Livent Annual Report 2017

← All annual reports

FY2017 Annual Report · Livent

Loading PDF…

J A M E S L A T H A M P L C

ANNUAL REPORT & ACCOUNTS 2017

Contents

Summary and Highlights

1 Financial Highlights and Calendar
2 Chairman’s Statement

Strategic Report

James Latham plc and Our Objectives

4 Outline of the Strategic Report
5
6 Key Performance Indicators
7 Operating Review
10 Financial Review
12 Principal Risks and Uncertainties
14 Corporate Responsibility

Corporate Governance

17 Corporate Governance Report
19 Directors and Advisors
20 Directors’ Remuneration Report
24 Directors’ Report
27 Statement of Directors’ Responsibilities
28

Independent Auditor’s Report

Financial Statements

29 Consolidated Income Statement
29 Consolidated Statement of Comprehensive Income
30 Consolidated and Company Balance Sheet
31 Consolidated Statement of Changes in Equity
32 Company Statement of Changes in Equity
33 Consolidated and Company Cash Flow Statement
34 Notes forming part of the Group Accounts

59 Notice of the Annual General Meeting
61 The Latham Group

Financial Highlights and Calendar

for the year ended 31 March 2017

Financial Highlights

Year to 31 March

Turnover

Operating proﬁt

Operating margin

Proﬁt before taxation

Earnings per share

Total ordinary dividend per share

Equity shareholders’ funds

Cash and cash equivalents

2017
£000

2016
Increase
£000 (Decrease)

198,808

185,929

14,179

7.1%

13,827

56.0p

15.35p

73,258

17,246

13,241

7.1%

12,876

53.7p

14.3p

71,183

16,832

2015
£000

174,855

10,564

6.9%

7.1%

----

6.0%

7.4%

4.3%

7.3%

2.9%

2.5%

10,107

40.3p

12.5p

62,231

12,501

Turnover (£000’s)

Adjusted EPS

Dividend

9
2
9
,
5
8
1

5
5
8
,
4
7
1

8
0
8
,
8
9
1

7
1
1
,
3
6
1

9
6
0
,
3
4
1

p
7
.
3
5

p
0
.
6
5

p
5
3
.
5
1

p
3
.
4
1

p
5
.
2
1

p
4
.
1
1

p
2
.
0
1

p
3
.
0
4

p
9
.
6
3

p
7
.
8
2

2013

2014

2015

2016

2017

2013

2014*

2015

2016

2017

2013

2014

2015

2016

2017

* Adjusted for an exceptional pension credit

Financial Calendar

Record date for ﬁnal dividend 2017

AGM

Payment of ﬁnal dividend

Interim 2017/18 results announcement

Interim dividend expected payment date

Preliminary announcement of 2017/18 results

AGM 2018

4 August 2017

23 August 2017

25 August 2017

30 November 2017

26 January 2018

28 June 2018

22 August 2018

JAMES LATHAM PLC ANNUAL REPORT 2017

Chairman’s Statement

I am pleased to report good trading results for the financial year to
31 March 2017.

Group revenue for the financial year to 31 March 2017 was £198.8m,
6.9% up on last year’s £185.9m. The operating profit was £14.2m, up
£1.0m from £13.2m.

Finance income was £56,000 against £56,000 last year. Finance costs,
which are principally interest on the pension scheme deficit as calculated
under IAS19 (revised), were £408,000 against £421,000 last year

Pre-tax profit was £13.8m, up £0.9m from £12.9m last year. Post-tax profit
for the year is £11.0m, up from last year’s figure of £10.5m.

Earnings per share were 56.0p compared to last year’s 53.7p.

Net assets (total equity) were £73.3m compared to £71.2m last year.

At the year end the Group’s cash reserves stood at £17.2m compared to
£16.8m last year.

Final dividend
The directors recommend a final dividend of 10.85p per ordinary share
(2016 10.3p). The final dividend will be paid on 25 August 2017 to
shareholders on the register at the close of business on 4 August 2017.
The shares will become ex-dividend on 3 August 2017.

The total dividend per ordinary share of 15.35p for the year is covered
3.6 times by earnings (2016: 3.8 times).

Financial year 2016/17
The Group’s results are based on the trading of Lathams Limited, a
specialist panel and timber distributor. Revenue continued to grow
during the year due to higher prices resulting from the weakness of
sterling against both the dollar and the euro and to increased volumes
ex-warehouse. Year on year increases in both revenue and volume for
the fourth quarter was particularly encouraging. The gross margin, before
warehouse costs, was down by 0.3 percentage points, due to competitive
pressures and higher stock replacement costs.

Panel and timber prices rose sharply during the year, due to the weakness
in sterling. Focus panel products including melamine panels and door
blanks, continued to show good growth. Our high quality certified
sustainable hardwood for the joinery sector also showed good growth.

Overheads have been well controlled in spite of higher volumes through
the warehouses and bad debts were low overall for the year.

Peter Latham
Chairman, James Latham plc

JAMES LATHAM PLC ANNUAL REPORT 2017

Pension Scheme
At 31 March 2017 the deficit of the defined benefit
scheme under IAS19 (revised) was £16.6m up £6.9m
compared with £9.7m last year, but down from £23.2m at
30 September 2016. These variations are the result of the
changes in the corporate bond yield used to calculate the
present value of the scheme’s liabilities, offset by the
increases in the value of scheme assets, and reflects the
volatility of the accounting for this scheme.

Current financial year 2017/18
This year like for like revenue, both in panels and timber, is
3% higher for April and May than the corresponding period
last year which had two more working days. However the
gross margin is still under pressure.

Development strategy
The directors continue to identify opportunities for growth
and to introduce and promote new products. Construction
of the new, up-graded site for our Yate operation is nearing
completion and the move is planned for July. Negotiations
are at an advanced stage for the construction of a new site
for our Wigston unit and relocation is expected by the end
of the financial year.

The Group is in a strong financial position to take
advantage of opportunities for further business growth, as
and when they arise.

Chairman’s Statement

Directors and staff
From 23 August 2017 I will stand down as Non-Executive
Chairman. Nick Latham, currently Deputy Chairman, will
take over as Executive Chairman. Nick has been actively
involved is establishing our successful newer branches
and has been responsible for the development of our
timber products.

In terms of corporate structure, there is a clear division of
responsibilities between the main board, which determines
strategy and exercises corporate governance and the
trading board of Lathams Limited, chaired by Chris Sutton,
which sets and monitors operations policy. Both boards
are well balanced in terms of skills and experience. Their
support throughout the year has been invaluable.

While the business is organised to give as much local
autonomy as possible and staff are targeted at depot
level, groups of senior staff meet regularly to coordinate
purchasing and sales strategy. Group product champions
look after key product ranges backed by product
champions at each depot.

I have been Chairman for more than 10 years and have
seen a number of significant changes in how the company
operates, both in terms of products sold and operating
procedures. Last year the Directors carried out a detailed
strategic review of how the company should progress over
the next 10 years and I am confident that an excellent
team is in place at all levels in the business to carry this
out. I would like to thank the Directors and everyone in
the group for their support over the years and for their
individual contribution to the year’s successful results.

Peter Latham
Chairman, James Latham plc

21 June 2017

JAMES LATHAM PLC ANNUAL REPORT 2017

Strategic Report

Introduction

Outline of the Strategic Report
The directors present their Strategic Report for the year ended 31 March 2017.
The Strategic Report encompasses the following information.

Page
5
6
7
10
12
14

James Latham plc and Our Objectives
Key Performance Indicators
Operating Review
Financial Review
Principal Risks and Uncertainties
Corporate Responsibility

The Strategic Report was approved by the board of directors on 21 June 2017
and signed on its behalf by:-

Peter Latham

David Dunmow

1 Kronospan’s Trends 2017 Collection. 2 Super Prime Walnut in a kitchen manufactured by Chambers Furniture.
3 Egger’s new range for 2017. 4 Charred Accoya .

JAMES LATHAM PLC ANNUAL REPORT 2017

Strategic Report

James Latham plc and Our Objectives

James Latham plc sets out to be the supplier of choice throughout the UK
for joinery, door and kitchen manufacturers, shopfitters and other market
sectors, offering a wide range of wood based panel products, natural acrylic
stone, hardwoods, high grade softwoods, flooring, cladding, decking and
plastics. We also supply commodity and specialist products to timber and
builders’ merchants. The company aims to increase the amount of legal and
sustainable product supplied into its marketplace.

The company traces its history back to James Latham who traded in exotic
hardwood in Liverpool in 1757. His son had established a business in
London by 1799. It was taken public in 1965 and the shares are now quoted
on the AIM market. The Latham family owns over half of the company
shares and five members of the Latham family, now in the 9th generation,
work in the business.

The company believes that to provide the service demanded, we need to
be close to our customers. We offer national coverage from ten locations,
as shown in The Latham Group map on page 61, as well as from various
port and storage locations around the UK. Having stock of product in the
right place at the right time is important to provide this service. Commodity
imports are held in ports including Tilbury, Liverpool and Grangemouth.
This stock can be delivered directly to customers for multi-pack orders, or
transferred to the depots for onward delivery. Around London we stock
Panel Products and Timber Products in separate warehouses whereas a
full range of products are held in our other locations around Great Britain.
We also hold a range of specialist products in Leeds for national distribution
and Leeds also offers an efficient delivery service to Ireland.

Our core values are Integrity, Shareholder Value, Empowerment,
Sustainability and Customer Focus.

The company is well respected in its industry and amongst its customers
and suppliers for its principled trading policies and its integrity.

The company’s objectives are:

• To maximise shareholder value over the medium term;

• To provide a safe working environment for

• To grow the business profitably;

our staff.

• To maintain its presence in timber based products but
to extend the product range to the existing customer
base from an extended distribution network.

• To increase sales of third party certified legal and

sustainable timber products.

• To improve service levels by upgrading

warehouse facilities to speed order picking and
to cope with an extended product range; and

• To employ well-trained, knowledgeable and

helpful staff.

JAMES LATHAM PLC ANNUAL REPORT 2017

Strategic Report

Key Performance Indicators

The group monitors its performance against the following Key Performance Indicators that we believe best reflect our
performance and progress. In addition to the KPI’s disclosed below, we have set out on page 15 the non-financial KPI,
monitoring the amount of timber certified as coming from sustainable and well-managed forests.

Turnover (£000’s)

Weight of product sold
per working day (tonnes)

Earnings per share
(pence)

9
2
9

,
5
8
1

5
5
8
,
4
7
1

8
0
8
,
8
9
1

8
3
9

2
7
9

5
9
9

7
.
3
5

0
.
6
5

3
.
0
4

2015 2016 2017

Turnover up 6.9%

Tonnes per working
day up 2.4%

2015 2016 2017

Earnings per share up
4.3%

Debtors days
average

Stock turn
(times)

Cash (£000’s)

4
.
2
5

3
.
1
5

0
.
1
5

2
.
6

0
.
6

5
.
5

2
3
8
,
6
1

6
4
2
,
7
1

1
0
5
,
2
1

2015 2016 2017

This figure is adjusted to take
account of customer credit
terms and is compared with
our target of 53 days

This figure is compared with our
target of 6.0 times and excludes
stock being processed in kilns

Cash balances
up £414,000

JAMES LATHAM PLC ANNUAL REPORT 2017

Strategic Report

Operating Review

Results for the year to 31 March 2017
The UK economy has continued to show steady growth,
although there are signs of a slow down following the
verdict in the European Union referendum. Our customers
though still appear busy and remain positive for the
immediate future.

Revenue for 2016/17 was £198.8m, £13m higher than the
previous year, reflecting improving volumes in both panels
and timber as well as product prices being above last year’s
level. Volume growth was achieved across both commodity
products and our specialised products.

The gross margin, the difference between the sales
values and the cost prices excluding warehouse costs,
was 0.3 percentage points down on the previous year.
Continuing competitive pressure in the commodity
markets as well as the impact on cost prices caused by
weakness in sterling, resulted in some lower margins
being achieved in the second half of the year.

Staff numbers have increased this year, mainly warehouse
and distribution staff. This includes investment in trainees,
which are important to ensure that we have new talent
coming through the business. We have also continued
to extend the working day by introducing longer shifts,
bringing along with it more warehouse staff. This enables
us to efficiently pick orders placed later in the day and
allow our vehicles to be loaded overnight for prompt starts
the next day. Increasingly next day delivery is expected by
our customers and our operations have to adapt to deal
with this. Overhead cost control though has remained
important and we continually look to improve efficiency
and productivity.

For management purposes, the group is organised into
one trading division, importing and distribution of wood
based and related materials, carried out in each of the ten
locations trading mainly in the United Kingdom. Within this
one segment performance in terms of revenue and trading
margin of the main product types are considered below.

The group’s strategy continues to be to target specific
market sectors on both added value, core and premium
grade products.

Our extensive stock holding of melamine, laminates and
veneered panels has enabled us to show good sales growth
in these areas. We will continue to invest in these ranges.

Plywood sales were very encouraging with merchants,
contractors and specifiers continuing to support our
policy of sourcing and stocking legal, certified and fit
for purpose brands. We have committed to our strategic

plywood suppliers in Malaysia, Indonesia, Uruguay,
Finland and the Baltic States by purchasing from them
on a rolling agreement basis. Garnica high quality poplar
plywood was added to our range towards the end of the
year and sales to date have been very encouraging.

MDF supplies were affected by an accident on one of
the production lines of a key supplier, but through our
contacts in the industry we made sure that the effect of
this on our customers was minimal. In spite of the difficult
supply position, we once again grew MDF volumes.

The demand for OSB increased significantly during the year
and we expect this will continue. OSB is a certified and fit
for purpose product that is able to be used in structural
and non-structural applications.

Door blank sales for our Flamebreak, Moralt and Halspan
brands have all grown. We offer a solution for applications
such as fire, thermal and acoustic blanks.

The Advanced Technical Panels team, with their wealth of
experience and knowledge, together with their extensive
product range had a strong year showing sales and volume
growth. Branded products include Buffalo Board®, which
continues to be specified. Kydex® has been successful,
being sold into new markets in the commercial sector.
Good growth has been achieved in the WISA range of
coated Birch Plywood. Additional sales resources were
allocated to the team to ensure that we could target and
develop new customers and markets.

The market for Hi-Macs® natural acrylic stone has been
extremely competitive leading to static values and margins
being under pressure. We continue to work on gaining
specifications with contractors, architects and designers.

Strong sales have been achieved in Florian Prime European
Oak. This product is of a consistently high quality which
has proved successful in the joinery sector. African volumes
are ahead of last year but margins in particular on Sapele,
came under pressure. Our policy remains to source
certified products although they are more expensive.

Demand for Accoya modified wood has been good
this year, in line with our expectations. Our focus is
on developing new users for the product following the
investment by our supplier in increased production
facilities. Sales of Accoya and Cedar cladding have grown
and we are winning more specifications. The latest addition
to our cladding range is Shou Sugi Ban Charred Accoya
which has been well received by architects and designers
visiting our showroom at the Business Design Centre.

JAMES LATHAM PLC ANNUAL REPORT 2017

Strategic Report

Operating Review

Composite decking sales have grown significantly as our
brand has gained more awareness.

During the year we visited key strategic suppliers in
North America, Malaysia, Indonesia, Finland, China,
Eastern and Western Europe. This was to further develop
personal and business relationships and to carry out
product and environmental audits.

LDT, our bulk timber pack operation, have
made a very useful contribution to group
profits, despite finding the importer and
merchant market for hardwoods very competitive.
We have made some progress in developing overseas
markets in Europe and have also invested in staff to
explore export markets in the Middle East for our full
range of products. As part of their ongoing development,
LDT will look to increase their product offering to the
importer and merchant sectors, whilst maintaining their
strict environmental policy.

We continue to develop our range of certified Forest
Stewardship Council (FSC) and Programme for the
Endorsement of Forest Certification (PEFC) products.
Our supplier procurement strategy is largely based on the
Timber Trade Federation (TTF) Responsible Purchasing
Policy (RPP). Any supplier who does not meet this criteria
will not be considered. Product of Verified Legal Origin
(VLO) is also purchased.

additions to suppliers ranges. This year we showed new
lines from both Egger and Kronospan. As well as this show,
we undertake extensive marketing of our products, and
through various publications and on-line advertising, has
seen our name reach over 4.2 million people. We continue
to develop our on line marketing, social media and direct
product campaigns.

Strategy for developing the business
The directors recognise that the strength of the group is
as a distributor of fit-for-purpose, high quality timber and
associated products purchased using the TTF RPP from
legal and sustainable sources of supply to existing and new
customer bases. Our supply base has strengthened during
the course of the year as we are viewed as a good route to
market by current and prospective suppliers.

Our customers expect us to continue to bring new and
fit for purpose products to the market. Andrew Wright is
responsible for identifying these opportunities. Our aim is
to provide a true one stop shop to our key target markets.

We once again exhibited at the Surface Design Show
generating in excess of 550 leads. This show is a great
opportunity to promote new product launches and

Our speciality division, Advanced Technical Panels, will
continue to develop its product offering and will add
another leading brand of thermoformed plastics to its range.

Our showroom at the Business Design Centre.

JAMES LATHAM PLC ANNUAL REPORT 2017

Strategic Report

Operating Review

Our staff are a major asset for the company, and we
continue to invest in training to ensure that we have
the best operations, sales and technical teams in the
industry. Marketing of our products through brochures,
direct advertising, public relations, social media and
exhibitions is key to our success, and we will use multiple
channels to communicate clearly with our existing and
potential customers.

Our Architect and Design showroom at the Business
Design Centre in Islington has opened up our product
offering to a large number of professional specifiers.
This has already proved to be beneficial, gaining orders
and specifications for a wide range of products on display
from our key strategic suppliers. We have put in place
a programme of presentations to architects for their
Continual Professional Development. Visitor numbers
will continue to increase and we expect to gain more
specifications for our products through this facility.

ABET lockers & panels.

Commodity product remains very important to the
group and more emphasis will be placed on stocking
and marketing MDF, OSB, Plywood and North American,
European and African hardwoods.

A strategic part of our sales development will be in
Laminates and we have secured UK distributorship for
ABET, a high quality branded laminate. We have also
appointed our first national Laminate product manager.

Working with our staff and suppliers we aim to offer our
existing and potential customer base a first class service of
fit for purpose, legal and sustainable products, delivered
in a timely manner.

The melamine range of products will continue to develop,
with more stock lines of the Kronospan and Egger range
being held at our depots.

Market place
The group’s business is widely spread throughout many
sectors of the UK economy.

We have appointed a technical timber sales development
manager who will be focussing on added value timber
including Accoya, WoodEx®, decking and cladding.

Our Leeds depot acts as the central distribution point for
ATP, HiMacs®, Composite Decking, Kydex, Laminates,
Valchromat and other niche products. These are available
on a national basis for prompt delivery to our customer
base, and it is our intention to continue to develop and
improve this service.

All depots have a three year rolling business plan to ensure
that they monitor opportunities and threats throughout
the year, and review their practices to continually improve
service levels to our customers.

We will continue to look to develop new markets,
including Ireland and other export markets. We will also
continue to invest in our depots, with relocation of our
Yate site during the coming summer and the new
Wigston depot expected to be substantially complete
by the end of 2017. Both these new depots will have
an enhanced product offering across the full range of
our products. We will also consider acquisitions where
opportunities arise, to enhance our product range or
geographical coverage.

Market sector

Customer group Lathams
sales value %
2017 2016

Construction/housing

Merchants

Joiners

Builders

Kitchen manufacturers

Door manufacturers

Retail

Shopﬁtters

Laminators/Veneerers

Furniture manufacturers

Vehicle builders

Exhibition ﬁtters

Transport

Exhibitions

Cash sales

Other importers

Other sectors

TOTAL

100

End products are used in both the public and private
sectors. Our top ten customers account for 10% of sales
and our top 25 customers represent 15% of sales.

JAMES LATHAM PLC ANNUAL REPORT 2017

Strategic Report

Financial Review

Introduction
This report provides a commentary on how the group has
performed against the financial objectives during this year,
together with a review of its financial risks. I believe we
again out-performed our financial objectives for this year,
strengthening our position in the market, maintaining a
strong balance sheet and putting plans in place to invest in
the future.

Financial objectives
The board of directors remain committed to the long term
improvement in shareholder value, which we believe we
can achieve by:-

• Improving profitability by maximising gross margins,

whilst remaining competitive.

• Increasing group market share through improving

facilities at our existing depots.

• Identifying expansion and acquisition opportunities,

where the return on capital is at least equal to that of
the existing group.

• Controlling cashflows to maximise cash available for the

business and shareholders.

• Identifying and managing risks, with particular emphasis

on the pension scheme liability.

• Maintaining dividend cover at between 2.5 times and

4 times earnings.

Financial review
A commentary on the group’s trading results is set out in
the Operating Review on pages 7-9, and the key figures are
considered below, with emphasis on the financial figures

Operating profit
Revenues increased by 6.9% to £198.8m. A key focus
of the board throughout this year has been managing
margins to enable us to remain competitive in commodity
products but grow margins in our focus products in which
we can provide a value added service. This has been
especially important with the increases in costs in some
of our products caused by the weakening of sterling from
the middle of 2016. Gross profit reduced to 18.2% from
18.6%. At the half year stage we were achieving margins
of 18.7%, illustrating the effect of increased product cost
in the second half of the year. In addition warehouse
costs, which are included in the calculation of gross profit,
have remained under control, with warehouse cost per
tonne of product delivered increasing by just 1.8%. This is
despite continued investment in manpower to extend the
working day to meet customer demands. Most depots have

JAMES LATHAM PLC ANNUAL REPORT 2017

David Dunmow
Finance Director and Company Secretary

increased the number of hours in their working day, with
two operating a 24 hour system in order to provide the
service that our customers demand.

Selling and distribution costs increased by 2.2%. These
costs include the direct cost of transport. We monitor
transport costs by reviewing costs per tonne of product
delivered, and during this year the cost per tonne
increased only slightly by 0.7% over last year, mainly down
to increased fuel costs with some efficiencies due to
increasing our lorry fleet and reducing hauliers.

Costs in each location are monitored closely by the board
through the quarterly meetings at each depot.

Operating profit increased 7.1% to £14.2m. Group net profit
before taxation increased to £13.8m from £12.9m last year.

The taxation charge of £2.8m represents an effective rate of
20.6%, compared with 18.7% last year. The group’s profits
arise wholly in the UK and the group’s tax charge will
reflect the UK corporation tax rate.

Pension scheme
At 31 March 2017 the deficit of the defined benefit scheme
under International Financial Reporting Standards was
£16.6m compared with £9.7m last year. Discount rates,
represented by yields on corporate bonds, fell sharply to
2.5% from 3.5% last year. The increase in liabilities that this
produces has been offset to a degree by an increase in asset
values, mainly in the equity portfolio. In note 17.2 to the
accounts, we have provided some sensitivity analysis around
the various assumptions used to illustrate this volatility.
Under the recovery plan agreed following the triennial
valuation at 31 March 2014 there will be no deficit recovery
payments made in the year to 31 March 2018. The triennial

valuation for 31 March 2017 will be concluded during the
course of the next financial year and in anticipation of this
needing deficit recovery payments to restart in the year to
31 March 2019, the board agreed to pay £1m in this year,
with a further £1m to follow in the year to 31 March 2018
as a special contribution.

The group is constantly assessing the risks in the pension
scheme, and this year has maintained a cap on pensionable
salary increases to a maximum of 1% over CPI.

Gross IAS19 deﬁcit £000’s

2013

2014

2015

2016

2017

7
6
2
,
9

0
3
4
,
0
1

7
5
6
,
9

5
2
6
,
6
1

3
9
7
,
6
1

1000
2000
3000
4000
5000
6000
7000
8000
9000
10000
11000
12000
13000
14000
15000
16000

2
3
8
,
6
1

6
4
2
,
7
1

1000
2000
3000
4000
5000
Cash ﬂow and working capital
6000
7000
8000
At the end of the year cash balances of £17.2m were held,
9000
10000
up from £16.8m last year. The cash is being held as short
11000
12000
term deposits providing funds for short term working
13000
14000
capital fluctuations and allowing us to make capital
15000
16000
investments when opportunities arise. This cash is being
held to finance the relocations of Yate and Wigston. During
the year we invested £4.6m on the new Yate site with a
further £1.5m to spend this year. Practical completion
has now taken place and we expect to move into the
new site during July. We have also moved forward with
the Wigston relocation and it is anticipated that this site
will cost £6.5m and be substantially completed by March
2018, later than originally anticipated. We will endeavour
to dispose of the old sites as soon as possible after the
2015
relocations are complete. Interest rates have remained at
record lows throughout the year so we have continued to
use our cash to obtain cash settlement terms with most
of our major suppliers allowing us to earn £1,002,000 of
discounts received compared with £940,000 last year. I am
particularly grateful to my bought ledger team for their
hard and efficient work in processing suppliers invoices so
that these discounts are not missed.

1
0
5
.
2
1

4
3
2
,
1
1

5
7
0
,
8

2017

2013

2014

2016

Strategic Report

Financial Review

The timber importing and distribution business requires
considerable working capital investment in stock and debtors.

Control of cash flow from customers is closely monitored.
The key performance indicator of debtors days, taking into
account our credit terms, has moved from 51.3 days to
51.0 days. Bad debts this year ended up at 0.04% of
turnover against a budget of 0.4%, and last year of 0.11%.
I am very grateful for the work my credit control team
have done this year in getting right the difficult balance
of dealing with our customers, dealing with our depots
and collecting our debts. They also work very closely with
our credit insurers to ensure that as many of our major
accounts as possible are covered. At the year end we had
96% of accounts owing over £40,000 covered by credit
insurance. In addition, the amount of outstanding debt
being dealt with by our solicitors has remained low all year.

Stock turnover targets are set and monitored on a monthly
basis, and senior management has access to real time
stock levels. At 31 March 2017 stock turn is 5.5 times
compared with our target of 6.0 times. As our target is
measured using cost prices then the increase in product
2015
cost has had an effect on the stock turn, and there were
also some commodity product ranges that are temporarily
overstocked due to shipment timings.

2017

2016

2014

2013

7
6
2
,
9

0
3
4
,
0
1

7
5
6
,
9

Good stock and debtor control has allowed 86% of profit
before tax to be available as free cash for investment and
distribution.

5
2
6
,
6
1

3
9
7
,
6
1

Cash and Cash Equivalents

6
4
2
,
7
1

2
3
8
,
6
1

1
0
5
.
2
1

4
3
2
,
1
1

5
7
0
,
8

2013

2014

2015

2016

2017

JAMES LATHAM PLC ANNUAL REPORT 2017

Strategic Report

Financial Review

The new Yate site under development.

Capital investment
Other than the investment in the new Yate site, the
majority of the capital expenditure this year was due to the
asset replacement policy on our lorries and mobile plant.

Net assets at the year end were £73.3m (2016 £71.2m).
The group’s pre-tax return on capital for the year was
19.0% (2016 19.7%), which continues to be above our
weighted average cost of capital.

Financial risk management
In the course of our business, the group is exposed to
currency risk, interest rate risk, liquidity risk and credit risk.
The overall aim of the group’s financial risk management
strategy is to mitigate any potential negative effects on the
group’s assets and profitability. The group manages these
risks in accordance with group policies, and does not take
speculative positions.

currency spot prices. Speculative positions on currencies
are not entered into. Comparing against spot prices, we
had a positive tracking error of 0.3% during this year.
Our LDT division can have stock tied up in kilns for six to
nine months, and we enter into currency swaps to ensure
that this stock is costed at spot price when it becomes
available for sale.

The cash deposits and available bank facilities reduce our
liquidity risk. Cash flow forecasts are monitored against actual
cash flows to ensure that adequate facilities are maintained
to meet the future needs of the business. The board reviews
re-forecasted profits and cash flows on a quarterly basis.

Insurance products and external credit reference agencies
help reduce our credit risk.

The Audit Committee reviews the group’s risk register as
part of its regular monitoring process.

As the group trades predominantly in the UK, the market
price of our products tends to fluctuate in line with

David Dunmow Finance Director

Principal Risks and Uncertainties

The group operates in a market and an industry which by their nature are subject to a number of inherent risks. We attempt
to control these risks by adopting appropriate strategies and maintaining strong systems of internal control. These strategies
however do not attempt to eliminate risk, but control the risks that we believe are appropriate to take to generate acceptable
shareholder returns. Details of the group’s risk management processes are given in the Corporate Governance report on page 17.

We have considered opposite, the current risk factors that are considered by the board to be material. However in a changing
world, new risks may appear or immaterial risks may become more important, and the directors will develop appropriate
strategies as these risks appear.

JAMES LATHAM PLC ANNUAL REPORT 2017

Market
Conditions

Competition
from new
and existing
businesses

Inventory
levels move
out of line
with sales
requirements
and market
prices

Strategic Report

Principal Risks and Uncertainties

Inherent risk

Risk Description

Risk Mitigation

The group’s sales are predominantly UK based so
it is exposed to any slowdown in the UK economy.
Negative or uncertain economic conditions could
affect our customers business resulting in them
reducing purchases from our group.

The distribution of our customers across the UK economic sectors helps
reduce the impact of slowdown in any one sector. Regular financial information
helps the board assess current trends.

Competitive pressures from existing businesses
and new entrants to the market could reduce
prices, margins and profitability.

An assessment of the market and competitor activity is discussed at each
depot’s quarterly board meeting. This includes an assessment of our routes
to market as challenges to our depot structure and operations emerge and
assessment of our pricing strategies.

Product shortages can lead to high prices and
over purchasing throughout the trade, resulting
in excessive stock holding. Weaker prices lead
to stock reduction throughout the supply chain,
which magnifies the reduction in demand and
then leads to even sharper falls in price. Erratic
shipments can result in stock excess and shortages
in specific special products.

The market for certain product lines changes,
resulting in them becoming overvalued and
slow moving.

Supplier
political risks
or failure
could result in
shortages of
product

Although far more of the group’s purchases now
come from Europe and North America, it has
significant dealings with countries where the
political climate is less stable, resulting in a strategic
threat to the supply of product to the group.

The group is reliant on certain suppliers for certain
product ranges and their inability to meet our
demand due to financial or production difficulties
could result in stock shortages.

To mitigate this risk, the group has a strict policy of stock level targets by
product group and depot. These are monitored monthly by the board which
centrally controls the purchase of stocks and takes a group view on the action
to be taken to limit the group’s exposure to rapidly changing price levels.
Live stock level reports and predictive tools are available for our managers to
monitor current and future levels.

The group’s reduced reliance on commodity items has reduced this risk of
over exposure to low value, high volume and price sensitive items, although
as an important area for us, this risk cannot be completely removed.

The board has set strict guidelines relating to purchases where the
specification is unique to a particular customer, and has policies in place to
ensure that no individual can commit the group to a purchase greater than
his/her authorised limit.

Slow moving stocks are monitored regularly and action taken to mitigate the risk.

To mitigate the risk from these pressures, the groups dealings are spread
across a large number of countries of supply. The group keeps informed of
developments in higher risk producer countries through involvement in work
by the Royal Institute of International Affairs (Chatham House).

We maintain close relationships with our suppliers to ensure that we are
pre-warned of difficulties of supply. We maintain relationships with suppliers
of alternative products.

Reputational
Risk

Over many years the group has built up a reputation
for integrity and responsible trading and is
aware that this can be easily damaged with the
consequential cost to the Latham brand.

Policies are in place which cover standards of behaviour and good governance.
On the purchasing side the group has a strong risk based responsible
purchasing policy managed by our Environmental Manager to minimise possible
damage to its reputation and legal risk from dealing in illegal products.

Defined Benefit
pension scheme
funding could
increase

The group is required by law to maintain a
minimum funding level in relation to its obligations
to provide pensions to members of the pension
scheme. This level of funding is dependent on
a series of external factors, such as investment
performance, life expectancy and gilt yields.
Significant changes in these areas can also have
a significant effect on the funding levels. The
sensitivity of the funding level to these factors is
disclosed in note 17.2 in the notes to the accounts.

Information
technology
failures impact
our ability to
trade

The operations of the group depend to a large
extent on the availability and reliability of our
information technology systems. A failure
of systems, either of hardware, software or
communications, for an extended period of time
could impact our ability to trade.

The scheme has been closed to new entrants for many years. The board
regularly reviews the investment strategy and performance of the pension
scheme investments, and has set a cap on pensionable salaries of 1% above CPI.

Our main computer servers are located in a secure site away from the trading
operations, hosted in an external data centre. The systems are monitored
24 hours a day and maintenance work carried out on an ongoing basis.

Back ups are held offsite in a separate data centre to provide extra resilience.
Should there be any failure in the systems in the main datacentre, then the
back ups held in the secondary data centre can be made operational.

Software maintenance contracts ensure that our business critical software is
up to date, allowing software problems to be resolved quickly.

Inability to
trade from a
depot

Inability to trade from a depot due to an incident,
internally or externally, could cause loss of revenue
and profits.

Disaster recovery plans are in place at group and depot levels. These are
reviewed by the Audit Committee and the board, as well as discussed at depot
level. Insurance policies are in place to cover increased cost of working.

Our distribution network, as well as our inventories held at various ports, allow
us to manage customers requirements from a different location.

JAMES LATHAM PLC ANNUAL REPORT 2017

Strategic Report

Corporate Responsibility

At James Latham plc, we are conscious of our corporate
responsibilities to all our stakeholders and to society as
a whole. Health and safety, environmental matters, staff
training and equal opportunities are key areas relevant
to the group’s business. We also maintain contact with
and support both the local and the wider community.
A substantial amount of management time is devoted to
Corporate Social Responsibility issues, as we believe that
these enhance our standing with customers and suppliers
to the benefit of all stakeholders.

Health and Safety – Providing a safe working
environment
The handling of timber and panel products, both manually
and mechanically, and the stacking and storage of these
products at height, can be dangerous activities. We are very
active in assessing and minimising the risks in all areas of
the business and educating the workforce to provide as
safe a working environment as possible for all people
that come into contact with James Latham plc. We spend
an increasing amount of time and money on this activity.
We employ a full-time Health and Safety Advisor who
reports to the board regularly, attends board meetings
twice a year and chairs regular health and safety meetings
at all depots. We have a 3-year action plan and all sites are
subject to regular audits, with their audit scores and trends
being monitored at management meetings. Management
and employees are actively involved in improving our safety
record, which is high on everyone’s agenda. All employees
take a personal responsibility for making sure their actions
and behaviour maintain safety for all.

In addition, we recognise that safety extends beyond our
warehouses. We regularly monitor vehicle accidents in
our lorries and company cars to assess whether further
training is required. We operate a programme of lorry
driver mentoring and have introduced the FORS (Fleet
Operator Recognition Scheme), achieving Bronze status
and aim to improve this in the future. Our lorries all have
tracking devices fitted which provide alerts and information
on speed as well as the route taken, as well as cameras
to not only provide retrospective footage for training and
insurance purposes, but also to provide improved rear and
side visibility to our drivers.

Environmental
The directors of James Latham plc recognise that the
company has a responsibility to the environment,
customers, suppliers, shareholders and staff to base its
commercial activities on well-managed forests and to
reduce any negative environmental or social impact of its
trading as far as is reasonably practical.

JAMES LATHAM PLC ANNUAL REPORT 2017

With best practices observed, timber products are the
ultimate sustainable and recyclable materials, requiring
low energy to process and being thermally efficient in
use. Timber from well-managed forests absorbs carbon
in growing and locks in carbon in use. It is sustainable,
producing a regular crop and puts value into growing
forests so helping to reduce land clearance for other uses.

A lifecycle assessment study published by Wood for Good,
showed that timber has the lowest embodied carbon
impact of any mainstream building material. It shows that
all timber products are in fact carbon negative at the point
of delivery, i.e. the amount of carbon dioxide absorbed by
the tree by photosynthesis during growth, is greater than
all the emissions associated with harvesting, processing,
manufacture, transport and installation.

Timber from poorly managed forests destroys biodiversity,
leads to soil erosion and damages watercourses. It ruins
the lifestyle of traditional forest dwellers. Forest burning
adds to carbon emission and harms air quality in the
region. Purchasing from those involved in corrupt practices
undermines national governance.

It is therefore essential that we ensure our timber is legally
harvested and comes from well managed forests. The group
recognises that the independent certification of forests
and of the supply chain is the best means of providing
assurances of this. Where possible it purchases material
certified by the Programme for the Endorsement of Forest
Certification schemes (PEFC) or the Forest Stewardship
Council (FSC). As well as providing assurances on the
timber itself, these schemes also provide checks on the
welfare of the forest workers and indigenous population.

The group has third party audited chain of custody for
timber supplied as certified by PEFC, FSC and other
schemes. This is to ensure that claims made about
certification can be proved.

The group has signed up to the WWF
UK ‘Forest Campaign’ committing to
purchasing only certified legal and
sustainable timber products by 2020 and to publically
showing progress towards this target. WWF award up
to three “trees” to show companies progress towards
this goal, and we have achieved the top score. We are
sponsoring the PEFC UK 2017 stakeholder event which
aims to demonstrate the positive impacts of forest
certification on the ground.

In some parts of the world, timber certified by one of
the internationally recognised schemes is not available.
The group is committed to purchasing all timber from
legal sources and to seek confirmation that suppliers are
operating in accordance with the laws of their country.
Where the risk of corruption or illegal logging is high, we
seek third party audited proof of legality.

The group sets targets each year to increase the amount
of timber and timber based products that are certified by
recognised international organisations such as PEFC and
FSC, as coming from sustainable and well-managed forests.

The figures for the relevant calendar years are given below.

FSC

PEFC

3rd party
veriﬁed legal

TOTAL

Panels

2015

2016

2017
Target

Timber 2015

2016

2017
Target

71%

69%

70%

39%

43%

20%

23%

17%

33%

32%

43%

18%

32%

97%

98%

89%

92%

93%

The European Timber Regulation (EUTR), which came
into force in March 2013, places an obligation on the first
placer of timber on the European market to ensure that
the timber has been legally sourced and traded, to operate
a risk assessment process and to take mitigating measures
to minimise the risk of illegality. We have a rigorous system
for assessing our supply chains and are committed to only
purchasing product with negligible risk status. We will not
trade in timber species prohibited under Appendix 1 of
CITES legislation and obtain the appropriate documents
for the very limited trade we do in all other CITES listed
timber species.

Part of the EUTR process to ensure that only legal
timber enters the EU is the signing of bilateral agreements
with producer countries. This involves the issuing of
FLEGT (Forest Law Enforcement, Governance and Trade)
licences for all timber traded for that source. We are
proud, after many years of work, to have received plywood
and door blanks in the first FLEGT certified container
of wood from Indonesia, which will go a long way to
improving sustainability in this environmentally sensitive
part of the world.

Strategic Report

Corporate Responsibility

Piers Latham and Indonesian Ambassador Dr Rizmal Sukma,
inspecting the first shipment of FLEGT wood.

For a number of years the company has had
risk assessment tools in place to monitor
suppliers through the Timber Trade
Federation Responsible Purchasing Policy
and Code of Conduct. The risk assessment seeks to provide
the clearest practicable information regarding the sources
of raw material used in the manufacture of wood products.
We have supported the National Measurement Office, the
UK competent authority charged with enforcement of the
EUTR, in staff training by giving them access to our due
diligence system and having meetings with representatives
of other European agencies to share our experiences.

We publish our commitment to the environment regularly
in our product guide, specific literature and on our
website, www.lathamtimber.co.uk. We give clear guidance
to our customers about the importance of buying timber
that can be demonstrated to be legal and from well-
managed forests. This is condition of contract to supply
the UK Government and many environmentally aware
customers. Company staff give presentations to customer
trade associations and at customer premises.

Informing suppliers and supporting certification
Our senior staff have spoken about the importance of
independent certification of forests and supply chains at
EU and UK conferences for groups of suppliers in Ghana,
Cameroon, Congo Brazzaville, Gabon, Peninsular Malaysia,
Sarawak, Sabah and China. Company buyers have visited
individual suppliers in Europe, Russia, Congo Brazzaville,
China, Indonesia, Malaysia, the United States, Uruguay,
Brazil and Argentina giving the same message. Group
buyers have visited individual suppliers auditing the
source of logs. The group has been helping promote the
FLEGT Initiative to prevent illegal logging by giving press
and film interviews and speaking at the FLEGT review
meeting in Brussels.

JAMES LATHAM PLC ANNUAL REPORT 2017

Strategic Report

Corporate Responsibility

The group has supported and funded suppliers in Africa
and China working under the EU funded Timber Trade
Action Plan which is a step-by-step approach towards
certification. Our Chairman contributes a considerable
amount of his own time too as Chairman of the PEFC
International Board, the Timber Trade Federation
environmental committee and to promoting PEFC and FSC
certified products with chain of custody certification.

Supply chain transparency – Modern Slavery Act 2015
We are dedicated to promoting ethical values and integrity
in our business behavior by implementing controls through
ISO management and due diligence systems. We aim to
ensure that trading and operational purchases are free
from human trafficking and slavery. We are committed
to transparency within our supply chains and are alert to
the potential risks. Where risks are identified, adequate
mitigation measures will be implemented and monitored.

Local environmental issues
We also recognize that alongside our timber environmental
policy, we have a responsibility to minimise our local
environmental footprint. We have developed an environmental
management system which is accredited under ISO14001.
This commits us to considering energy efficient options for
lighting, heating and ventilation before making purchasing
decisions. Vehicle procurement considerations include
reduction of emissions and improved fuel efficiency.

The company seeks to minimise the use of packaging
material and to recycle discarded packaging material and
paper where it is practicable to do so, to avoid these
materials entering landfill.

We have launched this
year our inter depot
Environmental and Health
and Safety Awards to
encourage best practice
around the group but
also to encourage each
depot to come up with
initiatives for reducing
our carbon footprint.

We give support, both in staff time and financially, to
community projects local to our depots through schools,
sports teams and charities. We support the National
Forest project in Central England, which started with the
planting of 250 trees to celebrate the company’s 250 year
anniversary in 2007 and continues with further plantings
and woodland management activities for customers,
suppliers and staff.

JAMES LATHAM PLC ANNUAL REPORT 2017

Piers Latham presenting the prize to Chanti Barnes.

We sponsored the Innovative Timber Engineering prize at
Brighton School of Architecture and Design. Piers Latham
presented the prize to Chanti Barnes for her creative and
innovative development of a charcoal and resin composite
in her building proposition.

Our employees
The group’s ability to achieve its commercial objectives
and to serve the needs of its customers in a profitable and
competitive manner depends on the contribution of its
employees. Employees are encouraged to develop their
contribution to the business wherever they happen to
work. The group regularly keeps employees up to date
with financial and other information. Quarterly meetings
are held in each location, chaired by a board member,
where employees’ views concerning the performance
of their profit centre are considered. To encourage the
involvement of employees in the group’s performance,
share option schemes are operated together with bonuses
linked to performance.

The group’s employment policies do not discriminate
between employees, or potential employees, on the
grounds of age, gender, disability, sexual orientation,
colour, ethnic origin or religious belief. Employment
would continue for any employees that become disabled.
The sole criterion for selection or promotion is the
suitability of any applicant for the job. The group’s pay
policy is to ensure that every employee, other than
trainees, are at or above the Living Wage.

It is the policy of the group to train and develop employees
to ensure that they are equipped to undertake the tasks for
which they are employed, and to provide the opportunity
for career development equally and without discrimination.
Training and development is provided and is available to
all levels and categories of staff. Internal courses are run on
the technical aspects of our products, along side general
management, sales and presentation skills courses.

Corporate Governance

Corporate Responsibility / Corporate Governance Report

We have a successful program of introducing trainees
from school or college. All depots have trainees and we
have plans to recruit more during the year. Trainees are
put through external courses obtaining qualifications,
including NVQs in Sales and Warehousing and the Wood
Society exams covering the properties and uses of timber
and panel products. 9 of our trainees studied for the TFT
Woodexperts Ltd Level 4 Certificate in Wood Science and
Timber Technology. We were pleased that all 9 passed,
with Dean Taylor achieving a Distinction.

In addition we have set up a Timber Academy for 11 of our
staff, who will have work placements with our key suppliers
around the globe in order to expand their knowledge of
timber. Knowledge gained from this will help our future
sales and product development.

Details of the number of employees and their related costs
can be found in note 4 to the accounts.

Toby Hughff, timber trainee at our Leeds branch.

The e-Tree Initiative
James Latham plc has signed up to the
e-Tree initiative organised by our registrars
Computershare. e-Tree™ is a programme
designed to help companies promote eCommunications
to their shareholders, whilst also allowing them to make a
valuable contribution to the environment.

As a shareholder in James Latham plc, whenever you
opt in to receive your designated communications online,
eTree will make a donation to the Woodland Trust. So we
are doing our bit, while you are making your life easier.

To register visit www.investorcentre.co.uk/etreeuk/
jameslatham. You will need your shareholder number,
which is contained either on your share certificate or on
your latest dividend voucher.

Please help us to reduce costs and support a very
worthwhile cause.

Corporate Governance

The directors believe that good corporate governance,
involving risk appraisal and management, prudent decision
making, open communication and business efficiency, is
important for the long term benefit of the stakeholders
in our group. We aim to comply with the 12 principles
contained within the Quoted Companies Alliance
Corporate Governance Code for Small and Mid-Size
Quoted Companies 2013, and will show below how we
have applied this code.

The Board of Directors
The company is governed by a board of directors
consisting of the Chairman, Peter Latham, five executive
directors and two other non-executive directors. Each
director has a vote and no individual or small group of
individuals dominates the board’s decision making.

The board has a formal schedule of matters referred to
it for decision, with at least one specific strategy meeting
being held each year. Agendas and board packs are
discussed and circulated in advance of the meetings to
ensure that all directors have adequate time to research
and take part in discussions on the key issues, as well as
giving the non-executive directors time to add matters
of their particular interest to the agenda. In the year to
31 March 2017, the board met six times, with all directors
attending each meeting. In addition conference calls are
held where matters which cannot wait for the next board
meeting can be discussed.

The board is responsible for group strategy, corporate
responsibility including health and safety and environmental
issues, acquisition policy, bribery policy, approval of major
capital expenditure and monitoring the key operational and
financial risks. It also reviews the strategy and budgets for
the trading subsidiaries and monitors the progress towards
their long term objectives. All directors have access to the
company secretary or to independent professional advice, if
required, at the company’s expense. New directors receive
training from the company NOMAD on their responsibilities
under the AIM rules.

In addition to the scheduled meetings, the non-executives
attended the group annual operational budget and strategy
meeting, as well as making individual visits to operational
sites. Key financial information is circulated to directors on
a monthly basis outside of the board meetings.

The board has decided that the directors will retire by
rotation and the executive directors will be re-elected at least
every three years. The board regularly reviews the skills and
experience of the directors and assesses the effectiveness
of individual directors and the board as a whole.

JAMES LATHAM PLC ANNUAL REPORT 2017

Corporate Governance

Corporate Governance Report

The Audit Committee
The Audit Committee is chaired by Fabian French, and
includes Meryl Bushell and Nick Latham. Andrew Wright
will replace Nick Latham on the Audit Committee from
1 April 2017. David Dunmow also attends the meetings of
the committee. The committee meets at least three times
a year to review internal controls within the group, and
receive reports from the auditors. The duties of the audit
committee include, on behalf of the board, a review of
effectiveness of the group’s financial reporting and internal
control policies, and procedures for the identification,
assessment and reporting of risk.

Risk assessment
Procedures for identifying, quantifying and managing the
risks, financial or otherwise, faced by the group have been
in place throughout the year under review. The processes
for identifying and managing the key risks to the business
are communicated regularly to all staff, who are made
aware of the areas for which they are responsible. Such
processes include strategic planning, maintenance and
review of a risk register, the appointment of appropriately
qualified staff, regular reporting and monitoring of
performance against budgets and other performance
targets, and effective control over capital expenditure.

Whistleblowing
The group has established procedures whereby employees
of the group may, in confidence, raise concerns relating
to matters of potential fraud or other improprieties.
These procedures also cover other issues affecting
employees including health and safety issues. The audit
committee is confident that these ‘whistleblowing’
arrangements are satisfactory and will enable the
proportionate and independent investigation of such
matters and appropriate follow-up action to be taken.

Review of effectiveness of financial controls
The directors confirm that they have reviewed the
effectiveness of the system of internal control for the year
under review and to the date of approval of the Annual
Report and Accounts through the monitoring process
described above.

Relations with shareholders
The company is committed to maintaining good
communications with shareholders with any
published financial statements and Stock Exchange
announcements also posted on to our Investors website,
www.lathams.co.uk. The executive directors also allocate
three days a year for Investor Roadshows organised by our
broker, Northland Capital Partners.

It also keeps under review the scope and results of the
external audit, its cost effectiveness and the independence
and objectivity of the external auditor, including
recommending their re-appointment to the board. This
includes a review of the non-audit work performed
to ensure that such work would not impair their
independence or objectivity in carrying out the audit.

Once a year the auditor meets with the non-executive
directors only.

The Remuneration and Nominations Committee report is
contained on page 20.

Financial reporting
The directors have a commitment to best practice in the
group’s external financial reporting in order to present a
balanced and comprehensible assessment of the group’s
financial position and prospects to its shareholders,
employees, customers, suppliers and other third parties.
This commitment encompasses all published information
including but not limited to the year end and half yearly
accounts, regulatory news announcements and other
public information.

Internal controls
The board has established systems of internal control
as appropriate for the size of the group. The day to day
operation of the system of internal control is under the
control of executive directors and senior management.
The system is designed to manage rather than eliminate
risk. Any system of internal control can however only
provide reasonable, but not absolute, assurance against
material misstatement and loss. No material breaches of
internal controls were reported during the year.

JAMES LATHAM PLC ANNUAL REPORT 2017

Corporate Governance

Directors and Advisors

Directors’ biographies

Peter Latham OBE BA FIMMM
Non-executive Chairman
Peter Latham, age 66, has worked in the company
for 44 years and was appointed to the board in 1983,
and became a non-executive on 1 January 2016.
He is a former director of Lathams Limited, and
attends the Remuneration and Nominations
Committees. He is Chairman of the Programme for
the Endorsement of Forest Certification schemes
(PEFC) International board, an independent non-
governmental organisation, which has certified the
largest area of world forests. He is past chairman of
the industry’s environment committee, Forests
Forever and a Trustee of the Commonwealth
Forestry Association. He is a past president of the
Institute of Wood Science and of the High Wycombe
Furniture Manufacturers’ Society.

David Dunmow BSc FCA
Finance Director and Company Secretary
David Dunmow, age 53, has worked in the company
for 23 years and was appointed to the board as
Finance Director in 2000. He is a Fellow of the
Institute of Chartered Accountants in England and
Wales. He is a director of Lathams Limited, and
provides advice to the Audit and Remuneration
Committees. He is a former treasurer of the
Timber Trade Federation. He is a Trustee of the
James Latham plc Pension and Assurance Scheme.

Chris Sutton Executive Director
Chris Sutton, age 58, has worked in the company
for 39 years and was appointed to the board in 2005.
He is Managing Director, chairing the Lathams Limited
board. He is a director of the Timber Trade Federation.

Nick Latham BSc Executive Director
Nick Latham, age 49 has worked in the company for
26 years and was appointed to the board in 2007.
He is a director of Lathams Limited, and member
of the Audit Committee, and provides advice to the
Remuneration Committee. He sits on the main board
of the Timber Research and Development Association.

Piers Latham BSc Executive Director
Piers Latham, age 46 has worked in the company for
24 years and was appointed to the board in 2014.
He is a director of Lathams Limited, and Chairman
of the Trustees of the James Latham plc Pension
and Assurance Scheme.

Andrew Wright Executive Director
Andrew Wright, age 52, has worked in the company
for 16 years and was appointed to the board in
2015. He is a director of Lathams Limited and is a
board member of the North West Timber Trade
Association.

Fabian French MA Non-Executive Director
Fabian French, age 58, was appointed a non-
executive director in 2015. He chairs the Audit
Committee. He is a qualified solicitor and worked
in corporate finance for major investment banks.
He is currently Chief Executive of UK Community
Foundations and is a director of CRGH Investment
LLP, Goodenough College Charity, Trebartha
Hydro Ltd, and is a previous director of Inspiration
in Sport and Mithras Investment Trust Plc.

Meryl Bushell PhD FCIPS
Non-Executive Director
Meryl Bushell, age 62, was appointed a non-
executive director in 2008. She has many years
senior management experience with BT including
several years as Chief Procurement Officer for
the BT Group. She chairs the Remuneration and
Nomination Committees and is a member of the
Audit Committee. She is a previous member of the
Board of Management of the Chartered Institute of
Purchasing and Supply and a previous director of
Invest in Gateway London Limited, South London
Healthcare NHS Trust and of SupplierForce.

Registrars
Computershare Investor
Services plc
The Pavilions
Bridgwater Road
Bristol BS13 8FB

Bankers
Royal Bank of Scotland
Major Corporate Banking
280 Bishopsgate
London EC2M 4RB

Clydesdale Bank
St Albans Financial
Solutions Centre
Verulam Point
4th Floor
Station Way
St Albans AL1 5HE

Stockbrokers and
Nominated Adviser
Northland Capital Partners
60 Gresham Street,
London EC2V 7BB

Pension Advisor
Mercer
Tower Place West
London EC3R 5BU

Independent Auditor
RSM UK Audit LLP
25 Farringdon Street
London EC4A 4AB

Registered Ofﬁce
James Latham plc
Unit 3 Swallow Park
Finway Road
Hemel Hempstead
Herts HP2 7QU

Registered Number 65619
Registered in England
and Wales

Peter Latham

David Dunmow

Chris Sutton

Nick Latham

Piers Latham

Andrew Wright

Fabian French

Meryl Bushell

JAMES LATHAM PLC ANNUAL REPORT 2017

Corporate Governance

Directors’ Remuneration Report

This report has been compiled by the company’s
Remuneration and Nominations Committee and sets out
the company’s remuneration policies for its key directors.

Remuneration and Nominations Committee
During the year ended 31 March 2017, the Remuneration
and Nominations Committee comprised two non-executive
directors, Meryl Bushell as Chairman and Fabian French,
who both served throughout the year. The meetings were
attended by Peter Latham, Nick Latham and David Dunmow
to provide information to the Committee when required.

The main function of the Committee is to make
recommendations to the board regarding the group’s
policy on the remuneration and conditions of employment
of the executive directors of the group, and, where
appropriate, senior management, and includes considering
nominations to the board. Over the course of the year
the committee has also taken an active interest in talent
development, succession planning and group diversity.

The Committee has access to professional remuneration
advice from outside of the company.

Remuneration Policy
The remuneration policy aims to ensure that executive
directors are fairly rewarded for their individual
contributions to the performance of the group, with due
regard for the interests of shareholders.

The remuneration package consists of basic salary,
benefits (comprising car and private medical provision),
pensions, annual bonus schemes, share option schemes
and life assurance cover of 4 times gross salary.

Pay rises are considered once a year, to apply from
1 December. Pay rises are based on cost of living
increases plus awards for promotion where relevant.
The executive directors have their pay rises based on
the same criteria as all other employees.

Performance related bonuses
Annual bonuses can be earned by executive directors for
the achievement of specific financial performance targets
set by the group’s board of directors and agreed by the
remuneration committee. The criterion on which the
executive directors’ bonuses were based in 2017 was the
achievement of £11,485,000 operating profit, as measured
in the depots management accounts, an increase of 9.1%
over the previous year’s targets. Maximum bonuses of
19.5% of basic salary are paid on achieving 120% of the
target operating profit. The minimum bonus level is 1.3%
paid on achieving 90% of target operating profit. This year
135.9% of the target operating profit was achieved earning
19.5% of basic salary. The criterion for the year ended
31 March 2018 will be based on a similar formula
applying to target profits. In addition a Group Bonus
scheme pays out a bonus to all eligible members of staff,
subject to achieving a minimum level of group profits.
This year the scheme is paying 4.93% of basic salary to
357 eligible employees.

Service Contracts
Following a review by the board of directors in 1996, the
service contracts of executive directors were amended
to incorporate a rolling 2 year notice period. This was
considered by the board of directors to be a significant
but reasonable reduction in their original 5 year contracts.
In 2004, the board of directors agreed that any new
service contracts issued to new directors would
incorporate a fixed 2 year period, subject to a minimum
6 month notice period.

Executive director’s contracts have no provisions for
pre-determined compensation on termination that
exceeds two years salary and benefits in kind.

Remuneration of the non-executive directors
The remuneration of the non-executive directors is
determined by the board. The non-executive directors do
not receive a pension or other benefits from the group.

JAMES LATHAM PLC ANNUAL REPORT 2017

Corporate Governance

Directors’ Remuneration Report

Review of past performance
The graph below shows the company’s total shareholder return performance against the total shareholder return
performance of the AIM All Share Index for the five years ended 31 March 2017.

James Latham plc total shareholder return

250

200

150

100

2012

2013

2014

2015

2016

2017

Directors’ emoluments
Details of the individual directors’ emoluments for the year were as follows:

James Latham Plc

FTSE AIM All
Share Index

The Remuneration
Committee consider this
to be the most appropriate
graph against which to
compare the company’s
performance.

Salary
and fees

Beneﬁts

Bonus

Total
emoluments
excluding
pensions

Share
based
payments

Pension
contributions

£000

Executive
N.C. Latham

D.A. Dunmow

C.D. Sutton

P.F. Latham

A.G. Wright

2017
2016
2017
2016
2017
2016
2017
2016
2017
2016

Non-executive
P.D.L. Latham
(from 1 January 2016)
M.A. Bushell

2017
2016
2017
2016
2017
P.L.F. French
2016
(appointed 1 October 2015)
2017
P.A.J. Latham
(resigned 30 September 2015) 2016

Total

2016

165
131
159
152
158
148
105
95
108
100

71
179
32
31
32
15
-
15

830

866

1
1
13
13
12
10
11
10
10
9

-
4
-
-
-
-
-
-

41
39
40
38
40
38
29
24
29
26

-
-
-
-
-
-
-
-

207
171
212
203
210
196
145
129
147
135

71
183
32
31
32
15
-
15

179

165

1,056

1,078

2
2
2
5
2
4
2
2
1
1

-
1
-
-
-
-
-
-

TOTAL

£000

232
195
245
239
241
229
166
150
169
157

71
184
32
31
32
15
-
15

23
22
31
31
29
29
19
19
21
21

-
-
-
-
-
-
-
-

123

122

1,188

1,215

JAMES LATHAM PLC ANNUAL REPORT 2017

Corporate Governance

Directors’ Remuneration Report

Directors’ shareholdings
There were no contracts with the company or its subsidiaries during the year in which any of the directors had a
material interest, other than their service contracts. The directors’ holdings of the share capital at the end of the financial
year were as follows:

Directors

P.D.L. Latham
N.C. Latham
D.A. Dunmow
C.D. Sutton
P.F. Latham
A.G. Wright
M.A. Bushell
P.L.F. French

Beneﬁcial owner
Beneﬁcial owner
Beneﬁcial owner
Beneﬁcial owner
Beneﬁcial owner
Beneﬁcial owner
Beneﬁcial owner
Beneﬁcial owner

31 March 2017

31 March 2016

Ordinary shares

Preference shares

Ordinary shares

Preference shares

1,134,636
627,352
125,819
51,300
624,743
22,366
9,394
370,052

Nil
Nil
Nil
Nil
567
Nil
Nil
Nil

1,132,372
624,231
120,236
48,540
621,757
20,114
9,400
370,052

Nil
Nil
Nil
Nil
567
Nil
Nil
Nil

Directors’ share option schemes

Save as You Earn Scheme
Participation by the directors in the James Latham plc Save as You Earn Scheme is as follows:

N.C. Latham
D.A. Dunmow
C.D. Sutton
P.F. Latham
A.G. Wright

31 March 2017

31 March 2016

3,185
3,185
3,185
3,185
1,592

-
-
-
-
-

Options were granted on 1 September 2016 at 565p per share, and the options are exercisable on 31 August 2019.

Company Share Option Scheme

Participation by the directors in the James Latham plc Approved Company Share Option Scheme 2008 is as follows:

P.D.L. Latham

N.C. Latham

Outstanding
1 April 2016

Granted during
the year

Exercised

Outstanding
31 March 2017

Exercise
price

1,742
1,834

1,742
1,834
1,262
707
586
-

-
-

-
-
-
-
-
636

(1,742)
-

(1,742)
-
-
-
-
-

-
1,834

-
1,834
1,262
707
586
636

£2.295
£2.725

£2.295
£2.725
£3.96
£5.65
£6.825
£7.075

Exercise period

29.11.16 to 28.11.21
05.12.17 to 04.12.22

29.11.16 to 28.11.21
05.12.17 to 04.12.22
16.12.18 to 15.12.23
05.01.20 to 04.01.25
18.12.20 to 17.12.25
06.12.21 to 05.12.26

Continued on page 23

JAMES LATHAM PLC ANNUAL REPORT 2017

Corporate Governance

Directors’ Remuneration Report

Company Share Option Scheme (continued)

Participation by the directors in the James Latham plc Approved Company Share Option Scheme 2008 is as follows:

Outstanding
1 April 2016

Granted during
the year

Exercised

Outstanding
31 March 2017

Exercise
price

D.A. Dunmow

C.D. Sutton

P.F. Latham

A.G. Wright

2,532
1,742
1,834
1,262
707
586
-

1,818
2,532
1,742
1,834
1,262
707
586

1,742
1,834
1,262
707
586
-

2,025
1,742
1,834
1,262
707
586
-

-
-
-
-
-
-
636

-
-
-
-
-
-
-

-
-
-
-
-
636

-
-
-
-
-
-
636

(2,532)
(1,742)
-
-
-
-
-

-
(2,532)
-
-
-
-
-

(1,742)
-
-
-
-
-

(2,025)
-
-
-
-
-
-

-
-
1,834
1,262
707
586
636

1,818
-
1,742
1,834
1,262
707
586

-
1,834
1,262
707
586
636

-
1,742
1,834
1,262
707
586
636

£1.975
£2.295
£2.725
£3.96
£5.65
£6.825
£7.075

£1.65
£1.975
£2.295
£2.725
£3.96
£5.65
£6.825

£2.295
£2.725
£3.96
£5.65
£6.825
£7.075

£1.975
£2.295
£2.725
£3.96
£5.65
£6.825
£7.075

Exercise period

15.12.15 to 14.12.20
29.11.16 to 28.11.21
05.12.17 to 04.12.22
16.12.18 to 15.12.23
05.01.20 to 04.01.25
18.12.20 to 17.12.25
06.12.21 to 05.12.26

26.11.14 to 25.11.19
15.12.15 to 14.12.20
29.11.16 to 28.11.21
05.12.17 to 04.12.22
16.12.18 to 15.12.23
05.01.20 to 04.01.25
18.12.20 to 17.12.25

29.11.16 to 28.11.21
05.12.17 to 04.12.22
16.12.18 to 15.12.23
05.01.20 to 04.01.25
18.12.20 to 17.12.25
06.12.21 to 05.12.26

15.12.15 to 14.12.20
29.11.16 to 28.11.21
05.12.17 to 04.12.22
16.12.18 to 15.12.23
05.01.20 to 04.01.25
18.12.20 to 17.12.25
06.12.21 to 05.12.26

No performance conditions attach to these options. Mr P.D.L. Latham, Mr N.C. Latham and Mr P.F. Latham made a gain of
£8,542, Mr D.A. Dunmow made a gain of £20,000, Mr C.D. Sutton made a gain of £12,091 and Mr A.G. Wright made a gain
of £10,581 on options exercised during the year.

MA Bushell,
Chairman of the Remuneration Committee

21 June 2017

JAMES LATHAM PLC ANNUAL REPORT 2017

Corporate Governance

Directors’ Report

The directors have pleasure in presenting their annual
report and the audited accounts for the year ended
31 March 2017. In accordance with section 414c(11) of
the Companies Act 2006, included in the Strategic Review
is the review of financial risk management and employee
policies. This information would have been required by
section 7 of the Large and Medium sized Companies and
Groups (Accounts and Reports) Regulations 2008 to be
contained in the Directors Report.

Results and dividends
Group results for the year ended 31 March 2017 are
set out on page 29. The directors recommend the
following dividends:-

Ordinary dividends

Interim dividend paid, 4.5 pence per
ordinary share

Final dividend proposed, 10.85 pence per
ordinary share

Total ordinary dividends, 15.35 pence per
ordinary share

£000

833

2,127

2,960

The directors recommend payment of the final dividend
on 25 August 2017 to shareholders on the register of
members at the close of business on 4 August 2017.

Balance sheet and post balance sheet events
The balance sheet on page 30 shows the group’s
financial position. Since the year end we have completed
on the purchase of the new Yate site which is expected
to cost a further £1.5m. See note 27 on page 55.

Directors
The directors of the company, whose biographical details
are shown on page 19, were directors throughout the year.

In compliance with the Articles of Association,
Meryl Bushell, Fabian French, Chris Sutton and
Piers Latham will retire by rotation and, being eligible,
offer themselves for re-election.

Other than their service contracts, no director has a
material interest in any contract with the company.
Peter Latham, Meryl Bushell and Fabian French, as
non-executive directors, do not have a service contract
with the company, but each has received a letter of
appointment for a two year period. Details of directors’
emoluments, pension rights, service contracts and the
directors’ interests in the ordinary shares of the company
are included in the Directors’ Remuneration Report on
pages 20 to 23.

JAMES LATHAM PLC ANNUAL REPORT 2017

Article 168 of the company’s Articles of Association gives
the directors and officers of the company a right to be
indemnified out of the assets of the company in respect of
any liability incurred in relation to the affairs of the group
to the extent the law allows.

The company has undertaken to comply with best practice
on approval of directors’ conflicts of interest. Under the
Companies Act 2006 a director must avoid a situation
where there is, or can be, an interest that may conflict
with the company’s interests. None of the directors had
an interest in any contract to which the group was a party
during the year.

The company maintained directors’ and officers’ liability
insurance cover throughout the year.

Share capital
Resolutions concerning the ability of the board to
purchase the company’s own shares and to allot shares
and to dis-apply pre-emption rights are again being
proposed at the Annual General Meeting.

The company holds 519,200 ordinary shares as treasury
shares, with a view to being used for employee share
schemes. The company also holds 150 preference shares
in treasury. In addition the Trustees of the James Latham
Employee Benefits Trust holds 19,741 shares with a view
to being used for employee share schemes.

Share option schemes
On 29 August 2007, the shareholders approved by
ordinary resolution the extension of the Save as You
Earn scheme for a further 10 years, and a resolution to
extend this for a further ten years will be proposed at the
Annual General Meeting. A 3 year scheme commenced
on 1 September 2016 with 183,484 options being issued
at an option price of £5.65.

On 21 August 2008, the shareholders approved by special
resolution the establishment of the Company Share
Option Scheme. During the year 14,799 options were
issued at an option price of £7.075. In addition 36,285
options were exercised after being held for five years,
4,242 at an option price of £1.65, 9,620 at an option price
of £1.975 and 22,423 at an option price of £2.295.

Employees
The strategic report on page 16 sets out the group’s
communication policies with their employees and its
policy toward disability.

Corporate Governance

Directors’ Report

St Thomas’ Hospital Birch canopies.

Own Shares
The investment in own shares is detailed in note 23 on
page 53. The investment at 31 March 2017 represents
19,741 25p ordinary shares held on behalf of the James
Latham plc Employee Benefit Trust. At 31 March 2017
519,000 25p ordinary shares were held by the company as
Treasury shares.

Substantial shareholdings
At 21 June 2017, the company had received notification
under the Disclosure Transparency Rules that the holdings
and voting rights exceeding the 3% notification threshold
were as follows:

Peter Latham
Robert Latham
Nick Latham
Piers Latham

Number
1,134,636
680,787
627,352
624,743

%
5.78
3.47
3.19
3.18

Payments to suppliers
Operating businesses are responsible for agreeing the
terms and conditions under which business transactions
with their suppliers are conducted. The group’s policy is to
pay suppliers in accordance with these terms. The group’s
creditor days at 31 March 2017 were 34 days (2016: 34 days).

Going concern
After making appropriate enquiries, the directors have a
reasonable expectation that the company and the group
have adequate resources to continue in operational
existence for the foreseeable future. The directors
confirm that the business is a going concern and that
their assessment of the going concern position has been
prepared in accordance with the Guidance on the Going
Concern Basis of Accounting and Reporting On Solvency
and Liquidity Risks published by the Financial Reporting
Council in April 2016.

Political and charitable donations
During the year the group made no political contributions
but made direct donations to various charitable
organisations amounting to £3,758 (2016: £4,940). The
group also made small donations of our products to a
number of good causes and was involved in fund raising
activities for the Timber Trades Benevolent Society.

Close company status
The close company provisions of the Income and
Corporation Taxes Act 1988 do not apply to the company.

JAMES LATHAM PLC ANNUAL REPORT 2017

Corporate Governance

Directors’ Report

Chris Kelly, one of our trainees in Scotland.

Financial instruments
A summary of the group financial instruments and related
disclosures are set out in note 28 to the group accounts
and in the Financial Review on pages 10 to 12.

Provision of information to the auditor
In the case of each of the directors who are directors of
the company at the date when this report was approved:

• So far as each of the directors is aware, there is no
relevant audit information of which the company’s
auditor is unaware; and

• Each of the directors has taken all the steps that he

ought to have taken as a director to make himself aware
of any relevant audit information and to establish that
the company’s auditor is aware of that information.

Auditor
A resolution to reappoint RSM UK Audit LLP as the
company’s auditor and to authorise the directors to fix
their remuneration will be proposed at the Annual
General Meeting. RSM UK Audit LLP has indicated its
willingness to continue in office.

The following items are to be proposed as special business,
and the board recommends that the shareholders vote in
favour of all resolutions put before the meeting.

Resolution 9. Directors authority to allot shares. This
gives the board the power to allot ordinary shares or
other securities, up to an aggregate nominal amount of
£1,680,000 (or one third of the current ordinary shares).

Resolution 10. Dis-application of pre-emption rights.
The Companies Act 2006 provides that when ordinary
shares are being issued for cash, these shares must first
be offered to existing shareholders on a pro rata basis.
This resolution empowers the board to allot shares not
exceeding 5% of the issued share capital, without offering
to existing shareholders. The board only anticipates
using this power in conjunction with the employee
share schemes.

Resolution 11. Authority for the company to purchase
its own shares. This gives the board the power to purchase
up to 10% of the company’s shares at a price not more
than 105% of the average of the mid market price for the
ten business days preceding the date of the purchase.

Annual General Meeting special business
The Annual General Meeting of the company will be held
at Gallery Level, Business Design Centre, 52 Upper Street,
London, N1 0QH on 23 August 2017 at 12.30pm.

On behalf of the Board of Directors
Peter Latham
Chairman

21 June 2017

JAMES LATHAM PLC ANNUAL REPORT 2017

Corporate Governance

Statement of Directors’ Responsibilities

The directors are responsible for preparing the Strategic
Report, Directors Report and the financial statements in
accordance with applicable law and regulations.

Company law requires the directors to prepare group
and company financial statements for each financial year.
The directors are required by the AIM Rules of the London
Stock Exchange to prepare group financial statements in
accordance with International Financial Reporting Standards
(“IFRS”) as adopted by the European Union “EU” and to
prepare the company financial statements in accordance
with IFRS as adopted by the EU.

The group and company financial statements are required
by law and IFRS adopted by the EU to present fairly the
financial position and performance of the group; the
Companies Act 2006 provides in relation to such financial
statements that references in the relevant part of that
Act to financial statements giving a true and fair view are
references to their achieving a fair presentation.

Under company law the directors must not approve the
financial statements unless they are satisfied that they give a
true and fair view of the state of affairs of the group and the
company and of the profit or loss of the group for that period.

In preparing each of the group and company financial
statements, the directors are required to:

a. select suitable accounting policies and then apply

them consistently;

b. make judgements and accounting estimates that are

reasonable and prudent;

c. state whether they have been prepared in accordance
with IFRS’s adopted by the EU, subject to any material
departures disclosed and explained in the company
financial statements;

d. prepare the financial statements on the going concern
basis unless it is inappropriate to presume that the
group and the company will continue in business.

The directors are responsible for keeping adequate
accounting records that are sufficient to show and explain
the group’s and company’s transactions and disclose with
reasonable accuracy at any time the financial position
of the group and the company and to enable them to
ensure that the financial statements comply with the
requirements of the Companies Act 2006. They are also
responsible for safeguarding the assets of the group and
the company and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.

The directors are responsible for the maintenance and
integrity of the corporate and financial information
included on the James Latham plc Investors website,
www.lathams.co.uk.

Legislation in the United Kingdom governing the
preparation and dissemination of financial statements may
differ from legislation in other jurisdictions.

On behalf of the Board of Directors
Peter Latham
Chairman

21 June 2017

Timber drying sheds.

Trainees in our Timber Academy learning about timber grading.

JAMES LATHAM PLC ANNUAL REPORT 2017

Corporate Governance

Independent Auditor’s Report

Opinion on financial statements
We have audited the group and parent company financial
statements (“the financial statements”) on pages 29 to 58
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.

In our opinion
• the financial statements give a true and fair view of
the state of the group’s and the parent’s affairs as at
31 March 2017 and of the group’s profit for the year
then ended;

• the group’s financial statements have been properly

prepared in accordance with IFRSs as adopted by the
European Union;

Matters on which we are required to report by
exception
In the light of the knowledge and understanding of the
group and the parent company and its environment
obtained in the course of the audit, we have not identified
any material misstatements in the Strategic Report or the
Directors’ report.

We have nothing to report in respect of the following
matters where the Companies Act 2006 requires us to
report to you if, in our opinion:
• adequate accounting records have not been kept by the
parent company, or returns adequate for our audit have
not been received from branches not visited by us; or

• the parent company financial statements are not in

agreement with the accounting records and returns; or
• certain disclosures of directors’ remuneration specified

by law are not made; or

• the parent company’s financial statements have been

• we have not received all the information and

properly prepared in accordance with IFRSs as adopted
by the European Union and as applied in accordance
with the Companies Act 2006; and

• the financial statements have been prepared in

accordance with the requirements of the Companies
Act 2006.

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 other matter prescribed by the
Companies Act 2006
In our opinion the information given in the Strategic
Report and the Directors’ Report for the financial year for
which the financial statements are prepared is consistent
with the financial statements and, based on the work
undertaken in the course of our audit, the Strategic
report and the Directors’ Report have been prepared in
accordance with applicable legal requirements.

explanations we require for our audit.

Respective responsibilities of directors and auditor
As more fully explained in the Directors’ Responsibilities
Statement (set out on page 27), 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 (APB’s) Ethical Standards for Auditors.

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.

David Clark
Senior Statutory Auditor

For and on behalf of
RSM UK Audit LLP
Statutory Auditor, Chartered Accountants
25 Farringdon Street
London EC4A 4AB

21 June 2017

JAMES LATHAM PLC ANNUAL REPORT 2017

Financial Statements

Consolidated Income Statement

For the year ended 31 March 2017

£’000s

Notes

2017

2016

Continuing operations

Revenue
185,929
Cost of sales (including warehouse costs) 3, 4, 11 (162,709) (151,389)

198,808

Gross proﬁt
Selling and distribution costs
Administrative expenses

36,099

34,540
4, 11 (15,457) (15,129)
4, 11 (6,463) (6,170)

Operating proﬁt
Finance income
Finance costs

Proﬁt before tax
Tax expense

14,179
56

13,241
5
56
6 (408) (421)

3
12,876
7 (2,846) (2,410)

13,827

Proﬁt after tax attributable to owners
of the parent company

Earnings per ordinary share (basic)

Earnings per ordinary share (diluted)

10,981

56.0p

55.8p

10,466

53.7p

53.5p

Consolidated Statement of Comprehensive Income

For the year ended 31 March 2017

£’000s

Notes

2017

Profit after tax attributable to owners of the
parent company
Other comprehensive income:
Actuarial (loss)/gain on defined benefit
pension scheme
Deferred tax relating to components of other
comprehensive income

Other comprehensive income for the year,
net of tax

10,981

17 (7,543)

825

19 1,362

(219)

Total comprehensive income attributable to the owners
of the parent company

(6,181)

4,800

2016

10,466

606

11,072

JAMES LATHAM PLC ANNUAL REPORT 2017

Financial Statements

Consolidated and Company Balance Sheet

As at 31 March 2017

£’000s

Assets
Non-current assets
Investments
Goodwill
Other intangible assets
Property, plant and equipment
Deferred tax asset

Company Registration Number 65619

Group

Company

Notes

2017

2016

2017

2016

22
12
10
11
19

-
237
1
26,312
2,904

-
237
93
22,111
1,802

9,613
-
-

9,613
-
-
20 24
79 65

Total non-current assets

29,454

24,243

9,712

9,702

Current assets
Inventories
Trade and other receivables
Cash and cash equivalents

Total current assets

Total assets

Current liabilities
Trade and other payables
Interest bearing loans and borrowings
Tax payable

Total current liabilities

Non-current liabilities
Interest bearing loans and borrowings
Retirement and other beneﬁt obligation
Other payables
Deferred tax liabilities

13
14

15
16

16
17
18
19

35,508
40,076
17,246

33,403
-
35,288 1,585
7,993
16,832

-
3,322
14,924

92,830

85,523

9,578

18,246

122,284

109,766

19,290

27,948

27,063
-
1,517

23,471
-
1,376

28,580

24,847

1,036
1,778
-

2,814

852
9,132
-

9,984

987
16,625

987
9,657
349 406
2,686

2,485

987
-

987
-
221 254
-

Total non-current liabilities

20,446

13,736

1,208

1,241

Total liabilities

Net assets

Capital and reserves
Issued capital
Share-based payment reserve
Own shares
Capital reserve
Retained earnings

49,026

38,583

4,022

11,225

73,258

71,183

15,268

16,723

5,040
56

5,040
108

5,040
20
21
108 56
23 (291) (441) (291) (441)
-
12,068

3
68,398

-
10,411

3
66,525

5,040

Total equity attributable to
shareholders of the parent company

73,258

71,183

15,268

16,723

The Company’s profit for the year and total comprehensive income for the year were £1,266,000 (2016: loss of £551,000)
and £1,270,000 (2016: loss of £631,000) respectively.

These accounts were approved and authorised for issue by the Board of Directors on 21 June 2017 and signed on its behalf by:
P.D.L. Latham
D.A. Dunmow

} Directors

The consolidated notes on pages 34 to 58 form part of these accounts.

JAMES LATHAM PLC ANNUAL REPORT 2017

Financial Statements

Consolidated Statement of Changes in Equity

Attributable to owners of the parent company

Issued
capital
£’000

5,040
-

Share-based
payment
reserve
£’000

Own
shares
£’000

143 (177)
-

Capital
reserve
£’000

3
-

Retained
earnings
£’000

57,222
10,466

Total
equity
£’000

62,231
10,466

- -

825

Balance at 1 April 2015
Proﬁt for the year
Other comprehensive income:
Actuarial gain on deﬁned beneﬁt
pension scheme

Deferred tax relating to components
of other comprehensive income

Total comprehensive income for the year
Transactions with owners:
Dividends
Write down on conversion of ESOP shares
Exercise of options
Transfer of treasury shares
Conversions of ESOP shares
Change in investment in ESOP shares
Share-based payment expense

-
-
- (149)
-
-
-
-

-
-
- 819
-
- (1,385)
-
507
- (205)
-

- (219) (219)

11,072

- (2,484) (2,484)
-
- (819)
-
-
149
-
- 1,385
-
507
-
- (205)
-
62
-
-

Total transactions with owners

- (87) (264)

- (1,769) (2,120)

Balance at 31 March 2016

5,040

56 (441)

Proﬁt for the year
Other comprehensive income:
Actuarial loss on deﬁned beneﬁt
pension scheme

Deferred tax relating to components
of other comprehensive income

Total comprehensive income for the year

Transactions with owners:
Dividends
Exercise of options
Write down on conversion of ESOP shares
Change in investment in ESOP shares
Share-based payment expense

-
-
- (19)
-
-
-
-
71
-

-
-
52
98
-

66,525

71,183

10,981

- (7,543) (7,543)

1,362

4,800

- (2,894) (2,894)
-
19
-
- (52)
-
98
-
-
71
-
-

Total transactions with owners

150

- (2,927) (2,725)

Balance at 31 March 2017

5,040

108 (291)

68,398

73,258

JAMES LATHAM PLC ANNUAL REPORT 2017

Financial Statements

Company Statement of Changes in Equity

Attributable to owners of the parent company

Balance at 1 April 2015
Loss for the year

Deferred tax relating to components
of other comprehensive income

Total comprehensive income for the year

Transactions with owners:
Dividends
Write down on conversion of ESOP shares
Exercise of options
Transfer of treasury shares
Conversions of ESOP shares
Change in investment in ESOP shares
Share-based payment expense

Issued
capital
£’000

5,040
-

Share-based
payment
reserve
£’000

Own
shares
£’000

Retained
earnings
£’000

Total
equity
£’000

143 (177)

14,468

19,474
- (551) (551)

- - (80) (80)

- (631) (631)

- - (2,484) (2,484)
-
-
819 (819)
-
-
-
149
- (149)
-
-
1,385
- 507
-
- (205)
-
62
-
-

-
- (1,385)
- 507
- (205)
-

Total transactions with owners

- (87) (264) (1,769) (2,120)

Balance at 31 March 2016

5,040

56 (441)

12,068

16,723

Proﬁt for the year
Deferred tax relating to components
of other comprehensive income

Total comprehensive income for the year

Transactions with owners:
Dividends
Exercise of options
Write down on conversion of ESOP shares
Change in investment in ESOP shares
Share-based payment expense

1,266 1,266

- -

1,270 1,270

-
- (19)
-
-
-
-
71
-

- - (2,894) (2,894)
-
-
98
71

19
52 (52)
-
-

98
-

Total transactions with owners

- 52

150 (2,927) (2,725)

Balance at 31 March 2017

5,040

108 (291)

10,411

15,268

JAMES LATHAM PLC ANNUAL REPORT 2017

Financial Statements

Consolidated and Company Cash Flow Statement

For the year ended 31 March 2017

Group

Company

£’000s

Notes

2017

2016

2017

2016

Net cash flow from operating activities
Cash generated from operations
Interest paid
Income tax (paid)/received

11,902

1,010 (109)
(2) (23) (102) (196)
50 75
(2,646) (2,016)

11,704

Net cash inflow/(outflow) from operating activities

9,254

9,665 958 (230)

Cash flows from investing activities
Interest received and similar income
Purchase of property, plant and equipment
Proceeds from sale of property, plant
and equipment

113
(6,045) (2,056) - (6)

Net cash (outflow)/inflow from investing activities

(5,867) (1,864)

122

136

107

Cash flows from financing activities
-
Borrowings repaid during the year
5,000
Group investments repaid in the year
Dividend received
-
Equity dividends paid (2,894) (2,484) (2,894) (2,484)
(79) (79) (79) (79)
Preference dividend paid

- (907)
-
-
-
-

-
-
2,403

Net cash (outflow)/inflow from financing activities

(2,973) (3,470) (570)

2,437

414

4,331

423

2,314

Increase in cash and cash equivalents
for the year

Cash and cash equivalents at
beginning of year

Cash and cash equivalents at end of year

17,246

16,832

12,501

5,792

6,215

3,478

5,792

Balance sheet cash and cash equivalents
Bank overdraft in current liabilities (note 16)

17,246
-

16,832

14,924
7,993
- (1,778) (9,132)

Cash and cash equivalents at end of year

17,246

16,832

6,215

5,792

JAMES LATHAM PLC ANNUAL REPORT 2017

Financial Statements

Notes forming part of the Group Accounts

General information
James Latham plc is a public limited company incorporated
and domiciled in the United Kingdom under the Companies
Act 2006 and is listed on the AIM market. The nature of
the group’s operations and its principal activities are set out
in the Strategic Review. The address of the registered office
is Unit 3 Swallow Park, Finway Road, Hemel Hempstead,
Herts HP2 7QU.

1. Summary of significant accounting policies
The principal accounting policies applied in the preparation
of these consolidated accounts are set out below. These
policies have been consistently applied to all the years
presented, unless otherwise stated.

(a) Basis of preparation
These consolidated and company accounts have been
prepared in accordance with International Financial Reporting
Standards (IFRS) and IFRIC interpretations endorsed by the
European Union (EU) and with those parts of the Companies
Act 2006 applicable to companies reporting under IFRS.

The accounts have been prepared under the historic cost
convention except for forward contract financial instruments
measured at fair value. The directors have prepared the
financial statements on the going concern basis for the reasons
set out on page 25. A summary of the more important group
accounting policies, which have been applied consistently
across the group, is set out below.

At the date of authorisation of these financial statements, the
following standards and interpretations which are issued but
not yet effective or endorsed (unless otherwise stated), have
not been applied:

Annual Improvements to IFRSs 2014-16 Cycle

- IFRS 2

- IFRS 4

- IFRS 9

- IFRS 15

Classification and Measurement of Share-Based
Payment Transactions
Financial Instruments with IFRS 4 Insurance
Contracts
Financial instruments – Classification and
Measurement
Revenue from contracts with customers
(EU endorsed)

- IFRS 15 Clarifications
- IFRS 16 Leases (EU endorsed)
- IAS 7
- IAS 12

Discosure Initiative
Recognition of Deferred Tax Assets for
Unrealised Losses
Investments in Associates and Joint Ventures
- IAS 28
Transfers of Investment Property
- IAS 40
- IFRIC 22 Foreign Currency Transactions and Advance

Consideration

The directors anticipate that the adoption of these standards
and interpretations as appropriate in future periods will have
no material impact on the financial statements of the group
when the relevant standards come into effect for periods
commencing after 1 April 2017.

(b) Basis of consolidation
The consolidated accounts include the company and all its
subsidiary undertakings (from the date of acquisition or to
the date of disposal where applicable). Intra group sales and
profits are eliminated on consolidation. The accounts of all
subsidiary undertakings are made up to 31 March.

A subsidiary is an entity controlled, either directly or
indirectly, by the company, where control is the power to
govern the financial and operating policies of the entity
so as to obtain benefit from its activities. The acquisition
method of accounting is used to account for the acquisition
of subsidiaries by the group. The cost of an acquisition
is measured as the fair value of the assets given, equity
instruments issued and liabilities incurred or assumed at
the date of exchange. Acquisition costs are expensed in the
period in which they are incurred.

1.1 Revenue recognition
Revenue comprises net sales to external customers
exclusive of Value Added Tax. Revenue is recognised upon
delivery to, or collection by, the customer. Revenue is
shown net of returns and rebates and after eliminating sales
within the group.

1.2 Segmental reporting
IFRS 8 “Operating Segments” requires operating segments to
be identified on the basis of internal reporting of components
of the group that are regularly reviewed by the chief
operating decision maker, which the group considers to be
the Chairman, to allocate resources to the segments and to
assess their performance. Further information is available in
note 2.

1.3 Operating profit
Operating profit consists of revenues and other operating
income less operating expenses. Operating profit excludes
net finance costs.

1.4 Exceptional items
Exceptional items are those items of income and expenditure
that by reference to the group are material in size and nature
or incidence, that in the judgement of the directors, should
be disclosed separately on the face of the financial statements
to ensure both that the reader has a proper understanding
of the group’s financial performance and that there is
comparability of financial performance between periods.

JAMES LATHAM PLC ANNUAL REPORT 2017

Financial Statements

Notes forming part of the Group Accounts

1.5 Foreign currency translation
The functional and presentational currency of the parent
company and its subsidiaries is UK Pounds Sterling.
Transactions in currencies other than the functional
currency are translated at the rate ruling at the date of the
transaction. At each balance sheet date, monetary assets
and liabilities denominated in foreign currencies are
translated at the rate of exchange ruling at the balance sheet
date. Any gains or losses arising from the transactions are
taken to the income statement.

1.8 Goodwill
Goodwill on consolidation, being the excess of the purchase
price over the fair value of the net assets of subsidiary
undertakings at the date of acquisition is capitalised in
accordance with IFRS 3 (revised) “Business combinations”.
Goodwill is tested annually for impairment, or more
frequently when there is an indication that goodwill may
be impaired. Goodwill is carried at cost less accumulated
impairment losses. Impairment losses on goodwill are not
reversed in a subsequent period.

In order to help manage its exposure to certain foreign
exchange risks, the group enters into forward contracts.
Gains and losses on forward contracts are recognised at fair
value through the income statement.

1.6 Property, plant and equipment
Property, plant and equipment is stated at cost less
depreciation. Depreciation on property, plant and equipment
is provided at rates calculated to write off the cost less
estimated residual value of each asset over its expected life.
It is calculated at the following rates:

Freehold buildings
Leasehold improvements
Fixtures and ﬁttings
Plant, equipment and vehicles

- over 50 years
- over 5 to 15 years
- over 4 to 10 years
- over 5 to 20 years

Freehold land and assets under construction are not
depreciated.

Estimated residual values and useful lives are reviewed
annually and adjusted where necessary.

1.7 Impairment of non-current assets
Goodwill is reviewed annually for impairment. The carrying
amounts of the group’s other intangible assets and property,
plant and equipment are reviewed at each balance sheet date
to determine whether there is any indication of impairment.
If such an indication exists, the asset’s recoverable amount
is estimated and compared to its carrying value. Where the
asset does not generate cash flows that are independent
from other assets, the group estimates the recoverable
amount of the cash-generating unit to which the asset
belongs. Where the carrying value exceeds the recoverable
amount, a provision for the impairment loss is established
with a charge being made to the income statement.

1.9 Intangible assets – trademark
Acquired trademarks are shown at historical cost. Trademarks
are considered to have a finite life and are carried at cost
less accumulated amortisation. Amortisation is calculated
using the straight-line method over the estimated useful life
of 20 years.

1.10 Inventories
Inventories are stated at the lower of cost (including an
appropriate proportion of attributable supplier rebates and
discounts) and net realisable value.

Net realisable value is the estimated selling price in the
ordinary course of business, less applicable variable selling
expenses. Provision is made for obsolete or slow moving
inventories where appropriate.

The cost of inventories is based on the weighted average
principle.

1.11 Financial instruments
Financial assets and financial liabilities are recognised on the
group’s balance sheet when the group has become party to
the contractual provisions of the instrument.

1.11.1 Trade receivables
Trade receivables are classified as loans and receivables and
are initially recognised at fair value. They are subsequently
measured at their amortised cost using the effective interest
method less any provision for impairment. A provision
for impairment is made where there is objective evidence
(including customers with financial difficulties or in default
on payments), that amounts will not be recovered in
accordance with original terms of the agreement. A provision
for impairment is established when the carrying value of the
receivable exceeds the present value of the future cash flow
discounted using the effective interest rate. The carrying
value of the receivable is reduced through the use of an
allowance account and any impairment loss is recognised in
the income statement.

JAMES LATHAM PLC ANNUAL REPORT 2017

Financial Statements

Notes forming part of the Group Accounts

1.11.2 Cash and cash equivalents
Cash and cash equivalents comprise cash in hand and at
bank and other short-term, highly liquid investments that
are readily convertible to known amounts of cash and which
are subject to an insignificant risk of changes in value. The
carrying amount of these assets approximates their fair value.

1.11.3 Financial liabilities and equity
Financial liabilities and equity instruments are classified
according to the substance of the contractual arrangements
entered into. An equity instrument is any contract that
evidences a residual interest in the assets of the group after
deducting all of its liabilities.

1.11.4 Bank borrowings
Interest-bearing bank loans are recorded initially at their
fair value, net of direct transaction costs. Such instruments
are subsequently carried at their amortised cost and finance
charges, including premiums payable on settlement or
redemption, are recognised in the income statement over the
term of the instrument using an effective rate of interest.

1.11.5 Trade payables
Trade payables are initially recognised at fair value and
subsequently at amortised cost using the effective interest
method.

1.11.6 Equity instruments
Equity instruments issued by the group are recorded at the
proceeds received, net of direct issue costs.

1.11.7 Derivative ﬁnancial instruments
The group’s activities expose the entity primarily to foreign
currency and interest rate risk. The group uses foreign
exchange forward contracts and fixed rate bank loans to help
manage these exposures. The group does not use derivative
financial instruments for speculative purposes.

Derivative financial instruments are initially recognised at fair
value on the date a derivative contract is entered into and are
subsequently remeasured at their fair value.

Foreign currency forward contracts and fixed rate bank loans
are not designated effective hedges and so are marked to
market at the balance sheet date, with any gains or losses
being taken through the income statement.

1.12 Current and deferred income tax
Current tax is the expected tax payable on taxable income for
the year, using tax rates enacted or substantively enacted at
the balance sheet date, and any adjustments to tax payable in
respect of previous years.

Deferred tax expected to be payable or recoverable on
differences at the balance sheet date between the tax bases
and liabilities and their carrying amounts for financial
reporting purposes is accounted for using the liability
method. Deferred tax liabilities are generally recognised for
all taxable temporary differences, and deferred tax assets are
recognised to the extent that it is probable that taxable
profits will be available against which deductible differences
can be utilised.

Deferred tax is calculated at the rates of taxation which are
expected to apply when the deferred tax asset or liability is
realised or settled, based on the rates of taxation enacted or
substantively enacted at the balance sheet date.

1.13 Operating leases
Leases in which a significant portion of the risks and rewards
of ownership are retained by the lessor are classified as
operating leases. Payments made under operating leases are
charged to the income statement on a straight-line basis over
the period of the lease.

1.14 Dividend distribution
Dividend distribution to the company’s shareholders is
recognised as a liability in the group’s financial statements
in the period in which the dividends are approved by the
company’s shareholders.

1.15 Retirement beneﬁt costs
Retirement benefit costs are accounted for in accordance
with IAS 19 (revised) “Employee benefits”. Full details of the
basis of calculation of the net pension liability disclosed in
the balance sheet at 31 March 2017, and of the amounts
charged/credited to the income statement and equity, are
set out in note 17 to the accounts.

The cost of the defined benefit scheme is determined using
the projected unit credit method with actuarial valuations
being carried out at the end of each reporting period. The
current service cost represents the increase in the present
value of the plan liabilities expected to arise from employee
service in the current period. Past service costs resulting from
enhanced benefits are recognised in the income statement on
a straight-line basis over the vesting period, or immediately if
the benefits have vested. Interest cost represents a net
interest cost on the net defined benefit liability. Gains and
losses on curtailments or settlements are recognised in the
income statement in the period in which the curtailment or
settlement occurs.

JAMES LATHAM PLC ANNUAL REPORT 2017

Financial Statements

Notes forming part of the Group Accounts

1.20 Accounting estimates and judgements
The directors consider the critical accounting estimates and
judgements used in the financial statements and concluded
that the main areas of judgements are:

i. Post-employment beneﬁts
ii. Stock obsolescence provision
iii. Provisions for receivables impairment

These estimates are based on historical experience and
various other assumptions that management and the board
of directors believe are reasonable under the circumstances
and are discussed in more detail under their respective notes.
For post-employment benefits, the directors take advice from
a qualified actuary. Due to the inherent uncertainty involved
in making assumptions and estimates, actual outcomes could
differ from those assumptions and estimates.

2. Business and geographical segments
For management purposes, the group is organised into one
trading division, that of timber importing and distribution,
carried out in each of the eleven locations trading
predominantly in the United Kingdom.

In each location, turnover and gross margin is reviewed
separately for Panel Products (including ATP) and Timber
(including Flooring and LDT). Most locations sell both
products groups, except in the London region where
for operational efficiency Panel Products and Timber are
sold from separate locations. Resources are allocated and
employees incentivised on the basis of the results of their
individual location and not on the basis of a product group.

Whilst there are regional differences in the relative
importance of product groups and classes of customer,
each location is considered to have similar economic
characteristics and so can be aggregated into one segment.
We therefore consider there is one business segment and
one geographic segment.

Actuarial gains and losses, which represent differences
between the expected and actuarial returns on the plan
assets and the effect of changes in actuarial assumptions, are
recognised in the statement of comprehensive income in the
period in which they occur.

The defined benefit liability recognised in the balance sheet
comprises the present value of the benefit obligation,
minus any past service costs not yet recognised minus the
fair value of the plan assets, if any, at the balance sheet date.
The deficit is classified as a non-current liability.

Pension payments to the group’s defined contributions
schemes are charged to the income statement as they arise.

1.16 Finance leases
Assets held under finance leases are recognised as assets
of the group at their fair value or, if lower, at the present
value of the minimum lease payments, each determined at
the inception of the lease. The corresponding liability to
the lessor is included in the balance sheet as a finance lease
obligation. Lease payments are apportioned between finance
charges and the reduction of lease obligation so as to achieve
a constant rate of interest on the remaining balance of the
liability. Finance charges are charged directly against income.

1.17 Share-based payment
The group has applied the requirements of IFRS 2 “Share-
based payment” which requires the fair value of share-based
payments to be recognised as an expense.

Certain employees receive remuneration in the form of share
options. The fair value of the equity instruments granted is
measured on the date at which they are granted by using the
Black-Scholes model, and is based on the group’s estimate of
the number of options that will eventually vest. The fair value
is expensed in the income statement over the vesting period.

1.18 Treasury shares
Treasury shares are shown at historical cost, and deducted
from retained earnings directly in equity.

1.19 Employee Share Ownership Plan (ESOP)
Own shares represent the company’s own shares that are
held by the group sponsored ESOP trust in relation to the
group’s employees share schemes. Own shares are deducted
at cost in arriving at shareholders’ equity and gains and losses
on their sale or transfer are recognised directly in equity.
ESOP is treated separately and consolidated in the group and
company accounts.

JAMES LATHAM PLC ANNUAL REPORT 2017

Financial Statements

Notes forming part of the Group Accounts

3. Profit before tax

2017 2016

Proﬁt for the year has been arrived at after
taking into account the following:

Net foreign exchange gains/(losses)
Cost of inventories recognised as an expense and included
in ‘cost of sales’ in the consolidated income statement
Depreciation of property, plant and equipment – owned
Proﬁt on disposal of property, plant and equipment
Amortisation
Loss on disposal of intangible asset
Operating lease rentals - vehicles and plant
- property

Fees payable to the company’s auditor for the audit
of the consolidated and parent company accounts

Fees payable to the company’s auditor and its
associates for other services

£’000

193

(13)

157,375
1,667

145,914
1,507
(95) (97)
8
-

5
86

570
539

576
539

1,109

1,115

9 9

The audit of the company’s subsidiary pursuant to legislation
Tax services
Fees in relation to the audit of the James Latham plc Pension
and Assurance Scheme

63
61
12 11

4. Information regarding employees

The monthly average number of persons,
including directors, employed by the group during
the year was as follows:

Management and administration
Warehousing
Selling
Distribution

The aggregate payroll costs of these employees
were as follows:

Wages and salaries
Social security costs
Pension costs
Share-based payment

Group

Company

2017
Number

2016
Number

2017
Number

2016
Number

57
117
127
69

370

£’000

12,554
1,278
1,341
71

15,244

55
111
128
62

356

£’000

11,964
1,196
1,279
62

14,501

26
1
-
-

£’000

1,328
149
916
71

2,464

Of the above group payroll costs, £3,475,000 (2016: £3,218,000) is included in cost of sales, £8,028,000
(2016: £7,789,000) is included in selling and distribution costs, and £3,741,000 (2016: £3,494,000) is included
in administrative expenses in the income statement.

5. Finance income

Interest receivable

The interest received is on bank deposits.

JAMES LATHAM PLC ANNUAL REPORT 2017

2017
£’000

24
1
-
-

£’000

1,230
143
225
62

1,660

2016
£’000

Financial Statements

Notes forming part of the Group Accounts

2017
£’000

2016
£’000

23
327 319
79

6. Finance costs

On bank loans and overdrafts
On pension liability
On 8% Cumulative Preference shares

The interest payable on bank loans and overdrafts is payable on balances with a maturity analysis of less than
6 months at the balance sheet date and interest on all other interest payments are based on balances with a maturity
analysis of over five years at the balance sheet date.

408

421

7. Tax expense

The charge for taxation on proﬁt comprises:

2017
£’000

2016
£’000

Current year:
2,456
UK corporation tax at 20% (2016: 20%)
- (11)
Adjustment in respect of prior year
103 (9)
Deferred taxation - pension
- IBAs derecognised in current year (18) (22)
- change in tax rates
44 (28)
- other (70) 24

2,787

Proﬁt before taxation

Tax at 20% (2016: 20%)

2,846

13,827

2,765

2,410

12,876

2,575

Tax effect of expenses/credits that are not taxable
in determining taxable proﬁt
125 (124)
IBAs derecognised in current year (18) (22)
44 (28)
Change in tax rates
20
Other (70)
Adjustment in respect of prior year

- (11)

Total tax charge

2,846

2,410

8. Dividends

2017 2016

Ordinary dividends:

£’000

£’000 £’000 £’000

Final 10.3p per share paid 26 August 2016 (2015: 8.8p)
Interim 4.5p per share paid 27 January 2017 (2016: 4.0p)

2,011
883

1,707
777

2,894 2,484

The Directors propose a final dividend for 2017 of 10.85p per share, that, subject to approval by the shareholders,
will be paid on 25 August 2017 to shareholders on the register on 4 August 2017.

Based on the number of shares currently in issue, the final dividend for 2017 is expected to absorb £2,127,000.

JAMES LATHAM PLC ANNUAL REPORT 2017

Financial Statements

Notes forming part of the Group Accounts

9. Earnings per ordinary share

Earnings per ordinary share is calculated by dividing the net profit for the year attributable to ordinary shareholders by
the weighted average number of ordinary shares outstanding during the year.

Net proﬁt attributable to ordinary shareholders

2017
£’000

10,981

Number
’000

2016
£’000

10,466

Number
’000

Issued ordinary share capital
20,160
Less: weighted average number of own shares held in treasury investment (519) (619)
Less: weighted average number of own shares held in ESOP Trust (40) (48)

20,160

Weighted average share capital
Add: dilutive effects of share options issued

Weighted average share capital for diluted earnings per ordinary
share calculation

19,601
82

19,683

19,493
65

19,558

10. Intangible assets – Group

Cost:
At 1 April 2015
Additions

At 1 April 2016
Additions
Write-down

At 31 March 2017

Amortisation
At 1 April 2015
Charge for the year

At 1 April 2016
Charge for the year
Write-down

At 31 March 2017

Net book value
At 31 March 2017

At 31 March 2016

At 31 March 2015

Trademark
£’000

155
-

155
-
(154)

54
8

62
5
(67)

101

The amortisation charge is included in the income statement under administrative expenses.

The registered trademarks of the company are Bausen® Flooring and Buffalo® Board. Due to a change in trading
strategy, the board have decided to write down the remaining value of the Bausen® Flooring trade Mark.

JAMES LATHAM PLC ANNUAL REPORT 2017

Financial Statements

Notes forming part of the Group Accounts

11. Property, plant and equipment

11.1 Group

Group

Short
leasehold
property
improvements
£’000

Plant,
equipment
and
vehicles
£’000

Freehold
property
£’000

Total
£’000

Cost:
At 1 April 2015
Additions
Disposals

At 1 April 2016
Additions
Disposals

At 31 March 2017

Depreciation:
At 1 April 2015
Disposals
Charge for the year

At 1 April 2016
Disposals
Charge for the year

At 31 March 2017

Net book value

At 31 March 2017

At 31 March 2016

At 31 March 2015

18,742
64
(1)

30,234
2,056
- (603) (604)

10,879
1,992

613
-

18,805
4,573

31,686
6,045
(15) - (564) (579)

12,268
1,470

613
2

23,363

615

13,174

37,152

2,413
-
249

251

8,633
- (565) (565)
1,507

5,969

1,221

2,662

9,575
- - (552) (552)
37 1,518 1,817

6,625

262

288

2,924

325

7,591

10,840

20,439

290

5,583

16,143

16,329

325

362

5,643

4,910

26,312

22,111

21,601

Included in freehold property is land with a book value of £7,892,000 (2016: £6,311,000) which is not depreciated.
Also included in freehold property is an asset under construction with a book value of £2,992,000, which has not
been depreciated.

The depreciation charge is included in the income statement as follows:

Cost of sales
Selling and distribution costs
Administrative expenses

2017
£’000

1,113

610

1,817

2016
£’000

888
513
106

1,507

JAMES LATHAM PLC ANNUAL REPORT 2017

Financial Statements

Notes forming part of the Group Accounts

11.2 Company

Cost:
At 1 April 2015
Additions

At 1 April 2016
Additions
Disposals

At 31 March 2017

Depreciation:
At 1 April 2015
Charge for the year

At 1 April 2016
Charge for the year

At 31 March 2017

Net book value

At 31 March 2017

At 31 March 2016

At 31 March 2015

12. Goodwill

Cost:
At 1 April 2015 and 31 March 2017

Impairment
At 1 April 2015 and 31 March 2017

Net book value
At 31 March 2017, 2016 and 2015

Plant, equipment and vehicles
£’000

355
6

361
-
-

361

333
4

337
4

341

Goodwill
£’000

362

125

237

The goodwill arose upon the acquisition of part of the trade and net assets of F.H. Thompson Limited in the year
ended 31 March 2005.

In accordance with the group’s accounting policy the carrying value of goodwill is reviewed annually for impairment.
The review entails an assessment of the present value of projected return from an asset over a period of 5 years.
The discount rate used in the group’s estimated weighted average cost of capital is currently 6%.

The review performed at the year end did not result in the impairment of goodwill as the estimated recoverable
amount exceeded the carrying value. The recoverable amount of the cash generating unit to which the goodwill has
been allocated is determined based on value-in-use calculations.

13. Inventories

2017
£’000

2016
£’000

33,982
Finished goods and goods for resale
Less: provisions for slow moving and obsolete stock (551) (579)

36,059

35,508

33,403

The inventories impairment charge for the year ended 31 March 2017 was £340,000 (2016: £406,000). Impairment
charges reversed during the year were £368,000 (2016: £539,000). The reversal of inventories arises from sales in the
year of the slow moving and obsolete stock previously provided.

Inventories are pledged as securities against bank overdrafts (see note 16).

JAMES LATHAM PLC ANNUAL REPORT 2017

Financial Statements

Notes forming part of the Group Accounts

14. Trade and other receivables

Group

Company

Trade receivables

Other receivables:
Other receivables
Amounts owed by subsidiaries
Tax receivable
Prepayments

2017
£’000

36,098

1,445
-
-
2,533

3,978

2016
£’000

32,472

1,073
-
-
1,743

2,816

2017
£’000

3
284
1,270
23

1,580

40,076

35,288

1,585

2016
£’000

-
2,220
1,058
29

3,307

3,322

The directors consider that the carrying amount of trade and other receivables approximates their fair value.

Trade receivables amounted to £36,098,000 (2016: £32,472,000), net of a provision of £59,000 (2016: £106,000) for
impairment. Movements on the group provisions for impairment were as follows:

At 1 April 2016
Provisions for receivables impairment
Receivables written off during the year as uncollectible

At 31 March 2017

Group

2017
£’000

2016
£’000

126
106
206
81
(128) (226)

106

The average credit period on sale of goods is 51 days (2016: 51 days).

The following table provides analysis of trade and other receivables that were past due at 31 March 2017 but not
impaired. The group believes that the balances are ultimately recoverable based on a review of past payment history
and the current financial status of the customers.

0-30 days
31-60 days
61-90 days

Group

2017
£’000

588
39
6

633

2016
£’000

517
96
51

664

There are no significant credit risks arising from financial assets that are neither past due nor impaired.

At 31 March 2017, £39,408,000 (2016: £34,788,000) of trade and other receivables were denominated in sterling,
£394,000 (2016: £247,000) were denominated in Euros and £274,000 (2016: £253,000) were denominated in US dollars.

JAMES LATHAM PLC ANNUAL REPORT 2017

Financial Statements

Notes forming part of the Group Accounts

15. Trade and other payables

Trade payables
Other taxation and social security
Other payables
Accruals and deferred income

Group

Company

2017
£’000

19,516
4,326
1,473
1,748

2016
£’000

17,222
3,301
1,253
1,695

2017
£’000

26
588
276
146

27,063

23,471

1,036

2016
£’000

50
477
203
122

852

Trade and other payables principally comprise amounts outstanding for trade purchases and ongoing costs.
The average credit period taken for trade purchases is 34 days (2016: 34 days). The directors consider that the
carrying amount of trade payables approximates to their fair value.

At 31 March 2017, £25,300,000 (2016: £21,413,000) of trade and other payables were denominated in sterling,
£969,000 (2016: £1,374,000) in US dollars, £717,000 (2016: £647,000) in Euros and £77,000 (2016: £37,000) in
Canadian dollars.

Based on the balance sheet value of trade and other payables, as shown above, a 10% change in the currency
exchange rate would lead to an increase or decrease in income and equity of £176,000 (2016: £206,000).

16. Interest bearing loans and borrowings

Current liabilities
Bank overdraft

Non-current liabilities
Cumulative preference shares
of £1 each (note 20)

Group

Company

2017
£’000

2016
£’000

2017
£’000

1,778

987

2016
£’000

9,132

987

Total

987

2,765

10,119

The group would normally expect that sufficient cash is generated in the operating cycle to meet the contractual cash
flows as discussed above through effective cash management. In addition, the group maintains uncommitted undrawn
bank facilities of £1,000,000 (2016: £1,000,000) which can be accessed as considered necessary. The facilities bear
interest at 2% above base rate and are secured by fixed and floating charges over the assets of the company and its
subsidiaries. This facility is renewed annually.

The cumulative preference shares are held on an ongoing basis and pay dividends at 8% per annum.

JAMES LATHAM PLC ANNUAL REPORT 2017

Financial Statements

Notes forming part of the Group Accounts

17. Retirement and other beneﬁt obligation

Group

Retirement beneﬁt obligations (note 17.2)

17.1. Group pension schemes

2017
£’000

16,625

2016
£’000

9,657

James Latham plc operates a group contributory defined benefit pension scheme. The scheme is a funded scheme.
Benefits are provided based on earnings in the last twelve months before retirement, plus average bonuses received
over the last three years. The assets of the scheme are held separately from those of the company. 58% of the
assets are invested in equities, with 52% under passive management by Blackrock and 6% in a Fund of Hedge funds
managed by Mesirow. 33% are held in bonds and gilts, with 19% in a Buy and Maintain Fund managed by Mercers,
5% in an Absolute Return Fund managed by Wellington and 9% in an Index Linked fund managed by Blackrock, with
the remaining 9% in a HLV Property Fund managed by Aviva.

The group contributory defined benefit pension scheme is closed to new entrants, and a defined contribution group
scheme has been established for the pension provision of all other employees, including those contributing through
auto enrolment.

The pension charge for the year for all schemes was £1,341,000 (2016: £1,279,000). Of the charge, £171,000
(2016: £169,000) is included in cost of sales, £596,000 (2016: £597,000) is included in selling and distribution costs,
and £574,000 (2016: £513,000) is included in administrative expenses in the income statement.

Contributions are determined by a qualified actuary on a basis of triennial valuations using the projected unit funding
method. The most recent available valuation was at 31 March 2014. The assumptions which have the most significant
effect on the results of the valuation are those relating to the rate of return on investments and the rates of increase
in salaries and pensions.

It was assumed that the investment return would be 6.0% per annum pre-retirement and 4.5% per annum post-
retirement, that the salary increases would average 3.6% per annum and that the present and future pensions
would increase at the rate of 3% per annum in respect of service to 1 January 1991. Pensions accruing between
1 January 1991 and 28 February 1999 are required to increase at the greater of: (a) 4%, and (b) 3% on the GMP and
5% on the excess over the GMP. Pensions accruing after 1 March 1999 increase at Limited Price Indexation which
has been assumed to average 2.6% in the future. Limited Price Indexation was replaced by the Consumer Price Index
(CPI) for payrises occurring after 1 January 2014.

JAMES LATHAM PLC ANNUAL REPORT 2017

Financial Statements

Notes forming part of the Group Accounts

17.2. Group deﬁned beneﬁt pension scheme

The group operates a defined benefit scheme. The current practice of increasing pensions in line with inflation is
included in the measurement of the defined benefit obligation.

The retirement benefit liability recognised in the balance sheet is the present value of the defined benefit obligations,
less the fair value of the scheme assets, adjusted for past service costs. Actuarial gains and losses are immediately
recognised in the statement of other comprehensive income.

2017
£’000

2016
£’000

Change in beneﬁt obligation
64,421
Beneﬁt obligation at beginning of year
616
Service cost
2,014
Interest cost
5
Plan members’ contribution
Actuarial loss/(gain)
12,321 (3,686)
Beneﬁts paid (2,070) (3,192)
Premiums paid (13) (14)

60,164
521
2,069
-

Beneﬁt obligation at end of year

Analysis of deﬁned beneﬁt obligation
Schemes that are wholly or partly funded

72,992

60,164

Change in scheme assets
53,991
Fair value of scheme assets at beginning of year
Interest income
1,695
Return on plan assets (excluding interest income) 4,778 (2,861)
Employers contributions (incl. employer direct beneﬁt payments)
876
5
Member contributions
Beneﬁts paid from plan (2,070) (3,192)
Expenses paid (13) (7)

50,507
1,742

1,423
-

Fair value of scheme assets at end of year

Amounts recognised in the balance sheet
Present value of funded obligations
Fair value of scheme assets

Net liability

56,367

72,992
56,367

16,625

50,507

60,164
50,507

9,657

JAMES LATHAM PLC ANNUAL REPORT 2017

Financial Statements

Notes forming part of the Group Accounts

17.2. Group deﬁned beneﬁt pension scheme (continued)

2017
£’000

2016
£’000

Components of pension expense
616
Current service cost
Interest cost
2,014
Income on plan assets (1,742) (1,695)
Expenses paid - (7)

521
2,069

Total pension expense recognised in the income statement

848 928

Actuarial (gain)/loss immediately recognised

7,543 (825)

Total recognised in the statement of other Comprehensive income

7,543 (825)

Cumulative amount of actuarial loss immediately recognised

18,132

10,589

Plan assets
The asset allocations at the year end were as follows:
Equities
Bonds
Property
Other

Amounts included in the fair value of assets for
Equity instruments
Bond instruments
Property occupied
Other assets used

2017

57.5%
32.1%
9.0%
1.4%

100.0%

2017
£’000

32,406
18,114
5,051
796

56,367

2016

55.2%
34.4%
9.8%
0.6%

100.0%

2016
£’000

27,901
17,355
4,928
323

50,507

JAMES LATHAM PLC ANNUAL REPORT 2017

Financial Statements

Notes forming part of the Group Accounts

17.2. Group deﬁned beneﬁt pension scheme (continued)

Weighted average assumptions used to determine beneﬁt obligations:
Discount rate
Rate of compensation increase
Inﬂation (RPI)
Inﬂation (CPI)
Rate of pension increases (CPI capped at 5%)

Weighted average life expectancy for mortality tables used to
determine beneﬁt obligations:
Male member age 65 (current life expectancy)
Female member age 65 (current life expectancy)
Male member age 45 (life expectancy at age 65)
Female member age 45 (life expectancy at age 65)

Weighted average assumptions used to determine pension expense:
Discount rate
Rate of compensation increase

2017

2.50%
3.15%
3.15%
2.15%
2.20%

24.1
26.0
25.6
28.3

3.50%
2.90%

2016

3.50%
2.90%
2.90%
1.90%
2.00%

24.2
26.1
26.2
28.2

3.20%
2.95%

Sensitivity analysis of the key assumptions
The valuation of the scheme’s liabilities is dependant on the assumptions used. The sensitivity of the valuation of the
liability to changes in the assumptions is shown in the table below:

Impact on deﬁcit
(Decrease)/increase

£’000

(3,438)
Discount rate increases by 0.25%
Inﬂation rate increases by 0.25%
2,430
Life expectancy increases by one year 2,584

History of plan assets and deﬁned beneﬁt obligation

Present value of deﬁned beneﬁt obligation
Fair value of plan assets

Net liability

2017
£’000

72,992
56,367

16,625

2016
£’000

60,164
50,507

2015
£’000

64,421
53,991

2014
£’000

58,237
48,970

2013
£’000

62,770
45,977

9,657

10,430

9,267

16,793

Contributions
The group expects to contribute £1,433,000 to the pension scheme for the year ending 31 March 2018.

17.3. Defined contribution pension payments

The group operates a defined contribution scheme managed by Aviva. The group has agreed to match contributions
by eligible employees up to a maximum of 7.5%.

Pension contributions paid to the defined contribution scheme for the year totalled £809,000 (2016: £701,000).

JAMES LATHAM PLC ANNUAL REPORT 2017

Financial Statements

Notes forming part of the Group Accounts

Group

Company

2017
£’000

349

2016
£’000

406

2017
£’000

221

2016
£’000

254

18. Other payables (non-current liabilities)

Accruals and deferred income

19. Deferred tax

19.1 Group

The net deferred tax asset/(liability) is made up of the following elements:

Post-
employment
beneﬁts
£’000

Revalued
properties
£’000

Roll over
gains on
assets
£’000

Other (*)
£’000

Total
£’000

As at 1 April 2015 asset
As at 1 April 2015 liability
(Charge)/credit to the income statement (229)
(228)
Credit direct to equity

- (2,259)
-
- (90) (1,856) (1,013) (2,959)
186
35
- (219)
-

2,259

-
9

At 31 March 2016 asset
At 31 March 2016 liability

1,802

- 1,802
- (81) (1,670) (935) (2,686)

(Charge)/credit to the income statement
Credit direct to equity

(260)
1,362

At 31 March 2017 asset

2,904

-
-

93
-

108 (59)
1,362

- - 2,904

At 31 March 2017 liability

- (81) (1,577) (827) (2,485)

* Includes accelerated capital allowances, share-based payments, industrial buildings allowances and trading losses.

19.2 Company

The deferred tax asset is made up as follows:

As at 1 April 2015
Charge for the year

At 31 March 2016
Charge for the year

At 31 March 2017

Post-
employment
beneﬁts
£’000

Accelerated
capital
allowances
£’000

Total
£’000

5 170
(102) (3) (105)

165

63
14

2
-

65
14

Deferred tax has been calculated using rates that are expected to apply when the asset or liability is expected to be
realised or settled, based on rates that were substantively enacted at the balance sheet date.

JAMES LATHAM PLC ANNUAL REPORT 2017

Financial Statements

Notes forming part of the Group Accounts

20. Share capital

Ordinary shares

Authorised Issued and fully paid

Ordinary shares of 25 pence each

Number
28,000,000

£’000
7,000

Number
20,160,000

£’000
5,040

2017, 2016 and 2015

Preference
shares

8% Cumulative Preference Shares of £1 each

2017, 2016 and 2015

Authorised Issued and fully paid

Number
1,500,000

£’000
1,500

Number
987,000

£’000
987

Preference shares are included in non-current liabilities (as interest bearing loans and borrowings). See note 16.

The Cumulative Preference shares carry the right to receive the 8% dividend in priority to all other shares and the right
of a return on assets in priority to all other shares. They do not carry the right to further participate in profits or assets,
nor to vote at a General Meeting unless the resolution directly or adversely varies any of their rights or privileges.

There were no movements in the share capital of the company in either the year ended 31 March 2017 or 2016.

21. Share-based payment

Equity-settled share option schemes
Details of the share options outstanding during the year are as follows:

2017

Weighted
average
exercise
price (£)

Number
of share
options

Nil price
share
options

Number
of share
options

2016

Weighted
average
exercise
price (£)

Nil price
share
options

Outstanding at beginning of year 132,863 3.52
10,616
Granted during the year 198,092 5.76 - 14,349 6.75 136
-
Forfeited during the year (2,828) 3.78 - (14,637) 2.74
Exercised during the year (36,285) 2.14 - (188,330) 2.38 (10,752)

321,481 2.67

Outstanding at the end of the year 291,842 5.21

- 132,863 3.52 -

The weighted average share price for options exercised during the year was £7.23 (2016: £6.66).

JAMES LATHAM PLC ANNUAL REPORT 2017

Financial Statements

Notes forming part of the Group Accounts

21. Share-based payment (continued)

Details of the options outstanding at 31 March 2017 are shown below. 10,000 (2016: 17,000) of these options were
exercisable at the year end.

Range of exercise prices
Number of shares
Weighted average expected
remaining life (years)

2017

2016

CSOP

SAYE

CSOP

SAYE

£1.65-£7.08
107,920

£2.46-£5.65
183,922

£1.65-£6.75
132,234

£2.46
629

3.0

2.4 3.0

The Black-Scholes option model is used to calculate the fair value of the options and the amount to be expensed.
No performance conditions apply to any of the share option schemes.

The inputs into the Black-Scholes model, expressed as weighted averages for options granted during the year are
as follows:

2017

2016

CSOP

SAYE

Nil price
share
options

CSOP

SAYE

Share price at grant date
£7.08
Option exercise price £7.08
Expected volatility
22.5%
5 years
Option life
1.4%
Risk free interest rate
£1.61
Fair value

£5.65
£5.65
14.3%
3 years
0.7%
£1.48

- £6.75
- £6.75
- 14.5%
5 years
-
1.8%
-
£1.17
-

-
-
-
-
-
-

Nil price
share
options

-
-
-
-
-
-

Expected volatility was determined by calculating the historical volatility of the group’s share price over the previous
3 years. The option life is based on options being exercised in accordance with usual patterns. Options are forfeited if
the employee leaves the group before options vest. For the CSOP scheme, the options can be exercised up to 5 years
after the vesting date, and with the SAYE scheme, this period is 6 months. The risk free interest rate is based on 10 year
UK Government Bonds. For the nil price share options, dividends will be reinvested into additional shares in the plan.

The group recognised total expenses of £71,000 (2016: £62,000) related to equity settled share-based payment
transactions in the year.

Share Incentive Plan
The Company also runs an approved Share Incentive Plan in which eligible employees can buy Partnership Shares
at mid-market price on the date of the grant. The shares are held in the employee benefits trust for a 5-year period.
The number of shares held in trust of this plan at 31 March 2017 was 180,925 (2016: 175,354).

JAMES LATHAM PLC ANNUAL REPORT 2017

Financial Statements

Notes forming part of the Group Accounts

22. Fixed asset investments – Company

Shares:
At 1 April 2015 and 31 March 2017

Loans:
At 1 April 2015
Repayments

At 31 March 2016
Repayments

At 31 March 2017

Total at 31 March 2015

Total 31 March 2016 and 31 March 2017

Subsidiary undertakings

£’000

9,613

5,000
(5,000)

-
-

14,613

9,613

The loan to Lathams Limited was repaid in the year ended 31 March 2016, interest was charged at a rate of 1.25% above
base rate per annum.

Details of subsidiary companies are given below:

Name

Country of
incorporation

Class of shares Percentage

Principal activity

of ownership

Lathams Limited

England and Wales

£1 Ordinary

100%

James Latham Trustee Limited

England and Wales

£1 Ordinary

100%

Importing and
distribution of timber
and panel products

Corporate Trustee
Company

LDT Westerham Limited

Baüsen Limited

England and Wales

£1 Ordinary

England and Wales

£1 Ordinary

James Latham (Midland and Western) Limited* England and Wales

£1 Ordinary

Advanced Technical Panels Limited*

England and Wales

£1 Ordinary

Latham Timber Centres (Bridgwater) Limited

England and Wales

£1 Ordinary

James Latham (Warehousing) Limited

England and Wales

£1 Ordinary

100%

Dormant

* Indirectly held.
All companies operate within the United Kingdom.

All companies operate within the United Kingdom and their registered office is at Unit 3, Swallow Park, Finway Road,
Hemel Hempstead, Herts, HP2 7QU.

JAMES LATHAM PLC ANNUAL REPORT 2017

Financial Statements

Notes forming part of the Group Accounts

23. Own shares

At 1 April 2015
Cost
Movement in the year

At 31 March 2016

Movement in the year

At 31 March 2017

£’000

177
264

441

(150)

291

The investment in own shares represents 19,741 25p Ordinary shares (2016: 59,247 25p Ordinary shares) held on
behalf of the James Latham plc Employee Benefits Trust, a discretionary trust. This represents 0.10% (2016: 0.29%)
of the issued share capital. The maximum number of shares held during the year was 59,247 (0.29%). Dividends have
been waived and all income and expenditure of the trust has been dealt with through the group’s income statement.
None of these shares have been allocated to employees.

At 31 March 2017 519,200 (2016: 519,200) 25p Ordinary shares were held by the company as Treasury Shares.
These shares are held with a view to being used for employee share schemes.

24. Cash generated from operations

Group

Company

2017
£’000

2016
£’000

2017
£’000

2016
£’000

Proﬁt before tax

13,827

12,876 (1,195) (690)

Adjustment for ﬁnance income and cost
Depreciation and amortisation

352
1,822

365 (67)
4

1,515

162
4

-
Proﬁt on disposal of property, plant and equipment (95) (97)
-
Write down of intangible asset
-
-
Increase in inventories (2,105) (1,497)
(Increase)/decrease in receivables (4,788) (1,075)
94
Increase/(decrease) in payables 3,536 (480) 150 (43)
-
Retirement beneﬁts non cash amounts (902) (267)

-
-
-
1,949

Share-based payments non cash amounts
Own shares non cash amounts

71
62
98 302

71
98

62
302

Cash generated from operations

11,902

11,704 1,010 (109)

JAMES LATHAM PLC ANNUAL REPORT 2017

Financial Statements

Notes forming part of the Group Accounts

25. Leasing commitments

Future aggregate minimum payments under various operating lease contracts for vehicles, plant and property payable
by the group are as follows:

Group Company

Vehicles and Plant
No later than one year
Later than one year but no later than ﬁve years

Property:
No later than one year
Later than one year but no later than ﬁve years
Later than ﬁve years

2017
£’000

459
625

1,084

595
2,383
852

3,830

2016
£’000

442
672

1,114

595
2,383
1,448

4,426

2017
£’000

12
15

221
884
626

2016
£’000

13
7

221
884
848

1,731

1,953

JAMES LATHAM PLC ANNUAL REPORT 2017

Financial Statements

Notes forming part of the Group Accounts

26. Related party transactions

The group has a related party relationship with its subsidiaries and with its directors. Transactions between group
companies, which are related parties, have been eliminated on consolidation and are not disclosed in this note.

The remuneration of the key management of the group, who are the Companies directors, is set out below.

Salaries and other short-term employee beneﬁts
Social security costs
Pension costs
Share-based payments

2017
£’000
1,056
134
123
9

1,322

2016
£’000
1,078
143
122
15

1,358

There are 5 (2016: 5) directors to whom retirement benefits are accruing under defined benefit schemes, and 6
(2016: 6) directors that exercised share options during the year. The gains on these exercises can be found
on page 23.

Emoluments for the highest paid director totalled £212,000 (2016: £203,000). The highest paid director also exercised
4,274 CSOP share options during the year at a gain of £20,000.The highest paid director had an accrued defined
benefit pension of £56,000 (2016: £56,000) at the balance sheet date.

The company undertakes the following transactions with the active subsidiary company:
• Paying interest totalling £101,000 (2016: £257,000).
• Receiving an annual management charge to cover services provided of £1,911,000 (2016: £1,849,000).

Details of balances outstanding with subsidiary companies are shown in Note 14.

Other than the payment of remuneration, there have been no related party transactions with the directors.

27. Capital commitments

At 31 March 2017, there were capital commitments contracted for but not provided in the accounts of £6,495,000
(2016: £583,000).

JAMES LATHAM PLC ANNUAL REPORT 2017

Financial Statements

Notes forming part of the Group Accounts

28. Financial instruments

The group and company’s activities expose the group to a number of risks including market risk (foreign currency
risk and interest rate risk), credit risk and liquidity risk. These risks are managed through an effective risk management
programme. Further details are set out in the Financial Review on pages 10 to 12.

Maturity analysis
The table below analyses the financial liabilities on a contractual gross undiscounted cash flow basis into maturity
groupings based on period outstanding at the balance sheet date up to the contractual maturity date.

GROUP

2017
Trade payables
Accruals
Other payables
Cumulative preference shares of £1 each

Total

2016
Trade payables
Accruals
Other payables
Cumulative preference shares of £1 each

Total

Less than
6 months
£’000

Between
6 months
and 1 year
£’000

Between
1 and
5 years
£’000

More than
5 years
£’000

Total
£’000

19,516
1,716
1,473
-

22,705

17,222
1,663
1,253
-

20,138

-
-
-
-

-
-
-
987

19,516
1,716
1,473
987

987

23,692

-
-
-
987

17,222
1,663
1,253
987

987

21,125

COMPANY

2017
Trade payables
Accruals
Other payables
Cumulative preference shares of £1 each

Total

2016
Trade payables
Accruals
Other payables
Cumulative preference shares of £1 each

Total

Less than
6 months
£’000

Between
6 months
and 1 year
£’000

Between
1 and
5 years
£’000

More than
5 years
£’000

26
114
276
-

416

50
90
203
-

343

-
-
-
-

-
-
-
987

987

-
-
-
987

987

Total
£’000

26
114
276
987

1,403

50
90
203
987

1,330

JAMES LATHAM PLC ANNUAL REPORT 2017

Financial Statements

Notes forming part of the Group Accounts

28. Financial instruments (continued)

Foreign currency risk
Approximately 41% of the group’s purchases are denominated in foreign currencies, principally the US dollar and the
Euro. Forward contracts are used where we have agreed exchange rates with our customers and we also use other
currency derivatives to help manage our short term exposure on a weakening sterling from time to time. However, no
more than 25 percent of the currency requirements will be covered by forward contracts or other currency derivatives.

Whilst purchases in foreign currencies are a significant figure, fluctuations in currency exchange rates do not have a
major impact on the results. As the group trades mainly in the UK, the market price of our products tends to fluctuate
in line with spot prices.

Included in group cash and cash equivalents at 31 March 2017 was £249,000 in US Dollars (2016: £113,000), £83,000
in Euros (2016: £154,000) and £84,000 in Canadian dollars (2016: nil), at variable interest rates.

Based on the balance sheet value of cash and cash equivalents, as shown above, a 10% change in the currency
exchange rate would lead to an increase or decrease in income and equity of £42,000 (2016: £27,000).

There is no foreign currency held in the company accounts.

Interest rate risk
The interest rate exposure arises mainly from its interest bearing deposits. Deposits held at floating rates expose the
entity to cash flow risk whilst deposits held at fixed rate expose the entity to fair value risk.

At the reporting date, the interest rate profile of the group’s interest-bearing financial instruments was:

Group Company

2017
£’000

2016
£’000

2017
£’000

2016
£’000

Fixed rate instruments
Cumulative preference shares of £1 each (987) (987) (987) (987)

Variable rate instruments
Cash and cash equivalents
Bank overdraft

17,246
-

16,832

14,924
- (1,778) (9,132)

7,993

Interest rate risk is limited to the cash and cash equivalents, bank overdraft and bank loans.

Based on the balance sheet value of cash and cash equivalents, bank overdraft and bank loans, as shown above, a 1%
change in interest base rates would lead to an increase or decrease in income and equity of £172,000 (2016: £168,000)
in the group and £62,000 (2016: £57,000) in the company.

JAMES LATHAM PLC ANNUAL REPORT 2017

Financial Statements

Notes forming part of the Group Accounts

28. Financial instruments (continued)

Credit risk exposure
Credit risk arises on our financial asset investments, trade receivables and cash and cash equivalents. Credit exposure
is managed on a group basis and appropriate credit limits are set for each customer taking into account credit reports
received from outside agencies, and previous credit history. Credit insurance is taken out to cover approved individual
debtors with balances over £40,000. Where limits are required above £40,000 that cannot be backed by insurance, a
sub-committee of the board will review reports on the customer, and agree additional limits if appropriate. Bad debts
are 0.11% of sales this year, compared with our target of 0.4%. The carrying amount of financial assets recorded in the
accounts, which is net of impairment losses, represents the maximum exposure to credit risk. The maximum exposure
to credit risk at the reporting date was:

Trade receivables
Other receivables
Cash and cash equivalents

Total

Group Company

2017
£’000

36,098
1,445
17,246

54,789

2016
£’000

32,472
1,073
16,832

50,377

2017
£’000

5
-
7,993

7,998

2016
£’000

15
-
14,924

14,939

Liquidity risk
The group closely monitors its cash position to ensure that it has sufficient funds to meet the obligations of the
group as they fall due. Short term bank deposits are executed only with organisations with a long term rating of at
least A- from the major rating agencies.

The following table shows the financial liabilities measured at amortised cost:

Trade payables
Other payables
Accruals
Bank overdraft

Total

Group Company

2017
£’000

19,516
1,473
1,716
-

22,705

2016
£’000

17,222
1,253
1,663
-

20,138

2017
£’000

26
276
114
1,778

2,194

2016
£’000

50
203
90
9,132

9,475

Capital management
The group manages its capital risk by ensuring that its capital, which represents share capital, retained earnings,
investments in own shares and cash, is sufficient to support the ongoing needs of the business, and is organised to
try and minimise the cost of capital over the medium term. The group’s current strategy is to maintain sufficient cash
balances to satisfy ongoing needs.

Finance income
An analysis of finance income is set out in note 5 to the consolidated accounts.

Finance costs
An analysis of finance costs is set out in note 6 to the consolidated accounts.

JAMES LATHAM PLC ANNUAL REPORT 2017

Notice of Annual General Meeting

Notice is hereby given that the one hundred and eighteenth
Annual General Meeting of the Company will be held at Gallery
Level, Business Design Centre, 52 Upper Street, London, N1 0QH
on Wednesday 23rd August 2017 at 12.30pm. Resolutions 1 to 9
inclusive will be proposed as ordinary resolutions, and resolutions
10 and 11 will be proposed as special resolutions.

Ordinary business
1. To receive and adopt the Directors’ Report and Accounts for

the year ended 31 March 2017 together with the Independent
Auditor’s report thereon.

2. To declare the final dividend recommended by the directors on

the ordinary shares of the Company.

3. To re-elect Fabian French as a director, who retires by rotation.

4. To re-elect Meryl Bushell as a director, who retires by rotation.

5. To re-elect Chris Sutton as a director, who retires by rotation.

6. To re-elect Piers Latham as a director, who retires by rotation.

7. To re-appoint RSM UK Audit LLP, Chartered Accountants, as
auditors to hold office from the conclusion of the meeting to
the conclusion of the next meeting at which accounts are laid
before the Company, at a remuneration to be determined by
the directors.

8. To extend the rules of the James Latham plc Savings Related

Share Option Scheme for a further period of ten years from the
date of this meeting.

Special business
9. Directors authority to allot shares: To consider, and if thought
fit, pass the following resolution: “THAT in substitution for
all existing authorities, to the extent unused, the directors be
and they are generally and unconditionally authorised for the
purposes of section 551 of the Companies Act 2006 to exercise
all the powers of the Company to allot equity securities up to
an aggregate nominal amount of £1,680,000 provided that this
authority shall expire at the earlier of the conclusion of the
Company’s next Annual General Meeting or 15 months from the
date of the passing of this resolution and that the Company may
before such expiry make offers or agreements which would or
might require relevant securities to be allotted after such expiry
and the Directors may allot relevant securities in pursuance of
such offers or agreements notwithstanding that the authority
conferred has expired. The expression ‘equity securities’ and
‘allotment’ shall bear the same meanings respectively given to
the same in section 560 Companies Act 2006.”

10. Disapplication of pre-emption rights: To consider, and if

thought fit, pass the following resolution: “THAT subject to
the passing of the previous Resolution 9, pursuant to section
571 of the Companies Act 2006, section 561 of the Companies
Act 2006 shall not apply to any allotment or agreement to
allot equity securities pursuant to the authority conferred by
Resolution 9:

(a) this power shall be limited to:

(i) the allotment of equity securities in connection with or

subject to an offer or invitation, open for acceptance for a
period fixed by the Directors, to the holders of Ordinary
Shares on the register on a fixed record date in proportion
(as nearly as maybe) to their respective holdings or in
accordance with the rights attached thereto (including
equity securities which, in connection with such offer
or invitation, are the subject of such exclusions or other
arrangements as the Directors may deem necessary or
expedient to deal with the fractional entitlements which
would otherwise arise or with legal or practical problems
under the laws of, or the requirements of any recognised
regulatory body or any stock exchange in any territory or
otherwise how so ever); and

(ii) other than pursuant to paragraph (a)(i) of this Resolution,
the allotments of equity securities for cash up to an
aggregate nominal amount of £252,000; and

(b) this power shall expire at the earlier of the conclusion of the
next Annual General Meeting of the Company or 15 months
from the date after passing of this Resolution except that the
Directors may allot equity securities under this power after
that date to satisfy an offer or agreement made before this
power expired.

11. Authority of the Company to purchase its own shares:

To consider and, if thought fit, pass the following resolution:
“THAT the Company be and is generally and unconditionally
authorised to make one or more market purchases (within the
meaning of section 693 (4) of the Companies Act 2006) of its
Ordinary Shares of 25p each provided that:

(a) the maximum aggregate number of Ordinary Shares which

may be purchased is 2,016,000 (representing 10% of the
issued share capital of the Company);

(b) the price at which Ordinary Shares may be purchased shall

not be more than 105% of the average of the closing middle
market price for the Ordinary Shares as derived from the
AIM section of the London Stock Exchange Daily Official List
for the five business days preceding the date of purchase and
shall not be less than 25p per Ordinary Share (in both cases
exclusive of expenses); and

(c) this power shall expire at the earlier of the conclusion of the
next Annual General Meeting of the Company or 15 months
from the date of the passing of this resolution.”

By Order of the Board
D.A. Dunmow
Company Secretary

Registered Ofﬁce: Unit 3, Swallow Park, Finway Road Hemel
Hempstead, Hertfordshire HP2 7QU

21 June 2017

JAMES LATHAM PLC ANNUAL REPORT 2017

Notice of Annual General Meeting

Notes:
The Report and Accounts are sent to all members of the Company.

Holders of preference shares are not entitled to be present, either
personally or by proxy, or to vote at any general meeting so long
as the dividends on such preference shares are regularly paid or
unless a resolution is to be proposed for winding up the Company,
reducing its capital or selling its undertaking or adversely affecting
the rights of the holders of preference shares.

A member entitled to attend and vote at the above Meeting is
entitled to appoint one or more proxies to attend, speak and vote
on his/her behalf. A proxy need not be a member of the Company.

Any corporation which is a member can appoint one or more
corporate representatives who may exercise on its behalf all of its
powers as a member provided that they do not do so in relation to
the same shares.

A proxy form is enclosed. To be valid, it must be lodged with the
Company’s Registrars at Computershare Investor Services PLC,
The Pavilions, Bridgwater Road, Bristol BS99 6ZY, not later than
48 hours before the fixed time for the Meeting.

Copies of directors’ contracts of service, the register of interests
of directors, the Company’s memorandum of association and
the articles of association will be available for inspection at the
Registered Office during normal business hours from the date of
the above notice until the close of the meeting.

In accordance with Regulation 41 of the Uncertified Securities
Regulations 2001, only those members eligible to vote and entered
on the Company’s register of members as at 12.30pm on Monday
21 August 2017 are entitled to attend and vote at the meeting;
or, if the meeting is adjourned, shareholders entered on the
Company’s register of members not later than 48 hours before the
time fixed for the adjourned meeting shall be entitled to attend
and vote at the adjourned meeting.

At 21st June 2017, the Company’s issued share capital consisted
of 20,160,000 shares of which 519,200 shares are held in Treasury.
Each share not held in Treasury carries one vote. The total number
of voting rights are therefore 19,640,800.

Share dealing service for shareholders
We continue to operate a telephone share dealing service with
our registrar, Computershare Investor Services PLC, which
provides shareholders with a simple way of buying or selling
James Latham plc ordinary shares on the London Stock Exchange.
The commission is 1%, subject to a minimum charge of £35.
There are no forms to complete and the share price at which
you deal will generally be confirmed to you whilst you are still
on the telephone. The service is available from 8am to 4.30pm
Monday to Friday excluding bank holidays on telephone number
0370 703 0084. Please ensure you have your Shareholder
Reference Number (SRN) ready when making the call. The SRN
appears on your share certificate. In addition an internet share
dealing service is available by logging into your account on
www-uk.computershare.com/investor. The fee for this service will
be 1% of the value of each sale or purchase of shares, subject to a
minimum of £30. There are no additional charges for limit orders
(available for sales only). No stamp duty is currently payable on
share transfers.

Detailed terms and conditions are available on request, please
phone 0370 707 1093.

This is not a recommendation to buy, sell or hold shares in
James Latham plc. If you are unsure of what action to take
contact a financial adviser authorised under the Financial Conduct
and Markets Act 2000. Please note that share values may go down
as well as up, which may result in you receiving less than you
originally invested.

In so far as this statement constitutes a financial promotion for the
share dealing service provided by Computershare Investor Services
it has been approved by Computershare Investor Services PLC
for the purpose of Section 21(2)(b) of the Financial Conduct and
Markets Act 2000 only. Computershare Investor Services PLC is
regulated by the Financial Conduct Authority.

Where this has been received in a country where the provision of
such a service would be contrary to local laws or regulations, this
should be treated as information only.

JAMES LATHAM PLC ANNUAL REPORT 2017

James Latham Importing and
Distribution companies

PEFC/16-37-046

Purfleet serves timber customers across
the Thurrock, Hemel Hempstead and part
of the Fareham panels sales areas.

Leeds

Speciality Products
Advanced Technical Panels – Northern Depot
Topcliffe Close, Off Topcliffe Lane
Capitol Park East, Tingley, Leeds
West Yorkshire WF3 1DR
Tel 0113 387 0850
Fax 0113 387 0855
Email: atp@lathams.co.uk

Southern Depot
Unit 2 Swallow Park Finway Road
Hemel Hempstead Herts HP2 7QU
Tel 01442 849009
Fax 01442 239287
Email: atp@lathams.co.uk

www.advancedtechnicalpanels.co.uk

Timber and Flooring
Products
Purfleet, Essex
Units 22/24,
Purfleet Industrial Park
Juliette Way, Aveley,
South Ockendon
Essex RM15 4YD
Tel 01708 864477
Fax 01708 862727
Email: timber.purfleet@lathams.co.uk

Panel and Timber Products
Dudley, West Midlands
Unit 3, Yorks Park
Blowers Green Road, Dudley
West Midlands DY2 8UL
Tel 01384 234444
Fax 01384 233121
Email: panels.dudley@lathams.co.uk
Email: timber.dudley@lathams.co.uk

Fareham, Hants
Unit 6, Matrix Park
Talbot Road, Fareham
Hants PO15 5AP
Tel 01329 854800
Fax 01329 849585
Email: panels.fareham@lathams.co.uk
Email: timber.fareham@lathams.co.uk

Gateshead, Tyne & Wear
Nest Road, Felling Industrial Estate
Gateshead
Tyne & Wear NE10 OLU
Tel 0191 469 4211
Fax 0191 469 2615
Email: panels.gateshead@lathams.co.uk

Leeds, West Yorkshire
Topcliffe Close, Off Topcliffe Lane
Capitol Park East
Tingley, Leeds
West Yorkshire WF3 1DR
Tel 0113 387 0830
Fax 0113 387 0855
Email: panels.leeds@lathams.co.uk
Email: timber.leeds@lathams.co.uk

Wigston, Leicester
Chartwell Drive, Off West Avenue
Wigston, Leicester LE18 2FN
Tel 0116 288 9161
Fax 0116 281 3806
Email: panels.wigston@lathams.co.uk
Email: timber.wigston@lathams.co.uk

Yate, Bristol
Badminton Road Trading Estate
Yate, Bristol BS37 5JX
Tel 01454 315421
Fax 01454 323488
Email: panels.yate@lathams.co.uk
Email: timber.yate@lathams.co.uk

Eurocentral, Scotland
Pharos, Brittain Way
Eurocentral, Motherwell
Lanarkshire ML1 4XJ
Tel 01698 838777
Fax 01698 831452
Email: scotland@lathams.co.uk

Panel Products
Hemel Hempstead, Herts
Unit 2, Swallow Park
Finway Road, Hemel Hempstead
Herts HP2 7QU
Tel 01442 849000
Fax 01442 239287
Email: panels.hemel@lathams.co.uk

Thurrock, Essex
Unit 4, Dolphin Way
Purfleet, Essex RM19 1NZ
Tel 01708 869800
Fax 01708 860900
Email: panels.thurrock@lathams.co.uk

Accounts/Credit Control/Administration
James Latham Unit 3 Swallow Park Finway Road Hemel Hempstead Herts HP2 7QU
Tel 01442 849100 Fax 01442 267241

Marketing Tel 0116 257 3415
Email marketing@lathams.co.uk

Website www.lathamtimber.co.uk (Trading)
www.lathams.co.uk (Plc)

GDA Design

and printed on:

Regency Satin Howard Smith paper Group

Cover: 300gsm

Text: 150gsm

JAMES LATHAM PLC
Unit 3 Swallow Park Finway Road Hemel Hempstead Herts HP2 7QU
Telephone 01442 849100 Fax 01442 267241 Email: plc@lathams.co.uk
www.lathams.co.uk