J A M E S L A T H A M P L C
ANNUAL REPORT & ACCOUNTS 2018
Contents
Summary and Highlights
1 Financial Highlights and Calendar
2 Chairman’s Statement
Strategic Report
James Latham plc and Our Objectives and Strategy
4 Outline of the Strategic Report
5
8 Corporate Responsibility
12 Principal Risks and Uncertainties
14 Key Performance Indicators
15 Operating Review
18 Financial Review
Corporate Governance
22 Corporate Governance Report
25 Directors and Advisors
26 Directors’ Remuneration Report
30 Directors’ Report
33 Statement of Directors’ Responsibilities
34
Independent Auditor’s Report
Financial Statements
37 Consolidated Income Statement
37 Consolidated Statement of Comprehensive Income
38 Consolidated and Company Balance Sheet
39 Consolidated Statement of Changes in Equity
40 Company Statement of Changes in Equity
41 Consolidated and Company Cash Flow Statement
42 Notes forming part of the Group Accounts
67 Notice of the Annual General Meeting
69 The Latham Group
Financial Highlights and Calendar
for the year ended 31 March 2018
Financial Highlights
Year to 31 March
Turnover
Operating profit
Operating margin
Profit before taxation
Adjusted earnings per share*
Total ordinary dividend per share
Equity shareholders’ funds
Cash and cash equivalents
2018
£000
2017
Increase
£000 (Decrease)
214,919
198,808
14,391
6.7%
15,216
57.9p
16.6p
89,528
13,989
14,179
7.1%
13,827
56.0p
15.35p
73,258
17,246
2016
£000
185,929
13,241
8.1%
1.5%
-5.6%
7.1%
10.0%
3.4%
8.1%
22.2%
-18.9%
12,876
53.7p
14.3p
71,183
16,832
* Earnings per share have been adjusted to eliminate the profit on sale of property.
Turnover (£000’s)
Adjusted EPS
Dividend
9
1
9
,
4
1
2
8
0
8
,
8
9
1
5
5
8
,
4
7
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9
2
9
,
5
8
1
7
1
1
,
3
6
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0
.
6
5
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9
.
7
5
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7
.
3
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3
.
0
4
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9
.
6
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6
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5
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5
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1
1
2014
2015
2016
2017
2018
2014*
2015
2016
2017
2018*
2014
2015
2016
2017
2018
* Adjusted for an exceptional pension credit in 2014 and profit on sale of property in 2018.
Financial Calendar
Record date for final dividend 2018
AGM
Payment of final dividend
Interim 2018/19 results announcement
Interim dividend expected payment date
Preliminary announcement of 2018/19 results
AGM 2019
3 August 2018
22 August 2018
24 August 2018
29 November 2018
25 January 2019
27 June 2019
21 August 2019
JAMES LATHAM PLC ANNUAL REPORT 2018
1
Chairman’s Statement
I am pleased to report good trading results for the financial year to
31 March 2018.
Revenue for the financial year to 31 March 2018 was £214.9m, up
8.1% on last year’s £198.8m. We have seen volumes continue to grow,
especially through our own warehouses where they are up 4.5%.
The cost price of our products have increased in comparison to the
previous twelve months. This is in part down to the weakening of sterling
against the Euro, but also we have seen manufacturers continuing to
increase prices.
Gross margin for the financial year to 31 March 2018 was 17.6% compared
with 18.2% in the previous financial year. It was particularly pleasing to see
an improvement in the gross margin in the second half of the year, which
was 17.9% compared with 17.3% in the first half of the year.
Selling and distribution costs were 5.3% higher than last year. Distribution
costs rise in line with volumes, and we monitor costs per tonne which are
up by 2.3%.
Overheads have been well controlled when we consider that we have
relocated both Yate and Leicester (Wigston) sites during the year.
We have tried to minimise the relocation costs and double costs of owning
two empty sites, which have cost us less than £150,000. Both sites are
performing extremely well since their relocation, particularly in melamine
and added value timber products where the new racking systems have
allowed us to increase our stock range.
Profit before tax is £15.2m, up £1.4m on last year’s £13.8m. This includes a
profit of £1.3m on the sale of our Wigston site.
Post tax profit for the year is £12.6m, up from last year’s £11.0m.
Earnings per ordinary share were 64.4p (2017: 56.0p) an increase of 15.0%.
As at 31 March 2018 net assets have increased to £89.8m (2017: £73.3m).
Non-current assets have increased by £6.1m from 31 March 2017, with the
investment in the two new sites as well as continuing investment in
our vehicle fleet and warehouse forklifts. Inventory levels have increased
to £40.1m, partly due to the increase in unit cost of the stock as well as
an increase in volume. Trade Receivables have continued to show good
debtors day figures with there being another low bad debt charge of under
0.15% of revenue. Cash and cash equivalents of £14.0m (2017: £17.2m),
remain strong with good cash flows from operating activities.
Nick Latham
Chairman, James Latham plc
2
JAMES LATHAM PLC ANNUAL REPORT 2018
Chairman’s Statement
Pension Scheme
The company and the trustees of the James Latham plc
Pension and Assurance Scheme have approved the triennial
valuation dated 31 March 2017 with the scheme actuary.
This valuation shows a shortfall of assets of £12.1m compared
to a shortfall of £1.5m in the previous valuation dated
31 March 2014. The company has agreed a recovery plan
with the trustees of £2.0m per annum until 31 March 2024.
At 31 March 2018 the deficit of the defined benefit scheme
under IAS19 (revised) was £8.4m, down £8.2m compared
with £16.6m last year. The calculation of the pension deficit
remains very sensitive to changes in assumptions.
Directors and staff
Peter Latham retired as chairman in August 2017, having
been chairman for nearly 12 years. Peter worked in the
business for 44 years and the board would like to record
their enormous thanks for his skill in guiding the business
through a period of significant growth.
I am delighted to welcome Paula Kerrigan, who joined
as a non executive director in October 2017. Paula is
currently transformation director at SuperGroup, and was
formally chief strategy officer at the Co-operative group.
Her experience in strategic planning and supply chain
management will add a further dimension to the board.
Final dividend
The Board has declared a final dividend of 12.1p per
Ordinary Share (2017: 10.85p). The dividend is payable
on 24 August 2018 to ordinary shareholders on the
company’s register at close of business on 3 August 2018.
The ex-dividend date will be 2 August 2018.
On 31 August 2018 Meryl Bushell retires as a non
executive director. Meryl joined the board in September
2008, and has been an extremely valued member of
the board, with her challenging questions helping guide
us through what has been an exciting period of the
company’s development.
The total dividend per ordinary share of 16.6p for the
year (2017: 15.35p) is covered 3.9 times by earnings
(2017: 3.6 times).
Current and future trading
This year has started well with sales per working day 9.8%
higher for April and May than the corresponding period last
year. Margins are very slightly lower than the second half of
2017/8. We are seeing growth in sales of added value timber
and panel products from our decision to invest in specialist
sales staff last year, although volume growth in our core
products are proving more challenging. Despite the strong
start to the year there is increasing uncertainty surrounding
the economic outlook, but we remain confident that we are
in a strong position to continue to grow the business.
Development strategy
The directors will continue to develop the business.
This will be done by a combination of investing in our
current warehouse facilities, with the emphasis this year
on Purfleet, Thurrock and Gateshead, and further
extending the working day. We are also looking at
geographical growth, and focusing on developing sales of
our key product areas. In addition to our showroom at the
Business Design Centre in Islington, we are in the process
of opening a design centre in Manchester as we continue
to focus our efforts in the A&D specification sector.
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 Ltd, chaired by
Chris Sutton, which sets and monitors trading and
operations policy. Both boards are well balanced in
terms of both experience and skills.
The business is organised to give as much local autonomy
to our site directors to implement our sales and purchasing
strategy, with our senior timber and panel staff meeting
regularly to review and evaluate our key products groups.
I would like to personally thank all the directors and
everyone in the group for their support and individual
contributions during the course of this successful year.
This has been a real team performance in challenging
market conditions, demonstrated by a fantastic second
half of the year, for which I am enormously grateful
to everyone.
Nick Latham
Chairman, James Latham plc
27 June 2018
JAMES LATHAM PLC ANNUAL REPORT 2018
3
Strategic Report
Introduction
Outline of the Strategic Report
The directors present their Strategic Report for the year ended 31 March 2018. Included within these sections
are the four Principles for delivering growth as contained within the Quoted Companies Alliance Corporate
Governance Code 2018, demonstrating how we comply with these principles.
Page
5
8
12
14
15
18
James Latham plc and Our Objectives and Strategy
Corporate Responsibility
Principal Risks and Uncertainties
Key Performance Indicators
Operating Review
Financial Review
The Strategic Report was approved by the board of directors on 27 June 2018 and signed on its behalf by:-
Nick Latham
David Dunmow
1
3
2
4
1 Melamine Faced Chipboard from the Kronodesign Global Collection Trends 18/19 Industrial range.
2 Accoya Cladding. 3 Red Grandis WoodEx®. 4 Shinokki Manhattan Oak .
4
JAMES LATHAM PLC ANNUAL REPORT 2018
Strategic Report
James Latham plc and Our Objectives and Strategy
DELIVER GROWTH
Principle 1 – Establish a strategy and business model which promote long term value
for shareholders.
The company’s objectives are:
• To maximise shareholder value over the
medium term;
• To grow the business profitably;
• 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 provide a safe working environment for
our staff.
• 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.
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,
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 three 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 69, 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.
The company is well respected in its industry and
amongst its customers and suppliers for its principled
trading policies and its integrity.
JAMES LATHAM PLC ANNUAL REPORT 2018
5
Strategic Report
James Latham plc and Our Objectives and Strategy
Strategy for developing the business
The directors recognise that the strength of the group
is as a distributor of high quality timber and associated
products, purchased using the TTF RPP from legal and
sustainable sources of supply, to meet existing and new
customer demands on product and service.
Working with existing and potentially new suppliers,
we identify products to add to our extensive range of
products. Non timber products where they fit into the
requirements of our customer base, are increasingly
stocked. Andrew Wright is responsible for identifying
these opportunities and our aim is to provide a true one
stop shop to our key target markets.
Advanced Technical Panels, our speciality panels division,
continues to evaluate and develop its product range and
target markets. During the year an additional range of
thermoformable plastic was added to the offering.
Matrix Xylocleaf.
Commodity product remains very important to the group
and more emphasis will be placed on marketing and
developing the sales of MDF, OSB, Plywood and North
American, European and African hardwoods.
Laminate forms a part of our strategic panels development
with significant additions to our product range during the
year, including a new range of Compact Grade Laminate.
Our aim is to provide our customer base with an ex-stock
service covering over 700 combinations of brands and decors.
All Latham depots will continue to offer an enhanced
range of melamine products ex-stock, including decors
from Egger, Kronospan and CLEAF.
Sales of technical timber are a key part of our strategic
sales development for timber. An enhanced range of
products are stocked, including Accoya, WoodEx®,
decking and cladding.
Our Leeds depot acts as the central distribution point for
ATP, HI-Macs®, Composite Decking, Kydex®, Laminates,
Valchromat and other niche products. These are available
on a national basis for prompt delivery to our customer
base. We have and will continue to improve our delivery
service and will consider additions to our centrally held
stocks during the year.
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. Investment in our facilities
and ongoing review of our modus operandi is important
to the continuing development of our business.
We will continue to look to develop new markets,
including Ireland and other export markets, including
the Middle East, where we have had some success during
the year for some of our products. We will also consider
acquisitions where opportunities arise, to enhance our
product range or geographical coverage.
Egger laminate design wall.
6
JAMES LATHAM PLC ANNUAL REPORT 2018
Strategic Report
James Latham plc and Our Objectives and Strategy
Business Design Centre showroom in Islington.
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, fully complying with our responsibilities under
the General Data Protection Regulation.
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 continue to increase and we expect to gain
more specifications for our products through this facility.
Based on the success of the Islington facility we are
opening an office in the Northern Quarter of Manchester
to target architects and designers in the North West.
We may consider other locations during the course of
the year.
We value the personal relationships developed with our
suppliers, staff and customers. 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.
Principle 2 – Seek to understand and meet shareholder needs and expectations.
Nick Latham and David Dunmow are responsible for
maintaining good communications with shareholders.
This includes our published financial statements and Stock
Exchange announcements, which are also posted on to
our Investors website, www.lathams.co.uk. We allocate at
least three days a year for Investor Roadshows organised
by our broker, Northland Capital Partners, where investors
have the opportunity to discuss our strategy and their own
expectations. In addition we occasionally host shareholder
visits to our depots.
JAMES LATHAM PLC ANNUAL REPORT 2018
7
Strategic Report
Corporate Responsibility
Principle 3 – Take into account wider stakeholder and social responsibilities and their
implication for long-term success.
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.
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.
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 employ
a full-time Health and Safety Manager 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 and we encourage
reporting of “near misses” to enable us to constantly
improve our safety systems.
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 to Silver status in the near future. Our
lorries all have tracking devices fitted which provide alerts
and information on speed and the route taken, as well as
cameras and side scanners to not only provide retrospective
footage for training and insurance purposes, but also to
provide improved rear and side visibility to our drivers,
minimising blind spots. We undertake driving licence
verification checks on a regular basis for all our drivers.
8
JAMES LATHAM PLC ANNUAL REPORT 2018
Strategic Report
Corporate Responsibility
Chris Sutton and some of our key customers and suppliers helping at the National Forest.
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 signed up to the WWF
UK ‘Forest Campaign’ committing
to purchasing only certified legal
and sustainable timber products by 2020 and to publically
show progress towards this target. WWF awarded us the
top score of three “trees”, before closing this campaign.
We are actively looking for new initiatives in the future.
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
69%
74%
74%
43%
46%
23%
19%
20%
17%
6%
5%
5%
32%
98%
98%
99%
92%
17.5%
30%
93.5%
45%
18%
32%
95%
Panels
2016
2017
2018
Target
Timber 2016
2017
2018
Target
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.
JAMES LATHAM PLC ANNUAL REPORT 2018
9
Strategic Report
Corporate Responsibility
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.
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, with Indonesia having now achieved
FLEGT status.
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.
10
JAMES LATHAM PLC ANNUAL REPORT 2018
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. Two depots have upgraded
their warehouse lighting during the year to new energy
efficient LED lighting, which have already shown savings
in power bills. The two new depots constructed during
the year, have been built with energy efficiency as one of
the key objectives. Vehicle procurement considerations
include reduction of emissions, with an upper limit on CO2
emissions set, 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 awarded our first inter
depot Environmental
and Health and Safety
Awards to the Hemel
depot. The award is to
encourage best practice
around the group but
also to encourage each
depot to come up with
initiatives for reducing our
carbon footprint. Hemel won due to a
new initiative in the training of new Combi Lift truck
drivers. Other depots were close runners up with
initiatives in further waste recycling and supplying
customers with bird boxes to help increase the
number of UK nesting birds.
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
Strategic Report
Corporate Responsibility
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, appraisals, sales and
presentation skills courses.
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 Nine members of staff passed with
one gaining distinction in the Examination for the TFT
Woodexperts Ltd Level 4 Certificate in Wood Science and
Timber Technology.
Our Timber Academy is currently training 8 of our timber
trainees, 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. Another 8
applicants are being considered for this year.
Details of the number of employees and their related costs
can be found in note 4 to the accounts.
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.
JAMES LATHAM PLC ANNUAL REPORT 2018
11
Combi Lift fork truck in operation at our Scotland depot.
in 2007 and continues with further plantings and woodland
management activities for customers, suppliers and staff.
We sponsor the Innovative Timber Engineering prize at
Brighton School of Architecture and Design. Piers Latham
presented the prize to Briony Manning for her creative and
thoughtful design intervention into an existing building
in Stanmer Park, Brighton. Her project was praised in
particular for its use of local timber species and the
integration of new architectural elements into the fabric
of an existing historic oak framed structure.
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.
Strategic Report
Principal Risks and Uncertainties
Principle 4 – Embed effective risk management, considering both opportunities and
threats, throughout the organisation.
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 22.
We have considered below 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.
Inherent risk
Risk Description
Risk Mitigation
Market
Conditions
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.
Competition
from new
and existing
businesses
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.
Inventory
levels move
out of line
with sales
requirements
and market
prices
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.
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.
12
JAMES LATHAM PLC ANNUAL REPORT 2018
Strategic Report
Principal Risks and Uncertainties
Inherent risk
Risk Description
Risk Mitigation
Reputational
Risk
Supplier
political risks
or failure
could result
in shortages
of product
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 responsible purchasing policy managed by our
Environmental Manager to minimise possible damage to its
reputation and legal risk from dealing in illegal products.
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.
The uncertainty over Brexit is adding risk
over supplies from mainland Europe.
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.
Whilst the details of Brexit are not yet know, we are
putting plans in place with our European suppliers to
ensure continuity of supply, and are considering the
routes of supply to the Irish market.
Defined
Benefit
pension
scheme
funding could
increase
Information
technology
failures impact
our ability to
trade
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 18.2 in the notes to the accounts.
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.
This includes the risks of Cyber attack.
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.
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. Cyber training, simulating
phishing attacks and an overall review by external
consultants have been carried out this year.
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 2018
13
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 9 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
1
9
,
4
1
2
9
2
9
,
5
8
1
8
0
8
,
8
9
1
2
7
9
5
9
9
6
0
0
,
1
4
.
4
6
7
.
3
5
0
.
6
5
2016 2017 2018
2016 2017 2018
2016 2017 2018
Showing turnover
up 8.1%
Tonnes per working
day up 1.1%
Earnings per share
up 15.0%
Debtors days
average
Stock turn
(times)
Cash (£000’s)
3
.
1
5
0
.
1
5
2
.
1
5
1
.
6
7
.
6
2
.
6
2
3
8
,
6
1
6
4
2
,
7
1
9
8
9
,
3
1
2016 2017 2018
2016 2017 2018
This figure is adjusted to take
account of customer credit
terms and is compared with
our target of 53 days
This figure has been revised to be
based on volumes passing through
our warehouses and is compared
with our target of 6.5 times
2016 2017 2018
Cash balances reduced
by £3,257,000
14
JAMES LATHAM PLC ANNUAL REPORT 2018
Strategic Report
Operating Review
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.
This year we sponsored the Plywood: Material of the Modern World
exhibition at the Victoria and Albert Museum.
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 last year and sales
to date have been very encouraging.
Results for the year to 31 March 2018
Revenue for 2017/18 was £214.9m, £16.1m higher than
the previous year, reflecting improving volumes in panels.
Core timber product volumes came under pressure but
growth was achieved in added value lines. Suppliers prices
increased throughout the year, in particular in the second
half of the year. Most of our customers and markets
remain busy and were optimistic about their prospects
throughout the year.
The gross margin, the difference between the sales
values and the cost prices excluding warehouse costs,
was 0.9 percentage points down on the previous year
(2017: 0.3 percentage points). Continuing competitive
pressure in the commodity markets as well as the impact
on cost prices resulted in some lower margins being
achieved, as we could not pass on all of the price rises.
Staff numbers have increased this year, mainly warehouse
and some key speciality sales staff. In addition we continue
to invest 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
Panoramic view of the new Yate depot.
JAMES LATHAM PLC ANNUAL REPORT 2018
15
Strategic Report
Operating Review
The supply of MDF was difficult throughout the year
with some product shortages, extended lead times and
significant price increases whilst our competitors remained
aggressive in the market.
encapsulated with Kydex® were carried out during the
year and we can now offer this solution for a range of
applications. Positive growth has been achieved with some
of the WISA range of coated Birch Plywood.
The demand for OSB continued to increase during
the year. OSB is a certified and fit for purpose product
that is able to be used in structural and non-structural
applications. The next generation of OSB to include
fire retardant and passivhaus, which helps reduce a
building’s ecological footprint is now stocked across
the group.
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. On going testing
by our suppliers is carried out to ensure compliance with
legal and performance requirements.
Moralt door.
The Advanced Technical Panels team, with their wealth of
experience and knowledge, together with their extensive
product range had a more difficult year with some larger
accounts not being as busy. Branded products include
Buffalo Board®, which continues to be specified. Kydex®
has been successful, being sold into new markets in
the commercial sector. Tests on our range of doors
16
JAMES LATHAM PLC ANNUAL REPORT 2018
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,
which proved to be successful in the second half of the year.
Strong sales continue to be 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 similar to last year but margins in
particular on Sapele, remained under pressure. Our policy
remains to source certified products although they are
more expensive.
Demand for Accoya modified wood continues to grow
despite supply being more difficult this year. Investment
in manufacturing capacity by our supplier has been made
but additional volumes will not be available until later in
the year. Demand for bespoke cladding in Accoya Cedar
and Larch was good throughout the year, with us winning
specifications by working with architects and designers.
During the year we looked at different sources for our
supplies of WoodEx®, our brand of Engineered Hardwood
and Softwood. This has lead to strong sales growth and
ongoing repeat business.
We have worked very hard with our supply base in
North America to secure high quality Tulipwood, White
Oak and Black Walnut.
Our policy remains to visit strategic and potential new
supplies across the globe to strengthen and develop
personal relationships whilst looking to source new
product. Every supplier is subject to a robust audit by
our environmental manager.
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 though
achieved some sales into Europe and the Middle East.
As part of their ongoing development, LDT continue to
look to increase their product offering to the importer
and merchant sectors, whilst maintaining their strict
environmental policy.
Strategic Report
Operating Review
Market place
The group’s business is widely spread throughout many
sectors of the UK economy.
Market sector
Customer group Lathams
sales value %
2018 2017
Construction/housing Merchants
Joiners
Builders
Kitchen manufacturers
Door manufacturers
Retail
Shopfitters
Laminators/Veneerers
Furniture manufacturers
Vehicle builders/Van liners
Exhibition fitters
Transport
Exhibitions
Cash sales
Other importers
Other sectors
16
24
17
23
4
6
4
5
5
7
3
2
7
6
5
5
4
5
5
7
1
2
7
8
TOTAL
11
11
100
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 2018
17
Products on display at the Building Design Centre.
We continue to develop our range of certified Forest
Stewardship Council (FSC) and Programme for the
Endorsement of Forest Certification (PEFC) products.
Product of Verified Legal Origin (VLO) is also purchased.
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.
The Surface Design Show generated in excess of 600
leads with the link to our Business Design Centre
showroom proving to be very beneficial. New ranges of
decorative products were launched at this years show.
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
5.5 million people. We continue to develop our on line
marketing, social media and direct product campaigns.
During the year we refurbished the Business Design
Centre with some new suppliers added. Activity levels
have been high and supplier presentation days and
CPD’s were held regularly.
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.
Financial objectives
The board of directors remain committed to the long term
improvement in shareholder value and have set ourselves
these financial objectives to help achieve this.
• Improving profitability by maximising gross margins,
whilst remaining competitive;
This year has seen prices rise in most of our product
ranges making the balance between maximising
margins and remaining competitive more difficult than
in previous years. With the gradual improvement in
margin throughout the year I believe we have achieved
this objective.
• Increasing group market share through improving
facilities at our existing depots;
This year we relocated two of our older depots at Yate
and Wigston, to new sites in Yate and Leicester, providing
opportunities to increase market share in those areas.
• Identifying expansion and acquisition opportunities,
where the return on capital is at least equal to that of
the existing group.
The focus this year was on the moves of the two depots.
Strategic meetings of the directors are held twice a year
where opportunities are discussed and prioritised.
• Controlling cashflows to maximise cash available for
the business and shareholders.
This year the focus was on controlling the cashflows
connected with the new depots without affecting the
normal activities, which was successfully achieved with
good cash returns from operating activities.
• Identifying and managing risks, with particular
emphasis on the pension scheme liability.
Risks are considered at the Audit Committee meeting
and at board meetings at all levels throughout the group.
The risk register is a dynamic document where we
monitor new risks and changes in risk. Discussions this
year have concentrated on Cyber Security and potential
supply issues caused by Brexit.
• Maintaining dividend cover at between 2.5 times and
4 times earnings.
Dividend cover this year is 3.9 times (2017: 3.6 times).
18
JAMES LATHAM PLC ANNUAL REPORT 2018
David Dunmow
Finance Director and Company Secretary
Financial review
A commentary on the group’s trading results is set out
in the Operating Review on pages 15 to 17, and the key
figures are considered below, with emphasis on the
financial results.
Operating profit
Revenues increased by 8.1% to £214.9m. The majority
of this increase is down to prices and product mix.
Volumes through our warehouses have increased by 4.5%
but direct business, which is always more volatile, has
dropped by a similar amount. 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 continued to be
difficult this year with the increases in costs in most of
our products. Gross profit reduced to 17.6% from 18.2%.
At the half year stage we were achieving margins of 17.3%,
illustrating a recovery in the margin earned 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 reducing by 0.7%. This is despite continued
investment in manpower to extend the working day to meet
customer demands, and the increased costs of operating the
two new sites. Most depots have two or more shifts in their
working day, with two depots operating a 24 hour system in
order to provide the service that our customers demand.
Strategic Report
Financial Review
Gothic Pavilion constructed from Garnica Plywood.
Photo courtesy of Philip Panting.
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
2014
2015
2016
2017
2018
7
6
2
,
9
0
3
4
,
0
1
7
5
6
,
9
2
8
3
,
8
5
2
6
,
6
1
Selling and distribution costs increased by 5.3%. 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 2.3% over last year. This is mainly down to increased
costs of using external hauliers and so during the year we
have increased our lorry fleet by 3 lorries. We have also
employed an extra 7 sales staff this year, either in specialist
areas or as trainees for the future benefit of the company.
Costs in each location are monitored closely by the board
through the quarterly meetings at each depot.
Operating profit increased 1.5% to £14.4m. A profit
of £1.3m was achieved on the sale of the Wigston site
following its relocation. Group net profit before taxation
increased to £15.2m from £13.8m last year.
Taxation
Our strategy in managing and controlling our tax affairs is to
ensure compliance with all applicable rules, legislation and
regulations under which we operate. We maintain an open
and co-operative relationship with the UK Tax Authorities,
and pay the correct amount of tax as it falls due.
The taxation charge of £2.6m represents an effective rate
of 16.9%, compared with 20.6% last year. No capital gains
tax arises on the sale of Wigston. 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 2018 the deficit of the defined benefit scheme
under International Financial Reporting Standards was
£8.4m compared with £16.6m last year. Discount rates,
represented by yields on corporate bonds, increased
1000
slightly to 2.6% from 2.5% last year, still at historically low
2000
3000
levels. Changes to some assumptions such as inflation and
4000
5000
mortality rates have also reduced the liabilities. Assets under
6000
7000
management have shown a return of 4.5% in line with the
8000
9000
benchmarks for these asset classes. In note 18.2 to the
10000
11000
accounts on page 55, we have provided some sensitivity
12000
13000
analysis around the various assumptions used to illustrate
14000
15000
16000
this volatility.
We completed the triennial valuation at 31 March 2017
during the year, and as anticipated there is an increased
deficit of £12.1m. As noted last year we made a special
contribution to the scheme of £1m in the year to 31 March
2018. From then there will be deficit recovery payments of
£2m per annum until 31 March 2024.
6
4
2
,
7
JAMES LATHAM PLC ANNUAL REPORT 2018
1
2
3
8
,
6
1
9
8
9
,
3
1
19
1
0
5
,
2
1
4
3
2
,
1
1
2014
2015
2016
2017
2018
Strategic Report
Financial Review
1000
2000
3000
4000
5000
6000
7000
8000
9000
10000
11000
12000
13000
14000
15000
16000
Cash flow and working capital
At the end of the year cash balances of £14.0m were
held, down from £17.2m last year. The cash is being
held as short term deposits providing funds for short term
working capital fluctuations and allowing us to make
capital investments when opportunities arise. 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 £1,113,000 of discounts received compared with
£1,002,000 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.
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 51.0 days
to 51.2 days. Bad debts this year ended up at 0.13% of
turnover against a budget of 0.4%, and last year of 0.04%.
My credit control team have done exceptionally well 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.
Decking from our Profi Deck range.
20
JAMES LATHAM PLC ANNUAL REPORT 2018
2014
2015
2016
2017
2018
7
6
2
,
9
0
3
4
,
0
1
7
5
6
,
9
2
8
3
,
8
5
2
6
,
6
1
Cash and Cash Equivalents
6
4
2
,
7
1
2
3
8
,
6
1
9
8
9
,
3
1
1
0
5
,
2
1
4
3
2
,
1
1
2014
2015
2016
2017
2018
Stock turnover targets are set and monitored on a
monthly basis. Senior management and all staff responsible
for product areas have access to real time inventory levels
and targets. At 31 March 2018 stock turn is 6.2 times
compared with our target of 6.5 times. The calculation has
been amended to look at volumes rather than prices to
take out the effect of price rises, and volume targets are
also set. There were no significant overstocked areas giving
any concern to us at the year end.
Good stock and debtor control has allowed 74%
(2017: 86%) of profit before tax to be available as free
cash for investment and distribution.
Capital investment
During the year we spent £8.6m on completing the new
Yate and Leicester sites, including the racking. The cost
of these sites were below our budgeted costs. We sold
the old site at Wigston in March and the old site at Yate
was sold in April following the year end. In addition we
invested £0.3m in new racking at Hemel. Included in the
cost of the Yate and Leicester sites is the investment in
wi-fi at these sites. We are working on an IT project to use
mobile devices in our warehouses to make the picking
process more efficient and to reduce the possibility of
mis-picks. The majority of the rest of the capital
expenditure this year was due to the asset replacement
policy on our lorries and mobile plant.
Strategic Report
Financial Review
Construction of the new Leicester depot.
Net assets at the year end were £89.8m (2017: £73.3m).
The group’s pre-tax return on capital for the year was
16.6% (2017: 19.0%), which continues to be above our
weighted average cost of capital. The reduction this
year is due to the investment in our new sites, where
improvement in returns will be over the medium term.
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.
As the group trades predominantly in the UK, the market
price of our products tends to fluctuate in line with
currency spot prices. Speculative positions on currencies
are not entered into. 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. We will also
enter into forward currency agreements to cover where
customers are quoted a particular exchange rate.
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.
David Dunmow
Finance Director
JAMES LATHAM PLC ANNUAL REPORT 2018
21
Corporate Governance
Corporate Governance Report
I believe that good corporate governance, involving risk
appraisal and management, prudent decision making,
communication with shareholders and other stakeholders
and business efficiency, is important for the long term
benefit of the stakeholders in our group. As a board
we have considered the 10 Principles of Corporate
Governance contained within the Quoted Companies
Alliance Corporate Governance Code 2018 and show below
how we have applied these principles. I am responsible
for ensuring that the group conducts its business paying
due regard to each of the 10 principles. These principles
have been communicated to the rest of the board through
training and discussion at board meetings, and each board
member is responsible for ensuring that the message
passes down to all our employees.
The 10 Principles are split into three areas, Deliver
Growth, Maintain a Dynamic Management Framework
and Build Trust. I can confirm that we have complied with
all the Principles throughout the year.
The four Principles on Delivering Growth are considered
within the Strategic Report starting on page 4.
MAINTAIN A DYNAMIC MANAGEMENT FRAMEWORK
Principle 5 – Maintain the board as a well-
functioning, balanced team led by the chair.
The Board of Directors
I succeeded Peter Latham as Chairman on 24th August 2017.
I am extremely grateful to Peter for his 44 years service to
the company, which included 34 years on the board and
nearly 12 years as chairman. The company is governed
by a board of directors consisting of the Chairman, four
executive directors and three non-executive directors.
Each director has a vote and no individual or small group
of individuals dominates the board’s decision making.
In the year to 31 March 2018, 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 non-executive directors are Meryl Bushell,
Fabian French and Paula Kerrigan. I consider that all
non-executives are independent. Meryl Bushell, in her
tenth year of service as a non executive, will stand down
at the AGM, as her length of service could start to impact
on her independence. Paula Kerrigan was appointed in
October 2017 so that there is a period of hand over
22
JAMES LATHAM PLC ANNUAL REPORT 2018
with Meryl Bushell. When appointing Paula Kerrigan, the
role was widely advertised and we had over 400 applicants.
The ten best candidates were interviewed by Meryl Bushell
and Fabian French. They then recommended 2 people
who came for interview with myself and David Dunmow.
Paula Kerrigan was selected as best fitting our criteria of a
person with experience of operations, logistics, strategic
planning and procurement in a related industry. 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.
Principle 6 – Ensure that between them the
directors have the necessary up-to-date experience,
skills and capabilities.
The directors’ biographies are shown on page 25.
Each director has many years experience within the
Latham organisation at all levels. Each director has agreed
responsibilities on the board, covering all aspects of the
business including sales, procurement, operations, finance
and IT. As well as responsibilities to the plc board, each
director is actively involved in the running of the Lathams
Limited business, the company’s trading subsidiary, and
keep their skill sets up to date by training, discussions
on market trends with customers and suppliers and
involvement with trade and environmental organisations.
I believe the board works well together, challenging each
other to constantly improve and move forward.
Principle 7 – Evaluate board performance
based on clear and relevant objectives, seeking
continuous improvement.
Each director has a detailed job description showing
their responsibilities on the board. I have regular meetings
with each director to discuss the progress in the areas
they are responsible for, and consider whether any
further development or mentoring needs are necessary.
Each director is subject to the formal appraisal process
used throughout the group.
As a board we periodically review the running of the
board, led by the non executive directors, to consider
the effectiveness of the board and whether there are any
gaps in skills on the board. Succession planning is key so
that no member of the board becomes indispensable.
Corporate Governance
Corporate Governance Report
Principle 8 – Promote a corporate culture that
is based on ethical values and behaviours.
Our core values are Integrity, Shareholder Value,
Empowerment, Sustainability and Customer Focus. The
company and the Latham brand is well respected in its
industry and amongst its customers and suppliers for its
principled trading policies and its
integrity. As such it is important
for us to have a corporate culture
based on these ethical values and
behaviours. The annual report
contains reports on corporate
responsibility including health and
safety, audit and remuneration
committee reports and reports
on our attitudes to risk.
The Audit Committee
The Audit Committee is chaired by Fabian French,
and includes Meryl Bushell, Paula Kerrigan and
Andrew Wright. 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.
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.
Principle 9 – Maintain governance structures
and processes that are fit for purpose and support
good decision-making by the board.
Once a year the auditor meets with the non-executive
directors only.
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.
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.
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. 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.
JAMES LATHAM PLC ANNUAL REPORT 2018
23
Corporate Governance
Corporate Governance Report
Remuneration and Nominations Committee
During the year ended 31 March 2018, the Remuneration
and Nominations Committee comprised three non-
executive directors, Meryl Bushell as Chairman and
Fabian French, who both served throughout the year,
and Paula Kerrigan who served from the date of her
appointment to the board. The meetings were attended
by Peter Latham, until his retirement, Nick Latham and
David Dunmow who 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 also considered group diversity including the
gender pay gap and succession planning.
The Committee has access to professional remuneration
advice from outside of the company.
The Remuneration and Nominations Committee report is
contained on page 26.
BUILD TRUST
Principle 10 – Communicate how the
company is governed and is performing by
maintaining a dialogue with shareholders and
other relevant stakeholders.
24
JAMES LATHAM PLC ANNUAL REPORT 2018
The directors have a commitment to best practice in the
group’s external financial reporting in order to present a
balanced and comprehensive 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.
The published accounts contain reports of the Audit and
Remuneration and Nomination Committees.
The published information is held on our investor website
at www.lathams.co.uk as well as historical financial and
meeting information.
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.
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.
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.
Nick Latham
Chairman
27 June 2018
Corporate Governance
Directors and Advisors
Directors’ biographies
Nick Latham BSc Chairman
Nick Latham, age 50 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.
David Dunmow BSc FCA
Finance Director and Company Secretary
David Dunmow, age 54, has worked in the company
for 24 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 Managing Director
Chris Sutton, age 59, has worked in the company
for 40 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.
Piers Latham BSc Executive Director
Piers Latham, age 47 has worked in the company for
25 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 53, has worked in the company
for 17 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 59, 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 63, 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 is currently a Crown Representative for HMG
Cabinet Office where she manages cross departmental
relationships with three of Government’s strategic
suppliers. 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.
Paula Kerrigan Non-Executive Director
Paula Kerrigan, age 46, was appointed a non executive
director in October 2017. She has a wide variety
of public company experience and is currently
Transformation Director (non-Board) at SuperGroup
plc, where she is responsible for sourcing, design,
corporate social responsibility and implementing
the transformation agenda as SuperGroup expands
its global brand presence. She sits on the Audit
Committee and the Remuneration and Nominations
Committee. She was previously Chief Strategy Officer
at the Co-operative Group where she was responsible
for developing the strategic direction of the Group and
delivering these objectives, and prior to that she spent
15 years at Kingfisher plc where she held a variety of
roles including Finance and Strategy Director for B&Q
in Asia and Delivering Value Director for B&Q in the UK.
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Pension Advisor
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Independent Auditor
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Registered Office
James Latham plc
Unit 3 Swallow Park
Finway Road
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Herts HP2 7QU
Registered Number 65619
Registered in England
and Wales
Nick Latham
David Dunmow
Chris Sutton
Piers Latham
Andrew Wright
Fabian French
Meryl Bushell
Paula Kerrigan
JAMES LATHAM PLC ANNUAL REPORT 2018
25
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 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.
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.
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.
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.
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 2018
was the achievement of £12,825,000 operating profit,
as measured in the depots management accounts,
an increase of 11.7% 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 124.2% of the
target operating profit was achieved earning 19.5% of
basic salary. The criterion for the year ended 31 March
2019 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 4.84% of basic salary to 378 eligible employees.
26
JAMES LATHAM PLC ANNUAL REPORT 2018
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 2018.
James Latham plc total shareholder return
240
190
140
90
40
-10
2013
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.
2014
2015
2016
2017
2018
Directors’ emoluments
Details of the individual directors’ emoluments for the year were as follows:
Salary
and fees
Benefits
Bonus
Total
emoluments
excluding
pensions
Share
based
payments
Pension
contributions
£000
£000
£000
£000
£000
£000
Executive
N.C. Latham
D.A. Dunmow
C.D. Sutton
P.F. Latham
A.G. Wright
Non-executive
P.D.L. Latham
(retired 24 August 2017)
M.A. Bushell
P.L.F. French
P. Kerrigan
(appointed 18 October 2017)
Total
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
174
165
167
159
165
158
121
105
125
108
29
71
33
32
33
32
14
-
861
830
-
1
12
13
13
12
12
11
13
10
-
-
-
-
-
-
-
-
44
41
42
40
42
40
30
29
34
29
-
-
-
-
-
-
-
-
218
207
221
212
220
210
163
145
172
147
29
71
33
32
33
32
14
-
50
47
192
179
1,103
1,056
2
2
2
2
2
2
2
2
1
1
-
-
-
-
-
-
-
-
9
9
TOTAL
£000
243
232
255
245
252
241
185
166
195
169
29
71
33
32
33
32
14
-
23
23
32
31
30
29
20
19
22
21
-
-
-
-
-
-
-
-
127
123
1,239
1,188
JAMES LATHAM PLC ANNUAL REPORT 2018
27
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
N.C. Latham
D.A. Dunmow
C.D. Sutton
P.F. Latham
A.G. Wright
M.A. Bushell
P.L.F. French
P. Kerrigan
Beneficial owner
Beneficial owner
Beneficial owner
Beneficial owner
Beneficial owner
Beneficial owner
Beneficial owner
Beneficial owner
31 March 2018
31 March 2017
Ordinary shares
Preference shares
Ordinary shares
Preference shares
630,296
128,701
55,064
627,621
24,312
9,394
370,052
-
-
-
-
567
-
-
-
-
627,352
125,819
51,300
624,743
22,366
9,394
370,052
-
-
-
-
567
-
-
-
-
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 2018
31 March 2017
3,185
3,185
3,185
3,185
1,592
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.
28
JAMES LATHAM PLC ANNUAL REPORT 2018
Corporate Governance
Directors’ Remuneration Report
Company Share Option Scheme
Participation by the directors in the James Latham plc Approved Company Share Option Scheme 2008 is as follows:
Outstanding
1 April 2017
Granted during
the year
Exercised
Outstanding
31 March 2018
Exercise
price
N.C. Latham
D.A. Dunmow
C.D. Sutton
P.F. Latham
A.G. Wright
1,834
1,262
707
586
636
-
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
-
-
-
-
-
-
560
-
-
-
-
-
560
-
-
-
-
-
-
560
-
-
-
-
-
560
-
-
-
-
-
-
560
(1,834)
-
-
-
-
-
(1,834)
-
-
-
-
-
(1,818)
(1,742)
(1,834)
-
-
-
-
(1,834)
-
-
-
-
-
(1,742)
-
-
-
-
-
-
-
1,262
707
586
636
560
-
1,262
707
586
636
560
-
-
-
1,262
707
586
560
-
1,262
707
586
636
560
-
1,834
1,262
707
586
636
560
£2.725
£3.96
£5.65
£6.825
£7.075
£8.025
£2.725
£3.96
£5.65
£6.825
£7.075
£8.025
£1.65
£2.295
£2.725
£3.96
£5.65
£6.825
£8.025
£2.725
£3.96
£5.65
£6.825
£7.075
£8.025
£2.295
£2.725
£3.96
£5.65
£6.825
£7.075
£8.025
Exercise period
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
14.12.22 to 13.12.27
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
14.12.22 to 13.12.27
26.11.14 to 25.11.19
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
14.12.22 to 13.12.27
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
14.12.22 to 13.12.27
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
14.12.22 to 13.12.27
No performance conditions attach to these options. Mr N.C. Latham, Mr D.A. Dunmow and Mr P.F. Latham made a gain
of £10,454, Mr C.D. Sutton made a gain of £35,094 and Mr A.G. Wright made a gain of £10,678 on options exercised during
the year.
M.A. Bushell,
Chairman of the Remuneration Committee
27 June 2018
JAMES LATHAM PLC ANNUAL REPORT 2018
29
Corporate Governance
Directors’ Report
The directors have pleasure in presenting their annual
report and the audited accounts for the year ended
31 March 2018. 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 2018 are
set out on page 37. The directors recommend the
following dividends:-
Ordinary dividends
Interim dividend paid, 4.5 pence per
ordinary share
Final dividend proposed, 12.1 pence per
ordinary share
Total ordinary dividends, 16.6 pence per
ordinary share
£000
885
2,379
3,264
The directors recommend payment of the final dividend
on 24 August 2018 to shareholders on the register of
members at the close of business on 3 August 2018.
Balance sheet and post balance sheet events
The balance sheet on page 38 shows the group’s financial
position. Since the year end we have completed the sale
of the old Yate site which realised net proceeds of £1.72m.
See note 13 on page 51.
Directors
Peter Latham retired as Chairman on 24th August 2017,
and Paula Kerrigan was appointed as non executive
director on 18th October 2017. The remaining directors
of the company were directors throughout the year.
Each director’s biographical details are shown on page 25.
In compliance with the Articles of Association,
Fabian French, Paula Kerrigan, David Dunmow and
Andrew Wright will retire by rotation and, being eligible,
offer themselves for re-election. Meryl Bushell will retire
at the Annual General Meeting and so does not offer
herself for re-election.
Other than their service contracts, no director has a
material interest in any contract with the company.
Meryl Bushell, Fabian French and Paula Kerrigan, 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 26 to 29.
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.
30
JAMES LATHAM PLC ANNUAL REPORT 2018
Corporate Governance
Directors’ Report
Employees
The strategic report on page 11 sets out the group’s
communication policies with their employees and its
policy towards disability.
Substantial shareholdings
At 27 June 2018, 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
Close Asset Management Ltd
Robert Latham
Nick Latham
Piers Latham
Number
1,212,955
1,015,112
680,787
630,296
627,621
%
6.16
5.16
3.47
3.20
3.19
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 2018 were 32 days
(2017: 34 days). Payment practices and performance data
for Lathams Limited is required to be published on the
Companies House website starting 1 April 2018.
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 investment in own shares is detailed in note 24 on
page 61. During the year, 50,000 shares were transferred
to James Latham Trustee Limited to be made available
for expiring employee share schemes. The company
holds 469,200 ordinary shares as treasury shares, with a
view to being used for future employee share schemes.
The company also holds 733 preference shares in
treasury, which will be cancelled at the appropriate time.
In addition the Trustees of the James Latham Employee
Benefits Trust holds 31,993 shares with a view to being
used for employee share schemes.
Share option schemes
On 23 August 2017, the shareholders approved by
ordinary resolution the extension of the Save as You
Earn scheme for a further 10 years. 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 13,820 options were
issued at an option price of £8.025. In addition 27,661
options were exercised after being held for five years,
1,818 at an option price of £1.65, 4,573 at an option price
of £2.295 and 21,270 at an option price of £2.725.
JAMES LATHAM PLC ANNUAL REPORT 2018
31
Corporate Governance
Directors’ Report
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.
In arriving at their opinion, the directors considered:-
• The group’s cash flow forecasts and revenue projections
• Cash and borrowing facilities available to the group
• Consideration of the principal risks and uncertainties
outlined on pages 12 to 13.
Political and charitable donations
During the year the group made no political contributions
but made direct donations to various charitable
organisations amounting to £2,535 (2017: £3,758). 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.
Financial instruments
A summary of the group financial instruments and related
disclosures are set out in note 29 to the group accounts
and in the Financial Review on pages 18 to 21.
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.
Annual General Meeting special business
Shareholders receive more than 20 working days notice
of the Annual General Meeting, where directors will be
available for questions and a trading update. The Annual
General Meeting will be held at Unit 1, Swallow Park,
Finway Road, Hemel Hempstead, Herts, HP2 7QU on
22 August 2018 at 12.30pm. Last year all resolutions were
passed with over 95% in favour.
This year 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 8. 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 9. 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 10. 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.
On behalf of the Board of Directors
Nick Latham
Chairman
27 June 2018
32
JAMES LATHAM PLC ANNUAL REPORT 2018
Corporate Governance
Statement of Directors’ Responsibilities
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.
We consider that the Annual Report and Accounts, when
taken as a whole, is fair, balanced and understandable
and provides the information necessary for shareholders
to assess the group’s position, performance, business
model and strategy.
On behalf of the Board of Directors
Nick Latham
Chairman
27 June 2018
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 have elected under company law 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.
JAMES LATHAM PLC ANNUAL REPORT 2018
33
Corporate Governance
Independent Auditor’s Report
Opinion
We have audited the financial statements of James
Latham plc (the ‘parent company’) and its subsidiaries
(the ‘group’) for the year ended 31 March 2018 which
comprise the consolidated income statement,
consolidated statement of comprehensive income,
consolidated and company statements of financial
position, consolidated and company statements of
changes in equity, consolidated and company cash flow
statements and notes to the financial statements,
including a summary of significant accounting policies.
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 of the parent company’s affairs
as at 31 March 2018 and of the group’s profit for the year
then ended;
• the group financial statements have been properly
prepared in accordance with IFRSs as adopted by the
European Union;
• the parent company financial statements have been
properly prepared in accordance with 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.
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) (ISAs (UK)) and applicable
law. Our responsibilities under those standards are
further described in the Auditor’s responsibilities for the
audit of the financial statements section of our report.
We are independent of the group and parent company in
accordance with the ethical requirements that are relevant
to our audit of the financial statements in the UK, including
the FRC’s Ethical Standard as applied to SME listed entities
and we have fulfilled our other ethical responsibilities
in accordance with these requirements. We believe that
the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our opinion.
Conclusions relating to going concern
We have nothing to report in respect of the following matters
in relation to which the ISAs (UK) require
us to report to you where:
• the directors’ use of the going concern basis of accounting
in the preparation of the financial statements is not
appropriate; or
• the directors have not disclosed in the financial statements
any identified material uncertainties that may cast significant
doubt about the group’s or the parent company’s ability to
continue to adopt the going concern basis of accounting for
a period of at least twelve months from the date when the
financial statements are authorised for issue.
Key audit matters
Key audit matters are those matters that, in our
professional judgment, were of most significance in our
audit of the financial statements of the current period
and include the most significant assessed risks of material
misstatement (whether or not due to fraud) we identified,
including those which had the greatest effect on the
overall audit strategy, the allocation of resources in the
audit and directing the efforts of the engagement team.
These matters were addressed in the context of our audit
of the financial statements as a whole, and in forming
our opinion thereon, and we do not provide a separate
opinion on these matters.
34
JAMES LATHAM PLC ANNUAL REPORT 2018
Inventories – stock level and valuation
Risk
The group carried inventory amounting to £40.1m at
31 March 2018. As disclosed in the accounting policies,
inventories are held at the lower of cost and net
realisable value. The determination of whether
inventory will be realised for value less than cost
requires management to exercise judgement and apply
assumptions. A change in the valuation of inventory could
have a material impact on the financial statements.
Our response
Our audit procedures included attending a sample of the
group’s year end stock takes and performing procedures
to test the robustness of the count process. Testing was
then performed to confirm that, for a sample of items,
the quantities counted had been correctly reflected within
the year end inventory figures and, by tracing to original
purchase documentation, that the carrying value reflected
the cost of purchase.
We also reviewed a sample of post year end sales to
test whether net realisable value was greater than cost.
To audit the adequacy of the provision against inventory,
we reviewed ageing of inventory balances at 31 March
2018 and challenged management’s assessment of the
provision required using information about the sales made
in the year and post year end and our previous experience
of sales of slow moving inventory. We also tested cut off
of inventory by checking a sample of invoices around
the year end to goods received records, and vice versa to
determine whether items have been correctly recognised
in the appropriate period.
Our application of materiality
When establishing our overall audit strategy, we set
certain thresholds which help us to determine the
nature, timing and extent of our audit procedures and to
evaluate the effects of misstatements, both individually
and on the financial statements as a whole. During
planning we determined a magnitude of uncorrected
misstatements that we judge would be material for the
financial statements as a whole (FSM). During planning
FSM was calculated as £2.1m, which was not changed
during the course of our audit. We agreed with the Audit
Committee that we would report to them all unadjusted
differences in excess of £10,000, as well as differences
below those thresholds that, in our view, warranted
reporting on qualitative grounds.
Corporate Governance
Independent Auditor’s Report
An overview of the scope of our audit
Our audit was scoped by obtaining an understanding
of the group and its control environment, including
group-wide controls, and assessing the risks of material
misstatement. The financial statements were audited on a
consolidated basis using group materiality. The scope of
our audit covered 100% of both consolidated profit before
tax and consolidated net assets.
Other information
The directors are responsible for the other information.
The other information comprises the information included
in the annual report, other than the financial statements
and our auditor’s report thereon. Our opinion on the
financial statements does not cover the other information
and, except to the extent otherwise explicitly stated in
our report, we do not express any form of assurance
conclusion thereon.
In connection with our audit of the financial statements,
our responsibility is to read the other information and,
in doing so, consider whether the other information is
materially inconsistent with the financial statements or
our knowledge obtained in the audit or otherwise appears
to be materially misstated. If we identify such material
inconsistencies or apparent material misstatements, we
are required to determine whether there is a material
misstatement in the financial statements or a material
misstatement of the other information. If, based on the
work we have performed, we conclude that there is a
material misstatement of this other information, we are
required to report that fact. We have nothing to report in
this regard.
Opinions on other matters prescribed by the
Companies Act 2006
In our opinion, based on the work undertaken in the
course of the audit:
• the information given in the Strategic Report and the
Directors’ Report for the financial year for which the
financial statements are prepared is consistent with the
financial statements; and
• the Strategic Report and the Directors’ Report have
been prepared in accordance with applicable legal
requirements.
JAMES LATHAM PLC ANNUAL REPORT 2018
35
Financial Statements
Independent Auditor’s Report
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 their environment
obtained in the course of the audit, we have not identified
material misstatements in the Strategic Report or the
Directors’ Report.
We have nothing to report in respect of the following
matters in relation to which the Companies Act 2006
requires us to report to you if, in our opinion:
• adequate accounting records have not been kept by the
parent company, or returns adequate for our audit have
not been received from branches not visited by us; or
• the parent company financial statements are not in
agreement with the accounting records and returns; or
• certain disclosures of directors’ remuneration specified
by law are not made; or
• we have not received all the information and
explanations we require for our audit.
Responsibilities of directors
As explained more fully in the directors’ responsibilities
statement set out on page 33, the directors are responsible
for the preparation of the financial statements and for
being satisfied that they give a true and fair view, and
for such internal control as the directors determine is
necessary to enable the preparation of financial statements
that are free from material misstatement, whether due to
fraud or error.
In preparing the financial statements, the directors are
responsible for assessing the group’s and the parent
company’s ability to continue as a going concern,
disclosing, as applicable, matters related to going concern
and using the going concern basis of accounting unless
the directors either intend to liquidate the group or
the parent company or to cease operations, or have no
realistic alternative but to do so.
Auditor’s responsibilities for the audit of the
financial statements
Our objectives are to obtain reasonable assurance about
whether the financial statements as a whole are free from
material misstatement, whether due to fraud or error,
and to issue an auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance, but is
not a guarantee that an audit conducted in accordance
with ISAs (UK) will always detect a material misstatement
when it exists. Misstatements can arise from fraud or
error and are considered material if, individually or in the
aggregate, they could reasonably be expected to influence
the economic decisions of users taken on the basis of
these financial statements.
A further description of our responsibilities for the audit
of the financial statements is located on the Financial
Reporting Council’s website at: http://www.frc.org.uk/
auditorsresponsibilities. This description forms part of
our auditor’s report.
Use of our report
This report is made solely to the company’s members,
as a body, in accordance with Chapter 3 of Part 16 of the
Companies Act 2006. Our audit work has been undertaken
so that we might state to the company’s members
those matters we are required to state to them in 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
27 June 2018
36
JAMES LATHAM PLC ANNUAL REPORT 2018
Financial Statements
Consolidated Income Statement
For the year ended 31 March 2018
£’000s
Notes
2018
2017
Continuing operations
Revenue
198,808
Cost of sales (including warehouse costs) 3, 4, 11 (177,145) (162,709)
214,919
Gross profit
Selling and distribution costs
Administrative expenses
Operating profit
Profit on disposal of property
Finance income
Finance costs
Profit before tax
Tax expense
37,774
36,099
4, 11 (16,277) (15,457)
4, 11 (7,106) (6,463)
14,391
1,276
37
14,179
-
5
56
6 (488) (408)
13,827
3
7 (2,570) (2,846)
15,216
Profit after tax attributable to owners
of the parent company
Earnings per ordinary share (basic)
Earnings per ordinary share (diluted)
9
9
12,646
64.4p
64.1p
10,981
56.0p
55.8p
Consolidated Statement of Comprehensive Income
For the year ended 31 March 2018
£’000s
Notes
2018
2017
10,981
12,646
7,948
(7,543)
(1,262)
1,358
Profit after tax
Other comprehensive income:
Actuarial gain/(loss) on defined benefit
pension scheme
Deferred tax relating to components of other
comprehensive income
Other comprehensive income for the year,
net of tax
Total comprehensive income attributable to
the owners of the parent company
6,686
(6,185)
19,332
4,796
JAMES LATHAM PLC ANNUAL REPORT 2018
37
Financial Statements
Consolidated and Company Balance Sheet
As at 31 March 2018
£’000s
Assets
Non-current assets
Investments
Goodwill
Other intangible assets
Property, plant and equipment
Deferred tax asset
Total non-current assets
Current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Assets held for sale
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
Total non-current liabilities
Total liabilities
Net assets
Capital and reserves
Issued capital
Share-based payment reserve
Own shares
Capital reserve
Retained earnings
Company Registration Number 65619
Group
Company
Notes
2018
2017
2018
2017
23
12
10
11
20
-
237
1
33,831
1,491
-
237
1
26,312
2,904
9,613
-
-
9,613
-
-
15 20
51 79
35,560
29,454
9,679
9,712
14
15
13
16
17
17
18
19
20
40,068
41,508
13,989
638
35,508
-
40,076 1,351
5,531
17,246
-
-
96,203
92,830
6,882
-
1,585
7,993
-
9,578
131,763
122,284
16,561
19,290
28,648
-
1,292
27,063
-
1,517
29,940
28,580
1,437
-
-
1,437
1,036
1,778
-
2,814
987
8,382
987
16,625
291 349
2,485
2,374
987
-
987
-
189 221
-
-
12,034
20,446
41,974
49,026
1,176
2,613
1,208
4,022
89,789
73,258
13,948
15,268
5,040
108
5,040
184
5,040
21
184 108
22
24 (529) (291) (529) (291)
-
10,411
3
85,091
3
68,398
-
9,253
5,040
Total equity attributable to
shareholders of the parent company
89,789
73,258
13,948
15,268
The Company’s profit for the year and total comprehensive income for the year were £1,481,000 (2017: £1,266,000) and
£1,481,000 (2017: £1,266,000) respectively.
These accounts were approved and authorised for issue by the Board of Directors on 27 June 2018 and signed on its behalf by:
N.C. Latham
D.A. Dunmow
} Directors
The consolidated notes on pages 42 to 66 form part of these accounts.
38
JAMES LATHAM PLC ANNUAL REPORT 2018
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
56 (441)
-
-
Capital
reserve
£’000
3
-
Retained
earnings
£’000
66,525
10,981
Total
equity
£’000
71,183
10,981
-
-
-
-
-
-
- - (7,543) (7,543)
-
-
- 1,358 1,358
-
4,796
4,796
-
-
-
-
- (19)
-
-
-
-
71
-
-
52
-
-
98
-
- (2,894) (2,894)
-
- (52)
-
19
-
4
4
-
98
-
-
71
-
-
Balance at 1 April 2016
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
Write down on conversion of ESOP shares
Exercise of options
Deferred tax on share options
Change in investment in ESOP shares
Share-based payment expense
Total transactions with owners
- 52 150
- (2,923) (2,721)
Balance at 31 March 2017
5,040
108 (291)
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
Exercise of options
Deferred tax on share options
Transfer of treasury shares
Write down on conversion of ESOP shares
Change in investment in ESOP shares
Share-based payment expense
-
-
-
-
- (19)
-
-
-
- (414)
-
-
-
15
- 161
-
-
-
95
3
-
68,398
73,258
12,646
12,646
- 7,948 7,948
- (1,262) (1,262)
-
19,332
19,332
19
- (3,014) (3,014)
-
-
- (43) (43)
-
-
414
- (15)
-
- 161
-
95
-
-
Total transactions with owners
-
76 (238)
- (2,639) (2,801)
Balance at 31 March 2018
5,040
184 (529)
3
85,091
89,789
JAMES LATHAM PLC ANNUAL REPORT 2018
39
Financial Statements
Company 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
Retained
earnings
£’000
Total
equity
£’000
56 (441)
12,068
16,723
-
-
- 1,266 1,266
- 1,266 1,266
- - (2,894) (2,894)
-
-
52 (52)
-
-
19
- (19)
-
4
4
-
-
98
-
-
-
71
-
71
-
-
-
98
-
Balance at 1 April 2016
Profit for the year
Total comprehensive income for the year
Transactions with owners:
Dividends
Write down on conversion of ESOP shares
Exercise of options
Deferred tax on share options
Change in investment in ESOP shares
Share-based payment expense
Total transactions with owners
- 52 150 (2,923) (2,721)
Balance at 31 March 2017
5,040
108 (291) 10,411
15,268
Profit for the year
Total comprehensive income for the year
Transactions with owners:
Dividends
Exercise of options
Deferred tax on share options
Transfer of treaasury shares
Write down on conversion of ESOP shares
Change in investment in ESOP shares
Share-based payment expense
-
-
-
-
- 1,481 1,481
-
1,481 1,481
-
-
- (19)
-
-
-
-
-
-
- - (3,014) (3,014)
-
19
- (43) (43)
-
-
- 161
95
-
- (414) 414
15 (15)
-
- 161
-
95
Total transactions with owners
- 76 (238) (2,639) (2,801)
Balance at 31 March 2018
5,040
184 (529)
9,253
13,948
40
JAMES LATHAM PLC ANNUAL REPORT 2018
Financial Statements
Consolidated and Company Cash Flow Statement
For the year ended 31 March 2018
Group
Company
£’000s
Notes
2018
2017
2018
2017
Net cash flow from operating activities
Cash generated from operations
Interest paid
Income tax paid
25
11,251
(1) (2)
(2,797) (2,646)
11,902 (178) 1,010
- (102)
182 50
Net cash inflow from operating activities
8,453
9,254
4
958
Cash flows from investing activities
Interest received and similar income
Purchase of property, plant and equipment
Proceeds from sale of property, plant
and equipment
37
35
(10,840) (6,045) - -
56
2
Net cash (outflow)/inflow from investing activities
(8,617) (5,867)
2,186
122
-
2
-
35
Cash flows from financing activities
Dividend received
2,403
Equity dividends paid (3,014) (2,894) (3,014) (2,894)
(79) (79) (79) (79)
Preference dividend paid
2,403
-
-
Net cash outflow from financing activities
(3,093) (2,973) (690) (570)
(3,257)
414 (684)
423
(Decrease)/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
13,989
17,246
17,246
16,832
6,215
5,531
5,792
6,215
Balance sheet cash and cash equivalents
Bank overdraft in current liabilities (note 17)
13,989
-
17,246
7,993
5,531
- - (1,778)
Cash and cash equivalents at end of year
13,989
17,246
5,531
6,215
JAMES LATHAM PLC ANNUAL REPORT 2018
41
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 32. 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:
- IFRS 9 ‘Financial Instruments’. This standard is the first step
in the process to replace IAS 39 ‘Financial Instruments:
Recognition and Measurement’. IFRS 9 introduces new
requirements for classifying and measuring financial assets
and affects the accounting for financial assets – IFRS 9 is
applicable for periods beginning on or after 1 January 2018.
- IFRS 15 ‘Revenue from Contracts with Customers’ provides
guidance on the recognition, timing and measurement of
revenue. IFRS 15 is applicable for periods beginning on or
after 1 January 2018.
- IFRS 16 ‘Leases’ establishes principles for the recognition,
measurement, presentation and disclosure of leases –
IFRS 16 is applicable for periods beginning on or after
1 January 2019.
the effect the adoption of IFRS 16 will have on the financial
statements in future periods; there is however expected
to be a material impact. IFRS 16 will require the Group to
recognise a lease liability and a right-of-use asset of most of
those leases previously treated as operating leases. This will
affect both non-current and current liabilities, fixed assets and
the measurement and disclosure of expense associated with
the leases which under the new standard will be treated as
depreciation and financing expense which were previously
recognised as operating expenses over the term of the lease.
Certain other new accounting standards, amendments to
existing accounting standards and interpretations which
are in issue but not yet effective, either do not apply to the
Group or are not expected to have any material impact on
the Group’s net results or net assets.
(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.
The directors anticipate that the adoption of IFRS 9 and IFRS
15 will have no material impact on the financial statements of
the Company when the relevant standards and interpretations
come into effect. The directors have not yet fully assessed
1.3 Operating profit
Operating profit consists of revenues and other operating
income less operating expenses. Operating profit excludes
net finance costs.
42
JAMES LATHAM PLC ANNUAL REPORT 2018
Financial Statements
Notes forming part of the Group Accounts
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.
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.
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 is 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.
1.8 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.
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 2018
43
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 2018, and of the amounts
charged/credited to the income statement and equity, are
set out in note 18 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.
44
JAMES LATHAM PLC ANNUAL REPORT 2018
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
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 ten 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 recognised income and
expense 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 2018
45
Financial Statements
Notes forming part of the Group Accounts
3. Profit before tax
2018 2017
Profit for the year has been arrived at after taking
account the following charges/(credits):
Employee remuneration (note 4)
Net foreign exchange (gains)
Cost of inventories recognised as an expense and included
in ‘cost of sales’ in the consolidated income statement
Depreciation of property, plant and equipment
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 auditors for the audit
of the consolidated and parent company accounts
Fees payable to the company’s auditors and its
associates for other services
The audit of the company’s subsidiary pursuant to legislation
Tax services
Other
Fees in relation to the audit of the James Latham plc
Pension and Assurance Scheme
Other expenses
Total cost of sales, distribution costs and
administrative expenses
£’000
£’000
£’000
£’000
16,530
(408)
15,244
(193)
168,839
1,941
154,269
1,817
(168) (95)
5
86
-
-
583
539
570
539
1,122
1,109
10 9
67
63
11 12
-
11
8
12,565
200,528
7
12,308
184,641
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
Apprenticeship levy
Pension costs
Share-based payment
Group
Company
2018
Number
2017
Number
2018
Number
2017
Number
59
122
134
70
385
£’000
13,378
1,385
51
1,621
95
16,530
57
117
127
69
370
£’000
12,554
1,278
-
1,341
71
15,244
25
-
-
-
25
£’000
1,310
144
5
920
95
2,474
26
1
-
-
27
£’000
1,328
149
-
916
71
2,464
Of the above payroll costs, £3,734,000 (2017: £3,475,000) is included in cost of sales, £8,496,000 (2017: £8,028,000) is
included in selling and distribution costs, and £4,300,000 (2017: £3,741,000) is included in administrative expenses in
the income statement.
46
JAMES LATHAM PLC ANNUAL REPORT 2018
Financial Statements
Notes forming part of the Group Accounts
2018
£’000
37
2018
£’000
2017
£’000
56
2017
£’000
1
2
408 327
79
79
5. Finance income
Interest receivable
The interest received is on bank deposits.
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.
488
408
7. Tax expense
The charge for taxation on profit comprises:
2018
£’000
2017
£’000
Current year:
UK corporation tax at 19% (2017: 20%)
2,787
50 103
Deferred taxation - pension
- IBAs derecognised in current year (16) (18)
- change in tax rates
44
- other (36) (70)
2,572
-
Profit before taxation
Tax at 19% (2017: 20%)
2,570
15,216
2,891
2,846
13,827
2,765
Tax effect of expenses/credits that are not deductible/
taxable in determining taxable profit (269) 125
IBAs derecognised in current year (16) (18)
Change in tax rates
- 44
Other (36) (70)
Total tax charge
2,570
2,846
8. Dividends
2018 2017
Ordinary dividends:
Final 10.85p per share paid 25 August 2017 (2016: 10.3p)
Interim 4.5p per share paid 26 January 2018 (2017: 4.5p)
2,129
885
2,011
883
£’000
£’000 £’000 £’000
3,014 2,894
The Directors propose a final dividend for 2018 of 12.1p per share, that, subject to approval by the shareholders,
will be paid on paid on 24 August 2018 to shareholders on the register on 3 August 2018.
Based on the number of shares currently in issue, the final dividend for 2018 is expected to absorb £2,379,000.
JAMES LATHAM PLC ANNUAL REPORT 2018
47
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
2018
£’000
12,385
Number
’000
2017
£’000
10,981
Number
’000
Issued ordinary share capital
20,160
Less: weighted average number of own shares held in treasury investment (494) (519)
Less: weighted average number of own shares held in ESOP Trust (26) (40)
20,160
Weighted average share capital
Add: dilutive effects of share options issued
Weighted average share capital for diluted earnings per ordinary
share calculation
19,640
85
19,725
19,601
82
19,683
10. Intangible assets – Group
Cost:
At 1 April 2016
Additions
Disposals
At 1 April 2017
Additions
At 31 March 2018
Amortisation
At 1 April 2016
Charge for the year
Disposals
At 1 April 2017
Charge for the year
At 31 March 2018
Net book value
At 31 March 2018
At 31 March 2017
At 31 March 2016
Trademark
£’000
155
-
(154)
1
-
1
62
5
(67)
-
-
-
1
1
93
The amortisation charge is included in the income statement under administrative expenses.
The registered trademarks of the company are Woodex®, Buffalo® Board and Bausen® Flooring. Due to a change in
trading strategy, the board decided to write down the remaining value of the Bausen® Flooring trade Mark in the year
ended 31 March 2017.
48
JAMES LATHAM PLC ANNUAL REPORT 2018
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 2016
Additions
Disposals
18,805
4,573
(15)
31,686
6,045
- (564) (579)
12,268
1,470
613
2
At 1 April 2017
Additions
Reclassification as non-current asset held for sale
Disposals
At 31 March 2018
Depreciation:
At 1 April 2016
Disposals
Charge for the year
At 1 April 2017
Reclassification as non-current asset held for sale
Disposals
Charge for the year
At 31 March 2018
Net book value
At 31 March 2018
At 31 March 2017
At 31 March 2016
23,363
6,873
37,152
11,557
(765) - - (765)
(767) - (2,519) (3,286)
13,174
4,684
615
-
28,704
615
15,339
44,658
2,662
-
262
288
9,575
- (552) (552)
1,817
6,625
1,518
37
2,924
10,840
(127) - - (127)
(182) - (1,645) (1,827)
37 1,528 1,941
7,591
376
325
2,991
362
7,474
10,827
25,713
253
7,865
20,439
16,143
290
325
5,583
5,643
33,831
26,312
22,111
Included in freehold property is land with a book value of £8,519,000 (2017: £7,892,000) which is not depreciated.
The depreciation charge is included in the income statement as follows:
Cost of sales
Selling and distribution costs
Administrative expenses
2018
£’000
1,216
627
98
1,941
2017
£’000
1,113
610
94
1,817
JAMES LATHAM PLC ANNUAL REPORT 2018
49
Financial Statements
Notes forming part of the Group Accounts
11.2 Company
Cost:
At 1 April 2016
Additions
At 1 April 2017
Additions
At 31 March 2018
Depreciation:
At 1 April 2016
Charge for the year
At 1 April 2017
Charge for the year
At 31 March 2018
Net book value
At 31 March 2018
At 31 March 2017
At 31 March 2016
12. Goodwill
Cost:
At 1 April 2016 and 31 March 2018
Impairment
At 1 April 2016 and 31 March 2018
Net book value
At 31 March 2018, 2017 and 2016
Plant, equipment and vehicles
£’000
361
-
361
-
361
337
4
341
5
346
15
20
24
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.
50
JAMES LATHAM PLC ANNUAL REPORT 2018
Financial Statements
Notes forming part of the Group Accounts
13. Assets held for sale
Cost:
At 1 April 2016 and 1 April 2017
Reclassification as non-current asset held for sale
At 31 March 2018
Depreciation:
At 1 April 2016 and 1 April 2017
Reclassification as non-current asset held for sale
At 31 March 2018
Net book value
At 31 March 2018
At 31 March 2017
At 31 March 2016
Freehold property
£’000
-
765
765
-
127
127
638
-
-
The asset held for sale related to the vacated Yate property, where the business has been relocated to the
new Yate site. The sale was completed on 4 April 2018 realising net proceeds of £1,720,000 and a profit on
sale of £1,059,000.
14. Inventories
2018
£’000
2017
£’000
Finished goods and goods for resale
36,059
Less: provisions for slow moving and obsolete stock (567) (551)
40,635
40,068
35,508
The inventories impairment charge for the year ended 31 March 2018 was £438,000 (2017: £340,000). Impairment
charges reversed during the year were £422,000 (2017: £368,000). 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 17).
JAMES LATHAM PLC ANNUAL REPORT 2018
51
Financial Statements
Notes forming part of the Group Accounts
15. Trade and other receivables
Group
Company
Trade receivables
Other receivables:
Other receivables
Amounts owed by subsidiaries
Tax receivable
Prepayments
2018
£’000
38,718
994
-
-
1,796
2,790
2017
£’000
36,098
1,445
-
-
2,533
3,978
2018
£’000
7
18
-
1,280
46
1,344
41,508
40,076
1,351
2017
£’000
5
3
284
1,270
23
1,580
1,585
The directors consider that the carrying amount of trade and other receivables approximates their fair value.
Trade receivables amounted to £38,718,000 (2017: £36,098,000), net of a provision of £132,000 (2017: £59,000) for
impairment. Movements on the group provisions for impairment were as follows:
At 1 April 2017
Provisions for receivables impairment
Receivables written off during the year as uncollectible
At 31 March 2018
Group
2018
£’000
2017
£’000
59
106
81
294
(221) (128)
132
59
The average credit period on sale of goods is 51 days (2017: 51 days).
The following table provides analysis of trade and other receivables that were past due at 31 March 2018 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
2018
£’000
898
46
36
980
2017
£’000
588
39
6
633
There are no significant credit risks arising from financial assets that are neither past due nor impaired.
At 31 March 2018, £38,624,000 (2017: £36,875,000) of trade and other receivables were denominated in sterling, £771,000
(2017: £394,000) were denominated in Euros and £317,000 (2017: £274,000) were denominated in US dollars.
The Company balanced are all denominated in sterling.
52
JAMES LATHAM PLC ANNUAL REPORT 2018
Financial Statements
Notes forming part of the Group Accounts
16. Trade and other payables
Trade payables
Other taxation and social security
Amounts owed to subsidiaries
Other payables
Accruals and deferred income
Group
Company
2018
£’000
20,120
5,308
-
1,469
1,751
2017
£’000
19,516
4,326
-
1,473
1,748
2018
£’000
78
606
392
276
85
2017
£’000
26
588
-
276
146
28,648
27,063
1,437
1,036
Trade and other payables principally comprise amounts outstanding for trade purchases and ongoing costs.
The average credit period taken for trade purchases is 32 days (2017: 34 days). The directors consider that the
carrying amount of trade payables approximates to their fair value.
At 31 March 2018, £18,370,000 (2017: £19,226,000) of trade and other payables were denominated in sterling,
£1,456,000 (2017: £969,000) in US dollars, £1,699,000 (2017: £717,000) in Euros and £64,000 (2017: £77,000) in
Canadian dollars. The company balances are all denominated in sterling.
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 £322,000 (2017: £176,000).
17. Interest bearing loans and borrowings
Current liabilities
Bank overdraft
Non-current liabilities
Cumulative preference shares
of £1 each (note 21)
Total
Group
Company
2018
£’000
2017
£’000
2018
£’000
-
-
987
987
-
-
987
987
-
-
987
987
2017
£’000
1,778
1,778
987
2,765
The loans and borrowings were all denominated in sterling.
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 (2017: £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 2018
53
Financial Statements
Notes forming part of the Group Accounts
18. Retirement and other benefit obligation
Group
Retirement benefit obligations (note 18.2)
18.1. Group pension schemes
2018
£’000
8,382
2017
£’000
16,625
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. 59% of the
assets are invested in equities, with 53% under passive management by Blackrock and 6% in a Fund of Hedge funds
managed by Mesirow. 32% are held in bonds and gilts, with 18% 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 £1,621,000 (2017: £1,341,000). Of the charge, £206,000
(2017: £171,000) is included in cost of sales, £668,000 (2017: £596,000) is included in selling and distribution costs,
and £747,000 (2017: £574,000) 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 2017. 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 4.1% per annum pre-retirement and 2.5% per annum post-
retirement, that the salary increases would average 3.4% 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 2.4% in the future. Limited Price Indexation was replaced by the Consumer Price Index (CPI) for
payrises occurring after 1 January 2014.
54
JAMES LATHAM PLC ANNUAL REPORT 2018
Financial Statements
Notes forming part of the Group Accounts
18.2. 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.
2018
£’000
2017
£’000
Change in benefit obligation
60,164
72,992
Benefit obligation at beginning of year
723
Service cost
521
2,069
1,796
Interest cost
Actuarial (gain)/loss (6,767)
12,321
Benefits paid (2,288) (2,070)
Premiums paid (17) (13)
Benefit obligation at end of year
Analysis of defined benefit obligation
Schemes that are wholly or partly funded
66,439
66,439
72,992
72,992
Change in scheme assets
Fair value of scheme assets at beginning of year
50,507
Interest income
1,742
Return on plan assets (excluding interest income) 1,181 4,778
1,423
Employers contributions (incl. employer direct benefit payments)
1,433
Administrative expenses (7)
-
Benefits paid from plan (2,288) (2,070)
Expenses paid (17) (13)
56,367
1,388
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
58,057
66,439
58,057
8,382
56,367
72,992
56,367
16,625
JAMES LATHAM PLC ANNUAL REPORT 2018
55
Financial Statements
Notes forming part of the Group Accounts
18.2. Group defined benefit pension scheme (continued)
Components of pension expense
Current service cost
521
Interest cost
2,069
Income on plan assets (1,388) (1,742)
723
1,796
Total pension expense recognised in the income statement
1,131 848
2018
£’000
2017
£’000
Actuarial (gain)/loss immediately recognised (7,948)
Total recognised in the statement of other Comprehensive income (7,948)
Cumulative amount of actuarial loss immediately recognised
10,184
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
2018
58.1%
31.1%
9.0%
1.8%
100.0%
2018
£’000
33,712
18,027
5,252
1,066
58,057
7,543
7,543
18,132
2017
57.5%
32.1%
9.0%
1.4%
100.0%
2017
£’000
32,406
18,114
5,051
796
56,367
56
JAMES LATHAM PLC ANNUAL REPORT 2018
Financial Statements
Notes forming part of the Group Accounts
18.2. 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
2018
2.60%
3.05%
3.05%
2.05%
2.10%
23.6
25.6
25.1
27.2
2.50%
3.15%
2017
2.50%
3.15%
3.15%
2.15%
2.20%
24.1
26.0
25.6
28.3
3.50%
2.90%
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
(2,752)
Discount rate increases by 0.25%
Inflation rate increases by 0.25%
1,938
Life expectancy increases by one year 2,655
History of plan assets and defined benefit obligation
Present value of defined benefit obligation
Fair value of plan assets
Net liability
2018
£’000
66,439
58,057
8,382
2017
£’000
72,992
56,367
16,625
2016
£’000
60,164
50,507
9,657
2015
£’000
64,421
53,991
10,430
2014
£’000
58,237
48,970
9,267
Contributions
The group expects to contribute £2,582,000 to the pension scheme for the year ending 31 March 2019.
18.3. 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 £879,000 (2017: £809,000).
JAMES LATHAM PLC ANNUAL REPORT 2018
57
Financial Statements
Notes forming part of the Group Accounts
19. Other payables (non-current liabilities)
Accruals and deferred income
20. Deferred tax
20.1 Group
Group
Company
2018
£’000
291
2017
£’000
349
2018
£’000
189
2017
£’000
221
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 2016 asset
As at 1 April 2016 liability
(Charge)/credit to the income statement (260)
1,362
Credit direct to equity
1,802
-
- (81) (1,670) (935) (2,686)
108 (59)
93
1,362
-
1,802
-
-
-
-
-
At 31 March 2017 asset
At 31 March 2017 liability
2,904
-
2,904
- (81) (1,577) (827) (2,485)
-
-
(Charge)/credit to the income statement
(Charge)/credit direct to equity
(35)
(1,378)
-
24
-
-
37
2
50 (1,304)
At 31 March 2018 asset
1,491
-
- - 1,491
At 31 March 2018 liability
- (57) (1,577) (740) (2,374)
* Includes accelerated capital allowances, industrial buildings allowances and trading losses.
20.2 Company
The deferred tax asset is made up as follows:
As at 1 April 2016
Charge for the year
At 31 March 2017
Charge for the year
At 31 March 2018
Post-
employment
benefits
£’000
Accelerated
capital
allowances
£’000
Total
£’000
63
14
77
(28)
2
-
65
14
79
2
- (28)
49
2
51
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.
58
JAMES LATHAM PLC ANNUAL REPORT 2018
Financial Statements
Notes forming part of the Group Accounts
21. Share capital
Ordinary shares
Authorised Issued
Ordinary shares of 25 pence each
Number
28,000,000
£’000
7,000
Number
20,160,000
£’000
5,040
2018, 2017 and 2016
Preference
shares
8% Cumulative Preference Shares of £1 each
2018, 2017 and 2016
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 17.
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 2018 or 2017.
22. Share-based payment
Equity-settled share option schemes
Details of the share options outstanding during the year are as follows:
2018
2017
Number
of share
options
Weighted
average
exercise
price (£)
Number
of share
options
Outstanding at beginning of year
Granted during the year
Forfeited during the year
Exercised during the year
132,863
198,092
(22,237) 5.31 (2,828)
(28,290) 2.59 (36,285)
291,842
13,820
5.21
8.03
Weighted
average
exercise
price (£)
3.52
5.76
3.78
2.14
Outstanding at the end of the year
255,135
5.64
291,842
5.21
The weighted average share price for options exercised during the year was £8.45 (2017: £7.23).
JAMES LATHAM PLC ANNUAL REPORT 2018
59
Financial Statements
Notes forming part of the Group Accounts
22. Share-based payment (continued)
Details of the options outstanding at 31 March 2018 are shown below. 11,000 (2017: 10,000) of these options were
exercisable at the year end.
Range of exercise prices
Number of shares
Weighted average expected
remaining life (years)
2018
2017
CSOP
£1.65-£8.03
89,261
SAYE
£5.65
165,874
CSOP
SAYE
£1.65-£7.08
107,920
£2.46-£5.65
183,922
3.0
1.4
3.0
2.4
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:
Share price at grant date
Option exercise price
Expected volatility
Option life
Risk free interest rate
Fair value
CSOP
£8.03
£8.03
20.5%
5 years
1.3%
£1.68
2018
SAYE
-
-
-
-
-
-
2017
CSOP
£7.08
£7.08
22.5%
5 years
1.4%
£1.61
SAYE
£5.65
£5.65
14.3%
3 years
0.7%
£1.48
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 £95,000 (2017: £71,000) 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 2018 was 161,845 (2017: 180,925).
60
JAMES LATHAM PLC ANNUAL REPORT 2018
Financial Statements
Notes forming part of the Group Accounts
23. Fixed asset investments – Company
Shares:
At 1 April 2016 and 31 March 2018
Details of subsidiary companies are given below:
Subsidiary undertakings
£’000
9,613
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%
100%
100%
100%
100%
100%
Dormant
Dormant
Dormant
Dormant
Dormant
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.
24. Own shares
At 1 April 2016
Cost
Transfer to employees
At 31 March 2017
Transfer of treasury shares
Transfer to employees
At 31 March 2018
£’000
441
(150)
291
414
(176)
529
The investment in own shares represents 31,993 25p Ordinary shares (2017: 19,741 25p Ordinary shares) held on
behalf of the James Latham plc Employee Benefits Trust, a discretionary trust. This represents 0.16% (2017: 0.10%)
of the issued share capital. The maximum number of shares held during the year was 31,993 (0.16%). 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 2018 469,200 (2017: 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. During the year 50,000 shares were issued to
the James Latham Employee Benefits Trust.
JAMES LATHAM PLC ANNUAL REPORT 2018
61
Financial Statements
Notes forming part of the Group Accounts
25. Cash generated from operations
Group
Company
2018
£’000
2017
£’000
2018
£’000
2017
£’000
Profit before tax
15,216
13,827 (1,053) (1,195)
Adjustment for finance income and expense
Depreciation and amortisation
451
1,941
352
1,822
2 (67)
4
5
Profit on disposal of property, plant and equipment (1,444) (95)
Loss on disposal of intangible asset
86
Increase in inventories (4,560) (2,105)
(Increase)/decrease in receivables (1,432) (4,788)
3,536
Increase in payables
Retirement benefits non cash amounts (703) (902)
1,526
-
Share-based payments non cash amounts
Own shares non cash amounts
95
71
161 98
-
-
-
30
582
-
95
161
-
-
-
1,949
150
-
71
98
Cash generated from operations
11,251
11,902 (178)
1,010
Analysis of net debt
As at
1 April
2017
£’000
Cashflow
£’000
Non cash
movement
£’000
As at
31 March
2018
£’000
Cash and cash equivalents
17,246 (3,257)
-
13,989
26. 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
2018
£’000
504
607
1,111
595
2,349
456
3,400
2017
£’000
459
625
1,084
595
2,383
852
3,830
2018
£’000
12
20
32
221
884
405
2017
£’000
12
15
27
221
884
626
1,510
1,731
62
JAMES LATHAM PLC ANNUAL REPORT 2018
Financial Statements
Notes forming part of the Group Accounts
27. Related party transactions
27.1 Group
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 company’s directors, is set out below and
shown in the Directors’ Remuneration Report on pages 26 to 29.
Salaries and other short-term employee benefits
Social security costs
Pension costs
Share-based payments
2018
£’000
1,103
139
127
9
1,378
2017
£’000
1,056
134
123
9
1,322
There are 5 (2017: 5) directors to whom retirement benefits are accruing under defined benefit schemes, and
5 (2017: 6) directors that exercised share options during the year.
Emoluments for the highest paid director totalled £221,000 (2017: £212,000). The highest paid director also exercised
1,834 CSOP share options during the year at a gain of £10,000. The highest paid director had an accrued defined
benefit pension of £66,000 (2017: £56,000) at the balance sheet date.
The company undertakes the following transactions with the active subsidiary company:
• Paying interest totalling £nil (2017: £101,000).
• Receiving an annual management charge to cover services provided of £2,056,000 (2017: £1,911,000).
Details of balances outstanding with subsidiary companies are shown in Notes 15 and 16.
Other than the payment of remuneration, there have been no related party transactions with the directors.
28. Capital commitments
At 31 March 2018, there were capital commitments contracted for but not provided in the accounts of £171,000
(2017: £6,495,000).
JAMES LATHAM PLC ANNUAL REPORT 2018
63
Financial Statements
Notes forming part of the Group Accounts
29. 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 18 to 21.
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
2018
Trade payables
Accruals
Other payables
Cumulative preference shares of £1 each
Total
2017
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
20,120
1,719
1,469
-
23,308
19,516
1,716
1,473
-
22,705
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
987
20,120
1,719
1,469
987
987
24,295
-
-
-
987
19,516
1,716
1,473
987
987
23,692
Less than
6 months
£’000
Between
6 months
and 1 year
£’000
Between
1 and
5 years
£’000
More than
5 years
£’000
78
53
392
276
-
799
26
114
-
276
-
416
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Total
£’000
78
53
392
276
987
-
-
-
-
987
987
1,786
-
-
-
-
987
26
114
-
276
987
987
1,403
COMPANY
2018
Trade payables
Accruals
Amounts owed to subsidiaries
Other payables
Cumulative preference shares of £1 each
Total
2017
Trade payables
Accruals
Amounts owed to subsidiaries
Other payables
Cumulative preference shares of £1 each
Total
64
JAMES LATHAM PLC ANNUAL REPORT 2018
Financial Statements
Notes forming part of the Group Accounts
29. 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 2018 was £201,000 in US Dollars (2017: £249,000), £78,000 in
Euros (2017: £83,000) and £nil in Canadian dollars (2017: £84,000), 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 £28,000 (2017: £42,000).
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
2018
£’000
2017
£’000
2018
£’000
2017
£’000
Fixed rate instruments
Cumulative preference shares of £1 each (987) (987) (987) (987)
Variable rate instruments
Cash and cash equivalents
Bank overdraft
13,989
-
17,246
-
5,531
7,993
- (1,798)
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 £140,000 (2017: £172,000)
in the group and £55,000 (2017: £62,000) in the company.
JAMES LATHAM PLC ANNUAL REPORT 2018
65
Financial Statements
Notes forming part of the Group Accounts
29. 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 0.13% 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
Amounts owed by subsidiaries
Cash and cash equivalents
Total
Group Company
2018
£’000
38,718
994
-
13,989
53,701
2017
£’000
36,098
1,445
-
17,246
54,789
2018
£’000
7
-
-
5,531
5,538
2017
£’000
5
-
284
7,993
8,282
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
Amounts owed by subsidiaries
Accruals
Bank overdraft
Total
Group Company
2018
£’000
20,120
1,469
-
1,719
-
23,308
2017
£’000
19,516
1,473
-
1,716
-
22,705
2018
£’000
78
276
392
53
-
799
2017
£’000
26
276
-
114
1,778
2,194
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.
66
JAMES LATHAM PLC ANNUAL REPORT 2018
Notice of Annual General Meeting
Notice is hereby given that the one hundred and nineteenth
Annual General Meeting of the Company will be held at Unit 1
Swallow Park, Finway Road, Hemel Hempstead, Herts, HP2 7QU
on Wednesday 22nd August 2018 at 12.30pm. Resolutions 1 to 8
inclusive will be proposed as ordinary resolutions, and resolutions
9 and 10 will be proposed as special resolutions.
Ordinary business
1. To receive and adopt the Directors’ Report and Accounts for
the year ended 31 March 2018 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 elect Paula Kerrigan as a director, who was appointed during
the year.
5. To re-elect David Dunmow as a director, who retires by rotation.
6. To re-elect Andrew Wright 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.
Special business
8. 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.”
9. Disapplication of pre-emption rights: To consider, and if
thought fit, pass the following resolution: “THAT subject to the
passing of the previous Resolution 8, 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 8:
(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.
10. 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
27 June 2018
JAMES LATHAM PLC ANNUAL REPORT 2018
67
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
20th August 2018 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 27th June 2018, the Company’s issued share capital consisted
of 20,160,000 shares of which 469,200 shares are held in Treasury.
Each share not held in Treasury carries one vote. The total number
of voting rights are therefore 19,690,800.
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.
68
JAMES LATHAM PLC ANNUAL REPORT 2018
James Latham Distribution Sites
PEFC/16-37-046
Purfleet serves timber
customers across the Thurrock,
Hemel Hempstead and part of
the Fareham panels sales areas.
Distribution Facilities
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)
James Latham Dudley
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
James Latham Fareham
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
James Latham Gateshead
Nest Road, Felling Industrial Estate
Gateshead, Tyne & Wear NE10 OLU
Tel 0191 469 4211
Fax 0191 469 2615
Email: panels.gateshead@lathams.co.uk
James Latham Leeds
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
ATP (Advanced Technical Panels)
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
James Latham Scotland
Pharos, Brittain Way, Eurocentral,
Motherwell, Lanarkshire ML1 4XJ
Tel 01698 838777
Fax 01698 831452
Email: scotland@lathams.co.uk
James Latham Leicester
Unit A, Devana Avenue, Optimus Point,
Glenfield, Leicestershire LE3 8JS
Tel 0116 288 9161
Fax 0116 281 3806
Email: panels.wigston@lathams.co.uk
Email: timber.wigston@lathams.co.uk
James Latham Yate
Unit 14 Apollo Park, Armstrong Way,
Yate, Bristol BS37 5AH
Tel 01454 315421
Fax 01454 323488
Email: panels.yate@lathams.co.uk
Email: timber.yate@lathams.co.uk
James Latham Hemel Hempstead
Unit 2, Swallow Park, Finway Road,
Hemel Hempstead, Herts HP2 7QU
Tel 01442 849000
Fax 01442 239287
Email: panels.hemel@lathams.co.uk
James Latham Thurrock
Unit 4, Dolphin Way, Purfleet,
Essex RM19 1NZ
Tel 01708 869800
Fax 01708 860900
Email: panels.thurrock@lathams.co.uk
James Latham Purfleet
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
James Latham – BDC Showroom
Suite 301, Business Design Centre,
52 Upper Street, Islington, N1 0QH
Tel 020 7288 6417
E-mail: BDC@lathams.co.uk
Designed by
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