST 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 Director. Holders Technology plc | Annual Report & Accounts 2016 45 AGM Five year summary Group revenue – continuing Group revenue – discontinued Gross profit Distribution costs Administrative expenses Restructuring costs and impairment charges Other operating income 2016 2015 2014 2013 £’000 11,380 £’000 11,195 £’000 13,478 2,841 (399) (2,749) (183) 2,799 (364) (2,652) (25) 3,254 (414) (3,167) (67) £’000 14,265 990 3,467 (381) (3,049) - 2012 Restated £'000 13,631 1,974 3,584 (376) (3,275) - 116 91 37 68 11 Group operating (loss)/ profit Finance income Finance expenses (374) 3 (7) (151) 1 (16) (357) 2 (7) (Loss)/ profit before taxation (378) (166) (362) Taxation (17) (195) (11) 105 4 (12) 97 (24) (56) 1 (13) (68) (43) Profit after tax (395) (361) (373) 73 (111) 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 (9.72p) (9.72p) (9.16p) (9.16p) (9.47p) (9.47p) 1.85p 1.78p (2.82p) (2.82p) 0.50p 0.50p 1.25p 2.0p 2.0p 3,860 3,870 4,494 5,053 5,192 Holders Technology plc | Annual Report & Accounts 2016 46 

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