Livent Annual Report 2019

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FY2019 Annual Report · Livent

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

ANNUAL REPORT & ACCOUNTS 2019

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

70 Notice of the Annual General Meeting
73 The Latham Group

Financial Highlights and Calendar

for the year ended 31 March 2019

Financial Highlights

Revenue

£235.1m

Adjusted earnings per
share (see Note 9)

61.6p

Total Dividend
per share

17.9p

2019 up 9.4%

2018 up 8.1%

2017 up 6.9%

2016 up 6.3%

2015 up 7.2%

2019 up 6.4%

2018 up 3.4%

2017 up 4.3%

2016 up 33.3%

2015 up 9.2%

2019 up 7.8%

2018 up 8.1%

2017 up 7.3%

2016 up 14.4%

2015 up 9.6%

235.1

214.9

198.8

185.9

174.9

150

175

200

225

250

61.6

57.9

53.7

40.3

17.9

16.6

15.35

14.3

12.5

Adjusted net profit (see Note 9)

Equity Shareholders Funds

Cash and Cash Equivalents

£12.1m

Up 6.6%

£98.0m

Up 9.1%

£15.5m

Up 11.1%

Financial Calendar

Record date for ﬁnal dividend 2019

Annual General Meeting 2019

Payment of ﬁnal dividend

Interim 2019/20 results announcement

Interim dividend expected payment date

Preliminary announcement of 2019/20 results

Annual General Meeting 2020

2 August 2019

21 August 2019

23 August 2019

28 November 2019

24 January 2020

24 June 2020

2 September 2020

JAMES LATHAM PLC ANNUAL REPORT 2019

Chairman’s Statement

I am pleased to report good trading results for the financial year to
31 March 2019.

Revenue for the financial year to 31 March 2019 was £235.1m, up 9.4% on
last year’s £214.9m. Volumes increased by 0.9%, with the majority of the
growth being on direct business. The cost price of our products increased
against the comparative 12 months and fluctuated more than in previous
years. However cost prices on some imported plywood have shown price
weakness in the last quarter of the year.

Gross profit for the financial year to 31 March 2019 was 17.2% compared
with 17.6% in the previous financial year. This figure includes warehouse
costs, which have increased due to planned extended working hours,
further investment in our racking systems and some increased rents at our
leased sites.

Profit before tax is £15.3m, up £0.1m on last year’s £15.2m. As reported
at the half year, the High Court made a judgment confirming that
pension schemes are required to equalise male and female Guaranteed
Minimum Pensions (“GMP”). The trustees have assessed this one-off cost
and £0.7m has been provided to cover this. In addition, profit before tax
includes a profit of £1.1m on the sale of our old Yate site and last year
included a profit of £1.3m on the sale of our old site in Wigston.

Profit after tax for the year is £12.4m, down from last year’s £12.6 m.

Earnings per ordinary share, adjusted for the effect of the property profit
and the one off cost relating to GMP were 61.6p (2018: 57.9p) an increase
of 6.4%.

As at 31 March 2019 net assets have increased to £98.0m (2018: £89.8m).
Non current assets have increased by £2.7m from 31 March 2018, in part
due to the continuing investment in our vehicle fleet and warehouse
forklifts, plus also the acquisition of Abbey Wood Agencies Limited. Inventory
levels have increased to £42.3m, partly due to the increase in unit cost of the
stock as well as our planned Brexit stock. Trade receivables have continued to
show good debtors day figures with there being another low bad debt charge
of 0.23% of revenue. Cash and cash equivalents of £15.5m (2018: £14.0m),
remain strong with good cash flows from operating activities.

At 31 March 2019 the deficit of the defined benefit scheme under
IAS19 (revised) was £8.7m, up £0.3m compared with £8.4m last year.
The calculation of the pension deficit remains very sensitive to changes
in assumptions.

Nick Latham
Chairman, James Latham plc

JAMES LATHAM PLC ANNUAL REPORT 2019

Final dividend
The Board has declared a final dividend of 12.9p per
Ordinary Share (2018: 12.1p). The dividend is payable
on 23 August 2019 to ordinary shareholders on the
company’s register at close of business on 2 August 2019.
The ex-dividend date will be 1 August 2019.

The total dividend per ordinary share of 17.9p for the
year (2018: 16.6p) is covered 3.5 times by earnings
(2018: 3.9 times).

Current and future trading
We have had a positive start to the year with sales per
working day 4.5 % higher for April and May than the
corresponding period last year, excluding Abbey Woods.
Margins have also improved compared to the second half
of 2018/19. The acquisition and integration of Abbey Woods
has gone very well, and we now have a great platform to
develop sales in Ireland. We continue to see growth in
sales of added value timber and panel products, although
volume growth in our core products is proving more
challenging. Prices on some of our commodity panels are
showing signs of weakness, partly due to over stocking
within our industry. I am pleased to report that there is a
good level of activity for the majority of both our timber
and panel customers. Despite the strong start to the year,
there is still 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, and
look for opportunities to grow the business through any
suitable acquisitions to support market sectors we are
looking to grow and also identify new products in market
sectors where we are focussing our efforts. We will continue
to invest in our warehouses and extend the working day
at our depots to ensure that we meet the delivery needs
of our existing and new customers. The focus will be on
major racking investment in Purfleet and Thurrock, and
Gateshead where we have now gained planning permission
to develop the site to improve the yard layout and provide
new offices. Our Fareham depot will join Yate and Leeds
in working a 24 hour shift system. I am pleased to report
that our focus on the A&D specification sector is leading to
a growing number of specifications for our products, and
this is an area we will continue to develop as we build our
future order book.

Chairman’s Statement

Directors and staff
Chris Sutton retired from the board at the end of March
2019 after 40 years service, and the board would like
to record their enormous thanks for his commitment
throughout his time in the business, but particularly as
managing director, leading the business during a period
of substantial growth. Andrew Wright has taken over as
managing director, and will use his wealth of experience to
continue to develop the business in the years ahead.

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 Andrew Wright,
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, but
challenging year. Having spent a significant number of days
with our site directors, and also days out with our sales
representatives seeing our customers, it is fantastic to see
the real team spirit that we have in our business, which I
believe is a real driver for our continued success.

Nick Latham
Chairman, James Latham plc

26 June 2019

JAMES LATHAM PLC ANNUAL REPORT 2019

Strategic Report

Introduction

Outline of the Strategic Report
The directors present their Strategic Report for the year ended 31 March 2019. 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 26 June 2019 and signed on its behalf by:-

Nick Latham

David Dunmow

1 Products on display at our Manchester Show Room. 2 European Oak. 3 Shou Sugi Ban® Charred Cladding.
4 3D pyramid wall displaying different melamines, laminates and wood grains .

JAMES LATHAM PLC ANNUAL REPORT 2019

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.

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, door blanks, hardwoods, high grade
softwoods, cladding, decking and plastics. We also supply
commodity and specialist products to timber and builders’
merchants. Environmental concerns about the growth and
harvest of timber are key drivers of company policy, with
the company aiming to increase each year, 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 in the
UK and two locations in the Republic of Ireland, as
shown in The Latham Group map on page 73, 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 the island of Ireland.

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

The company’s objectives are:

• To maximise shareholder value over the

medium term;

• To be the supplier of choice for our

customers by understanding and meeting
their needs and providing them with the right
material at the right time;

• To maintain its presence in timber based

products but to expand 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 and drive
Corporate Social Responsibilities within our
company and industry;

• To provide a safe working environment for

our staff;

• To improve service levels by improving

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

• To employ and develop well-trained,

knowledgeable and helpful staff.

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 Timber Trade Federation
Responsible Purchasing Policy 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. This
can include non timber products where they fit into the
requirements of our customer base. Our aim is to provide
a true one stop shop to our key target markets.

JAMES LATHAM PLC ANNUAL REPORT 2019

Strategic Report

James Latham plc and Our Objectives and Strategy

Our strategy for developing the business is two fold.
Firstly to ensure that we maintain and improve our
volumes of commodity products, including MDF,
OSB, Plywood, North American Hardwoods, European
Hardwoods and African Hardwoods. Secondly, alongside
the commodity products we sell an increasing amount of
speciality products, including Door Blanks, Melamines,
Laminates and other decorative panels, Accoya, Woodex®,
Decking and Cladding. Full ranges of the specialist
products are stocked and key to our success is having the
right stock in the right place at the right time.

Laminates have gained an increased presence and
importance as part of our strategic decision to grow our
market share in this product. Our ex stock offer and
logistics infrastructure have been significantly enhanced
and we continue to invest in these areas. We are committed
to reaching our aim of providing our customer base with a
24-48 hour service on our complete Laminates collection
of new, innovative, exclusive products, supplying some of
the biggest Laminate brands in the market. This year we
have enhanced our range of AE Core decors, introducing
the Serica® range of thermoplastic laminates.

All Latham depots will continue to offer an enhanced
range of melamine products ex-stock, including decors
from Egger, Kronospan and CLEAF.

Horizon has been added to our portfolio of North
American Hardwoods. Their original concept of log intact
Oak results in unrivalled colour matching within packs,
and the quality of their waney edged Walnut has proved
very popular with high end furniture makers and boat
builders. Our Timber Director and our North American
specialists spent a lot of time with the mill to assess the

Horizon American White Oak log on its way to the Mill.

JAMES LATHAM PLC ANNUAL REPORT 2019

Horizon Cherry Staircase.

product and build up this relationship, subsequently
training a Horizon champion in each depot. Supported by
stocks in each depot and in the ports, the launch of this
product has proven a great success.

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 and Valchromat. This year we have introduced
Avonite solid surface to our product range. This product
has 65 striking colours in its range and is used in
architectural and design applications across numerous
sectors including hospitality, education, public and
living spaces and commercial workspace. These are all
available on a national basis for prompt delivery to our
customer base. We have and will continue to enhance
our delivery service and will continue to develop our
centrally held stocks.

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
are ongoing as we adapt our product ranges and service
levels to meet customer demands.

Strategic Report

James Latham plc and Our Objectives and Strategy

Our Architect and Design showrooms at the Business
Design Centre in Islington and our showroom in the
Northern Quarter of Manchester has opened up our
product offering to a large number of professional
specifiers. This has proved to be beneficial, gaining orders
and specifications for a wide range of products on display
from our key strategic suppliers. We also put in place
a programme of presentations to architects for their
Continual Professional Development.

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.

Avonite used for exterior applications.

We will continue to look to develop new markets, both
organically through our depot network, or by acquisition
where the opportunity arises. This year we completed
the acquisition of Abbey Wood Agencies Ltd, a timber
distributor with branches in Dublin and Cork. Abbey
Woods are the Accoya distributor in Ireland as well
as dealing in a wide range of hardwood and decking
products. As well as providing the company with a base in
Ireland, we are able to bring to Abbey Woods additional
products and our
wide experience of
dealing with timber
in the UK.

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 is done through brochures,
direct advertising, public relations, social media and
exhibitions and we use multiple channels to communicate
clearly with our existing and potential customers, fully
complying with our responsibilities under the General
Data Protection Regulation.

Products on display at our Manchester Showroom.

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, SP Angel, 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 2019

Strategic Report

Corporate Responsibility

Principle 3 – Take into account wider stakeholder and social responsibilities and their
implication for long-term success.

At James Latham plc, we are conscious of our corporate
responsibilities to all our stakeholders and to society as
a whole. Environmental matters, health and safety, 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.

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.

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.

JAMES LATHAM PLC ANNUAL REPORT 2019

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”
and we are confident of maintaining the three trees when
this year’s results are made public.

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 figures for the relevant calendar years are given below.

FSC

PEFC

Veriﬁed Legal
Uncertiﬁed

FSC
PEFC

Veriﬁed Legal

Uncertiﬁed

2018

2017

Of the Third Party Verified Legal products purchased, 60%
arise through the purchase of timber from the United States.
The European Union Timber Regulations (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 (the Convention on International Trade in
Endangered Species of Wild Fauna and Flora) legislation
and obtain the appropriate documents for the very limited
trade we do in all other CITES listed timber species.

Part of the EUTR process to ensure that only legal
timber enters the EU is the signing of bilateral agreements
with producer countries. This involves the issuing of
FLEGT (Forest Law Enforcement, Governance and
Trade) licences for all timber traded for that source.
The department for business, energy and industrial
strategy BEIS carried out an audit of our due diligence
system for product safety and standards in December 2018.
Having completed their full review their findings were
that our system was fully compliant with the European
Union Timber Regulation No 995/2010.

Should the UK withdraw from the European Union, then
the UK is expected to adopt the EUTR as UKTR. In any
case, our systems of monitoring supplies of our timber for
environmental reasons will be unchanged.

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 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.

Strategic Report

Corporate Responsibility

Informing suppliers and supporting certification
Our senior staff have spoken about the importance of
independent certification of forests and supply chains.
Company buyers have visited individual suppliers in
Europe, Congo Brazzaville, China, Indonesia, Malaysia,
the United States, Uruguay, Chile, Brazil, Bolivia and
Vietnam giving the same message. Group buyers have
visited individual suppliers auditing the source of logs.

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.
We have updated our modern slavery statement and a copy
is available on our website www.lathamtimber.co.uk.

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 further depots
have upgraded their warehouse lighting during the year
to new energy efficient LED lighting, which have already
shown savings in power bills in our warehouses. Our Yate
depot has solar panels on the roof and has purchased
replacement electric Combi trucks to combat the noise
levels while working at night. This was an initiative devised
working with the local community and council.

Our new electric Combi trucks charging up at Yate.

JAMES LATHAM PLC ANNUAL REPORT 2019

Strategic Report

Corporate Responsibility

Vehicle procurement considerations include reduction of
emissions, with an upper limit on CO2 emissions set, and
improved fuel efficiency. The London based depots have
lorries which are Euro six compliant and can enter the new
ULEZ zone without charge.

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 give support, both in staff time and financially, to
community projects local to our depots through schools,
sports teams and charities. This year for example, our
Advanced Technical Panels division has donated blue
WISA-Multiwall for the construction of the Phoenix
Playground Room, a sensory playground for children
with autism. We support the National Forest project in
Central England, which started with the planting of 250
trees to celebrate the company’s 250 year anniversary in
2007 and continues with further plantings and woodland
management activities for customers, suppliers and
staff. In February 2019, we sponsored the inaugural
‘Wood & Wellness’ conference in London, introducing
representatives from the National Forest as key speakers.

We sponsor the Innovative Timber Engineering prize at
Brighton School of Architecture and Design. Stuart Devoil,
our head of marketing, presented the prize to Barnaby
Thornton for his engagement with timber as part of the
circular economy.

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

JAMES LATHAM PLC ANNUAL REPORT 2019

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 manages health and safety meetings
at all depots. We have a 3-year action plan and all sites
are subject to audit, with their audit scores and trends
being monitored at quarterly 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.

This continuous improvement has led this year to an
improvement to our policy on segregating plant and
people, and we have introduced a “two metre” rule to
ensure a safe distance is maintained.

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 joined the Road Haulage Association
who carry out yearly audits to make sure we are operating
safely and efficiently. 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.

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.

Strategic Report

Corporate Responsibility

Wisa Blue Multi Wall at Phoenix School.

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.

knowledge of timber. Knowledge gained from the previous
years training has already helped our sales and product
development. Another 8 applicants are being considered
for this year.

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
six gaining distinction in the Examination for the TFT
Woodexperts Ltd Level 2 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

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 please 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 2019

Strategic Report

Principal Risks and Uncertainties

Principle 4 – Embed effective risk management, considering both opportunities and
threats, throughout the organisation.

All business involves taking risks, both general risks of trading and risks specific to our industry and the market in which we
operate. We are able to mitigate 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, without affecting our ethos on environmental and health and safety.

The risk reporting framework is designed so that information is passed in both directions, up and down the company’s
structure. A central risk register is maintained by the board and reviewed at least once a year by the Audit Committee.
These risks are fed down to the depots, who add their own risks specific to their sites. Risk mitigation is discussed in every
board meeting at depot and group level and reported back to the board. Any new or increased risks identified through this
process are communicated to all depots for monitoring and action.

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. This year we have identified increased risks concerned with Brexit, Cyber Security and Data
Protection and have taken actions to further mitigate these risks.

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.

Changes in customer purchasing habits may
lead to more on-line purchases.

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.

Investment planned in improving on-line trading platforms.

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.

Reputational
Risk

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

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

JAMES LATHAM PLC ANNUAL REPORT 2019

Strategic Report

Principal Risks and Uncertainties

Inherent risk

Risk Description

Risk Mitigation

Supplier
political risks
or failure
could result
in shortages
of product

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

Defined Benefit
pension scheme
funding could
increase

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.

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.

Information
technology
failures impact
our ability to
trade

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

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.

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.

We have plans in place with our European suppliers and have
warehouse space allocated in the UK to increase stock levels over
any transitional period should supplies be disrupted. We have also
established a physical presence within the EU through the acquisition
of Abbey Woods Agencies Ltd in Ireland.

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.

Long term investment strategy is to reduce allocations to growth
assets and increase allocations to defensive assets to reduce risk
and volatility.

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. Regular disaster recovery tests are carried out.

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

Cyber Security
and Data
Protection

The risks of Cyber attack, including
Ransomware demands are increasing, and may
lead to disruption to business and loss of data.

Theft of data relating to employees, customers
and suppliers could result in a regulatory
breach under GDPR.

Cyber training is carried out on a regular basis and for each new
employee as part of their induction process. We have also improved
and updated our Cyber security systems and had them independently
reviewed. Our IT disaster recovery plans include provisions for
Cyber Attack.

A review of systems was undertaken prior to the implementation of
GDPR in 2018 and appropriate policies put in place.

Inability to
trade from a
depot

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

Disaster recovery plans are in place at group and depot levels.
These are reviewed by the Audit Committee and the board, as well
as discussed at depot level. Insurance policies are in place to cover
increased cost of working. Our distribution network, as well as our
inventories held at various ports, allow us to manage customers
requirements from a different location.

Inability to
fill key roles
within the
organisation

Our staff are key to the success of our
business, and our inability to fill key roles
could affect our profitability.

The group, through the Remuneration Committee, is committed to
be having remuneration, training and development policies to make
James Latham the employer of choice.

Significant time is spent on identifying and training the leaders
of the future, with our Trainee and Talent Pool programmes. The
group also makes sure that continuity planning is considered by
each senior employee.

JAMES LATHAM PLC ANNUAL REPORT 2019

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 achieving the company objective’s outlined on page 5.

To maximise shareholder value over the medium term

2019

2018

2017

61.6

57.9

2019

2018

8.0%

10.2%

56.0

2017

1.7%

Adjusted earnings per share (see Note 9)
increased 6.4%.

Like for like revenue, adjusted for the effects of
acquisitions and working days, increased 8.0%.

To increase sales of third party certified legal
and sustainable timber products

To provide a safe working environment for
our staff

2019

2018

2017

97.19%

97.18%

97.14%

2019

2018

2017

8.16

0.37

10.37

0.50

8.45

0.52

Accident

Reportable

The percentage of product purchased as
certified legal and sustainable showed incremental
improvements year on year.

Total number of injuries, no matter how minor, and
total number of reportable injuries reported per
100,000 hours worked, show a reduction as a result of
our continued focus on health and safety.

To improve service levels by improving warehouse facilities to speed order picking over
an extended product range

Tonnes

Times

2019

2018

2017

1,015

2019

1,006

995

2018

2017

980

990

1,000

1,010

1,020

6.1

6.2

6.7

Weight of product sold per working
day continues to increase in a
difficult environment.

Stock turn is slightly below our budget of 6.5 times due
to additional stock held in case of a disorderly Brexit and
to some new product ranges introduced this year.

JAMES LATHAM PLC ANNUAL REPORT 2019

Results for the year to 31 March 2019
Revenue for 2018/19 was £235.1m, £20.2m higher than
the previous year, reflecting improving volumes especially
in our core timber products. Suppliers prices continued
to rise with the impact of global demand for imported
plywood causing prices to fluctuate, and continuing price
rises in MDF and OSB. Most of our customers and markets
remain busy and are optimistic about their prospects,
although the shopfitting sector has been more difficult
linked to a change in consumer habits on the high street
and demand from other key market sectors has fluctuated
during the year.

The gross margin, the difference between the sales
values and the cost prices excluding warehouse costs,
was 0.3 percentage points down on the previous
year (2018: 0.9 percentage points down). Continuing
competitive pressure in the commodity markets as well as
the impact on cost prices resulted in some lower margins
being achieved and this remains a key focus of ours.

Staff numbers have increased further this year, mainly
warehouse staff, some additional sales staff and a proportion
of the Abbey Woods staff since acquisition. 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, pick mixed product orders more
efficiently 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. Mixed product orders are important
showing that we can offer a pick and mix service to a wider
range of customers.

Overhead cost control though has remained important and
we continually look to improve efficiency and productivity.
The focus this year has been on our Supply Chain Team to
find savings in procuring timber supplies and consolidating
more work within this team.

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 twelve
locations trading in the United Kingdom and the Republic
of Ireland. Within this one segment performance in terms
of revenue and trading margin of the main product types
are considered below.

Strategic Report

Operating Review

Decospan Querkus range.

The group’s strategy continues to be to target
specific market sectors on both added value, core and
premium grade product and to provide product
solutions for our customers.

Our expanded range of melamine, enhanced stock
holding of ABET laminates and our exclusive distribution
agreement for the added value veneered panel range
from Decospan, has helped to boost sales of decorative
products. We will continue to invest in these ranges.

We continue to source plywood from our long term
strategic partners who offer quality, fit for purpose
products. Good growth was achieved in Poplar and
Spruce though other products proved more difficult
due to general overstocking in the UK and aggressive
pricing from our competitors.

The MDF turned around from the previous year with more
product being available with shorter lead times. Inevitably
this has lead to more competition and margins coming
under pressure.

The demand for OSB continued to increase during the
year and sales were very encouraging. The next generation
of OSB to include fire retardant and passivhaus, which
helps reduce a building’s ecological footprint, is 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 ourselves and our suppliers is carried
out to ensure compliance with legal and performance
requirements. We now have a suite of test evidence for
Kydex® encapsulated doors.

JAMES LATHAM PLC ANNUAL REPORT 2019

Strategic Report

Operating Review

The Advanced Technical Panels team, with their wealth of
experience and knowledge, together with their extensive
product range had a greatly improved year increasing
both sales and margins. Branded products include Buffalo
Board®, which continues to be specified. The WISA range
of coated Birch Plywood continues to be successful.

The demand for HI-Macs® natural acrylic stone improved in
the second half of the year, with some roll out specifications
being won by our specification team. The addition of the
Avonite range of solid surface products in the final quarter
of the year gave a boost to the year end sales.

The market for European Oak was more difficult, partly
due to less specified project work, but also lower grades
being offered in the market at competitive rates. African
volumes showed a small and very welcome increase.
Our legal and high quality Sapele continues to demand a
premium price.

Demand for Accoya modified wood continues to grow
despite supply being constrained by delays in additional
processing capacity being brought on line by our supplier.
This led to some product shortages for some prime sizes
throughout the year. Supplies are expected to improve
during 2019, and increased sales will be achieved through
our exposure to the Irish market. Strong sales were

achieved in Accoya cladding and the Shou Sugi Ban®
range of charred cladding.

Sales growth for WoodEx®, our brand of Engineered
Hardwood and Softwood, continued at good rate, with
some large ongoing contracts from existing and new
customers being secured.

After two years of static sales in North American
hardwood, we have seen growth in our high quality
premium brands of Oak, Tulipwood and Black Walnut.

Our policy remains to visit strategic and potential new
supplies across the globe to strengthen and develop
personal long term relationships whilst looking to source
new and further processed products. Every supplier is
subject to a robust audit by our environmental manager.

LDT, our bulk timber pack operation
servicing the merchant and importer
sectors, have added to their existing
ex-stock product range and are
expanding their customer base.

We continue to develop our range of certified Forest
Stewardship Council (FSC) and Programme for the
Endorsement of Forest Certification (PEFC) products.

Moralt PassiveHouse doors.

JAMES LATHAM PLC ANNUAL REPORT 2019

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 %
2019 2018

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

TOTAL

100

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

JAMES LATHAM PLC ANNUAL REPORT 2019

Our stand at the Surface Design Show.

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 in February once again
generated hundreds of leads, several of which have
already led to orders being taken and specifications
written. The Business Design Centre showroom was
busy throughout the year with many architects and
designers visiting. CPD’s and supplier presentations were
well received. The Manchester Product Specification
showroom was officially opened in October and has
generated a lot of interest from the North West region.

The James Latham website, www.lathamtimber.co.uk,
was updated during the year, providing more detailed
product information and news, plus better quality
images.Through our marketing activities, we reach over
6 million people. We have seen a very positive response
to our social media activities, in particular via Twitter
(https://twitter.com/lathamsltd). Product literature,
including our environmental brochure has been updated
and our company newsletter ‘Natural Choice’ is printed
three times a year.

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 generally rise in most of our
product ranges but with more volatility than in recent
years. The balance between maximising margins and
remaining competitive remains difficult but having
specialist product managers in both commodity and
niche products helps us maintain competitive margins
in a more difficult market. By increasing revenue and
with the second half margins getting back to last years
levels, I believe we have achieved this objective.

• Identifying expansion and acquisition opportunities,
where the return on capital is at least equal to that of
the existing group.

At the end of January this year, we completed the

acquisition of Abbey Wood Agencies Limited, giving us our
first physical location outside of the United Kingdom and
opportunities to get closer to the Irish market.

• Controlling cashflows to maximise cash available for

the business and shareholders.

This year the focus was on stock control and debtors
days, whilst continuing to invest in the business. Cash
reserves remain very healthy.

• 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 potential supply issues caused
by Brexit, Cyber security and Data Protection.

• Maintaining dividend cover at between 2.5 times and

4 times earnings.

Dividend cover this year is 3.5 times (2018: 3.9 times).

JAMES LATHAM PLC ANNUAL REPORT 2019

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 9.4% to £235.1m. The majority
of this increase is down to prices and product mix.
Volumes have increased by 0.9%. 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. Warehouse costs, which are
included in the calculation of gross profit, have received
continued investment in manpower to extend the working
day to meet customer demands, and the full effect of the
increased costs of operating the two new sites opened last
year in Leicester and Yate. 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.

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

Operating profit increased 0.5% to £14.5m. A profit of
£1.1m was achieved on the sale of the Yate site following
its relocation. Group net profit before taxation increased
to £15.3m from £15.2m last year.

Strategic Report

Financial Review

Open day at our Leicester depot.

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.

Following the High Court ruling on 26 October 2018
on Guaranteed Minimum Pensions (“GMP”) equalisation,
a plan amendment is deemed to have occurred. This
ruling has increased the scheme’s GMP liabilities by
£746,000 which has been charged directly to the income
and expenditure account this year.

The taxation charge of £2.9m represents an effective rate
of 19.0%, compared with 16.9% last year. No capital gains
tax arises on the sale of Yate. The group’s profits arise
mainly in the UK and the group’s tax charge will reflect the
UK corporation tax rate.

Pension scheme
At 31 March 2019 the deficit of the defined benefit scheme
under International Financial Reporting Standards was
£8.7m compared with £8.4m last year. Discount rates,
represented by yields on corporate bonds, decreased
slightly to 2.4% from 2.6% last year which increased the
liabilities. Assets under management have shown a return
of 4.3% in line with the benchmarks for these asset classes.
In note 18.2 to the accounts on page 59, we have provided
some sensitivity analysis around the various assumptions
used to illustrate this volatility.

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

2019

2018

2017

2016

2015

8,714

8,382

9,657

10,430

16,625

JAMES LATHAM PLC ANNUAL REPORT 2019

Strategic Report

Financial Review

Cash flow and working capital
At the end of the year cash balances of £15.5m were
held, up from £14.0m 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 low 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 £1.4m
of discounts received compared with £1.1m last year.
Approximately £2m extra has been paid ahead of terms to
new suppliers this year to obtain more settlement discount.
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.

We also spent £0.5m in purchasing back 390,382 £1 8%
preference shares, and a resolution will be put to the
Annual General Meeting to cancel these shares.

One of the new lorries purchased this year.

Control of cash flow from customers is closely monitored.
The key performance indicator of debtors days, taking into
account our credit terms, has reduced from 51.2 days to
50.6 days. Bad debts this year ended up at 0.23% of
turnover against a budget of 0.4%, and last year of 0.14%.
It was a more difficult year for collection of debt but 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 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 92% of accounts owing
over £40,000 covered by credit insurance, despite more
difficulties in obtaining credit cover.

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 stock levels
and targets. We have strengthened our Supply Chain
Team to improve stock turn and provide more efficient
routes of supply. At 31 March 2019 stock turn is 6.1 times
compared with our target of 6.5 times. At the year end
we obtained additional warehousing and invested £1m in
additional European stocks that we felt may be affected
by a disorderly withdrawal from the European Union.
This stock is now being unwound and the position will be
reviewed again in the coming months as events unfold.
There were no significant overstocked areas giving any
concern to us at the year end.

Cash and Cash Equivalents

2019

2018

2017

2016

2015

15,541

13,989

17,246

16,832

12,501

Good stock and debtor control has allowed 69% (2018:
74%) of profit before tax to be available as free cash for
investment and distribution.

Capital investment
During the year we completed the acquisition of Abbey
Wood Agencies Limited, with sites in Dublin and Cork for
an initial payment of €1,825,000 (£1,604,000), a further
payment in April 2019 of €346,000 (£301,000) to be
followed by two payments of €200,000 payable in February
2020 and 2021 dependent on achievement of turnover
targets. They specialise in timber products, including being
the Accoya distributor in the Republic of Ireland. Their
skills and knowledge of the local market will enhance and
improve the offering already provided to the Irish market
through our Leeds depot.

JAMES LATHAM PLC ANNUAL REPORT 2019

Strategic Report

Financial Review

In addition we spent £0.9m on improving our
warehouse racking at various sites as well as £1.1m on
our normal replacement spend on lorries and Combilift
forklifts. We sold the old site at Yate in April 2018 making
a profit of £1.1m.

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.

Net assets at the year end were £98.0m (2018 £89.8m).
The group’s pre-tax return on capital for the year was
16.2% (2018 16.6%), which continues to be above our
weighted average cost of capital.

Financial risk management
In the course of our business, the group is exposed to
currency risk, interest rate risk, liquidity risk and credit risk.
The overall aim of the group’s financial risk management
strategy is to mitigate any potential negative effects on the
group’s assets and profitability. The group manages these
risks in accordance with group policies.

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

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

Abbey Wood warehouse.

JAMES LATHAM PLC ANNUAL REPORT 2019

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
comply with 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
The company is currently governed by a board of directors
consisting of myself as Chairman, three executive directors
and two non-executive directors. Each director has a vote
and no individual or small group of individuals dominates
the board’s decision making. Chris Sutton retired from the
board in March 2019 after 40 years service. Chris has been
instrumental to the development of Lathams Limited, our
trading subsidiary, and has been managing director through
a period of significant growth. I am very grateful for Chris’
loyal and committed service. Andrew Wright will take on
the role of managing director and I am confident that he
will continue the great work that Chris started. In addition
Meryl Bushell retired as a non-executive director in August
2018 and I am also grateful for her contribution over the
past ten years.

In the year to 31 March 2019, 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.

JAMES LATHAM PLC ANNUAL REPORT 2019

The non-executive directors are Fabian French and Paula
Kerrigan. I consider that all non-executives are independent.
Paula Kerrigan was appointed in October 2017 so that there
was a period of hand over with Meryl Bushell. 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 executive 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, HR and IT. As well as responsibilities
to the plc board, each executive director is actively
involved in the running of 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,
which assisted the seamless transfer of responsibilities
following the retirements of Chris Sutton and Meryl Bushell
during the year.

Corporate Governance

Corporate Governance Report

The Audit Committee
The Audit Committee is chaired by Fabian French,
and includes 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 external auditors and reports of
internal audit tests carried out during the year. 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.

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.

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
environmental, health and safety, audit
and remuneration committee reports
and reports on our attitudes to risk.

Principle 9 – Maintain governance structures
and processes that are fit for purpose and support
good decision-making by the board.

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
and a refresher course was run this year. 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.

Medite Tricoya Extreme.

JAMES LATHAM PLC ANNUAL REPORT 2019

Corporate Governance

Corporate Governance Report

HI-Macs® exterior cladding at Fort Kinnaird retail park.

Remuneration and Nominations Committee
The Remuneration and Nominations Committee comprises
Paula Kerrigan as Chairman and Fabian French. The meetings
were attended by 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.

JAMES LATHAM PLC ANNUAL REPORT 2019

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

26 June 2019

Corporate Governance

Directors and Advisors

Directors’ biographies

Nick Latham BSc Chairman
Nick Latham, age 51, has worked in the company
for 27 years and was appointed to the board in
2007. He is a director of Lathams Limited 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 55, has worked in the
company for 25 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 Abbey Wood Agencies Ltd, 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.

Andrew Wright Managing Director
Andrew Wright, age 54, has worked in the
company for 18 years and was appointed to the
board in 2015 and was made Managing Director
on 1 April 2019. He is a director of Lathams
Limited and sits on the Audit Committee.

Piers Latham BSc Executive Director
Piers Latham, age 48 has worked in the company
for 26 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.

Fabian French MA Non-Executive Director
Fabian French, age 60, was appointed a
non-executive director in 2015. He chairs
the Audit Committee and sits on the
Remuneration and Nominations 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.

Paula Kerrigan Non-Executive Director
Paula Kerrigan, age 47, was appointed a non-
executive director in 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 chairs the Remuneration and Nominations
Committee and sits on the Audit 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.

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

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

Clydesdale Bank Corporate
and Structured Finance
15th Floor
The Leadenhall Building
122 Leadenhall Street
London EC3V 4AB

Stockbrokers and
Nominated Adviser
S P Angel Corporate
Finance LLP
Prince Frederick House
35-39 Maddox Street
London W1S 2PP

Pension Advisor
Mercer
Tower Place West
London EC3R 5BU

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

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

Registered Number 65619
Registered in England
and Wales

Nick Latham

David Dunmow

Andrew Wright

Piers Latham

Fabian French

Paula Kerrigan

JAMES LATHAM PLC ANNUAL REPORT 2019

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

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

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

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 in achieving long
term growth for the company.

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

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

Performance related bonuses
Annual bonuses can be earned by executive directors for
the achievement of specific financial performance targets
set by the group’s board of directors and agreed by the
remuneration committee. The criterion on which the
executive directors’ bonuses were based in 2019 was the
achievement of £14,150,000 operating profit, as measured
in the depots management accounts, an increase of 10.3%
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
117.4% of the target operating profit was achieved earning
16.9% of basic salary. The criterion for the year ended
31 March 2020 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 4.70% of basic salary to 375 eligible
employees.

JAMES LATHAM PLC ANNUAL REPORT 2019

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 2019.

James Latham plc total shareholder return

140

120

100

-20

-40

2014

2015

2016

2017

2018

2019

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

James Latham Plc

FTSE AIM All
Share Index

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

Salary
and fees

Beneﬁts

Bonus

Total
emoluments
excluding
pensions

Share
based
payments

Pension
contributions

£000

Executive
N.C. Latham

D.A. Dunmow

C.D. Sutton
(retired 31 March 2019)
P.F. Latham

A.G. Wright

Non-executive
P.D.L. Latham
(retired 23 August 2017)
M.A. Bushell
(retired 31 August 2018)
P.L.F. French

P. Kerrigan
(appointed 18 October 2017)

Total

2018

2019
2018
2019
2018
2019
2018
2019
2018
2019
2018

2019
2018
2019
2018
2019
2018
2019
2018

186
174
174
167
172
165
130
121
141
125

-
29
14
33
34
33
31
14

882

861

1
-
13
12
14
13
14
12
15
13

-
-
-
-
-
-
-
-

41
44
38
42
28
42
31
30
32
34

-
-
-
-
-
-
-
-

228
218
225
221
214
220
175
163
188
172

-
29
14
33
34
33
31
14

170

192

1,109

1,103

2
2
2
2
2
2
2
2
1
1

-
-
-
-
-
-
-
-

TOTAL

£000

254
243
260
255
247
252
198
185
212
195

-
29
14
33
34
33
31
14

24
23
33
32
31
30
21
20
23
22

-
-
-
-
-
-
-
-

132

127

1,250

1,239

JAMES LATHAM PLC ANNUAL REPORT 2019

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
P.F. Latham
A.G. Wright
P.L.F. French
P. Kerrigan

31 March 2019

31 March 2018

Ordinary shares

Preference shares

Ordinary shares

Preference shares

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

633,120
131,401
630,351
26,264
370,052
-

-
-
567
-
-
-

630,296
128,701
627,621
24,312
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
P.F. Latham
A.G. Wright

31 March 2019

31 March 2018

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.

JAMES LATHAM PLC ANNUAL REPORT 2019

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 2018

Granted during
the year

Exercised

Outstanding
31 March 2019

Exercise
price

N.C. Latham

D.A. Dunmow

P.F. Latham

A.G. Wright

1,262
707
586
636
560
-

1,834
1,262
707
586
636
560
-

-
-
-
-
-
718

-
-
-
-
-
-
718

(1,262)
-
-
-
-
-

(1,834)
-
-
-
-
-
-

-
707
586
636
560
718

-
1,262
707
586
636
560
718

£3.96
£5.65
£6.825
£7.075
£8.025
£6.26

£2.725
£3.96
£5.65
£6.825
£7.075
£8.025
£6.26

Exercise period

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
03.01.24 to 02.01.29

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
03.01.24 to 02.01.29

No performance conditions attach to these options. Mr N.C. Latham, Mr D.A. Dunmow and Mr P.F. Latham made a gain of
£3,111 and Mr A.G. Wright made a gain of £6,786 on options exercised during the year.

P. Kerrigan,
Chairman of the Remuneration Committee

26 June 2019

JAMES LATHAM PLC ANNUAL REPORT 2019

Corporate Governance

Directors’ Report

The directors have pleasure in presenting their annual
report and the audited accounts for the year ended
31 March 2019. 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 2019 are
set out on page 37. The directors recommend the
following dividends:-

Ordinary dividends

Interim dividend paid, 5.0 pence per
ordinary share

Final dividend proposed, 12.9 pence per
ordinary share

Total ordinary dividends, 17.9 pence per
ordinary share

Directors
Chris Sutton retired as Managing Director on 31 March
2019 and was succeeded as Managing Director by
Andrew Wright. Meryl Bushell retired as a non-executive
director on 31st August 2018. 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 and Nick Latham will
retire by rotation and, being eligible, offer themselves
for re-election.

Other than their service contracts, no director has a
material interest in any contract with the company.
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.

£000

984

2,537

3,521

The directors recommend payment of the final dividend
on 23 August 2019 to shareholders on the register of
members at the close of business on 2 August 2019.

Balance sheet and post balance sheet events
The balance sheet on page 38 shows the group’s
financial position. No significant events have occurred
since the balance sheet date.

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.

JAMES LATHAM PLC ANNUAL REPORT 2019

Corporate Governance

Directors’ Report

Employees
The strategic report on page 10 sets out the group’s
communication policies with their employees and its
policy towards disability.

Substantial shareholdings
At 26 June 2019, 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
1,216,289
1,015,112
684,121
633,120
630,351

%
6.17
5.16
3.47
3.22
3.20

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 2019 were 26 days
(2018: 32 days). Payment practices and performance
data for Lathams Limited is published on the Companies
House website.

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 63. During the year, 10,000 shares were
transferred to James Latham Trustee Limited to be
made available for expiring employee share schemes.
The company holds 459,200 ordinary shares as treasury
shares, with a view to being used for future employee
share schemes. The company also purchased 390,382
preference shares during the year and placed them in
treasury. A resolution will be put to the AGM for the
cancellation of the 391,115 preference shares held in
treasury. In addition the Trustees of the James Latham
Employee Benefits Trust holds 10,693 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 17,960 options
were issued at an option price of £6.26. In addition
18,568 options were exercised after being held for five
years, 4,584 at an option price of £2.725 and 13,984 at
an option price of £3.96.

JAMES LATHAM PLC ANNUAL REPORT 2019

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 £10,836 (2018: £2,535). 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.

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
or herself 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
21 August 2019 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 7. 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 8. 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 9. 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.

Resolution 10. Cancellation of 391,115 £1 8% Preference
Shares. This gives the company the authority to cancel the
preference shares which are currently held in treasury.

On behalf of the Board of Directors
Nick Latham
Chairman

26 June 2019

JAMES LATHAM PLC ANNUAL REPORT 2019

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.

On behalf of the Board of Directors
Nick Latham
Chairman

26 June 2019

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. assess the group and company’s ability to continue

as a going concern, disclosing, as applicable, matters
relating to going concern;

e. 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 2019

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 2019
which comprise the consolidated income statement,
consolidated statement of comprehensive income,
consolidated and company balance sheet, consolidated
statement of changes in equity, company statement of
changes in equity, consolidated and company cash flow
statement 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 2019 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.

JAMES LATHAM PLC ANNUAL REPORT 2019

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 group and parent company 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 group and parent company financial statements as a
whole, and in forming our opinion thereon, and we do
not provide a separate opinion on these matters.

Group key audit matters

Inventories – stock level and valuation

Risk
The group carried inventory amounting to £42.3m at
31 March 2019. 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
also 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 have 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 the ageing of inventory at 31 March 2019 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 purchase invoices around the
year end to goods received records and a sample of sales
invoices around the year end to goods despatched 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.
When evaluating whether the effects of misstatements,
both individually and on the financial statements as a
whole, could reasonably influence the economic decisions
of the users we take into account the qualitative nature
and the size of the misstatements. During planning
materiality for the group financial statements as a whole
was calculated as £2.2m which was not significantly
changed during the course of our audit. Materiality for
the parent company financial statements as a whole
was calculated as £196,000, which was not significantly
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 that threshold that, in our view,
warranted reporting on qualitative grounds.

Corporate Governance

Independent Auditor’s Report

An overview of the scope of our audit
Our group 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. Our group audit scope included
the full scope audits of James Latham plc and Lathams
Limited for the year ended 31 March 2019, performed to
a materiality level determined by reference to the scale of
the business concerned. Analytical procedures at group
level were performed for non-significant components that
represented less than 1% of consolidated result before tax
and consolidated net assets at 31 March 2019.

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 2019

Corporate Governance

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: 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

26 June 2019

JAMES LATHAM PLC ANNUAL REPORT 2019

Financial Statements

Consolidated Income Statement

For the year ended 31 March 2019

£’000s

Notes

2019

2018

214,919
Revenue
Cost of sales (including warehouse costs) 3 (194,686) (177,145)

235,132

Gross proﬁt
37,774
Selling and distribution costs 3 (18,082) (16,277)
Administrative expenses 3 (7,896) (7,106)

40,446

Operating proﬁt
Profit on disposal of property
Finance income
Finance costs

Proﬁt before tax
Tax expense

14,391
14,468
1,276
1,052
37
71
5
6 (256) (488)

3
15,216
7 (2,913) (2,570)

15,335

Proﬁt after tax attributable to owners
of the parent company

Earnings per ordinary share (basic)

Earnings per ordinary share (diluted)

Earnings per ordinary share (basic, excluding GMP
equalisation and profit on disposal of property)

Earnings per ordinary share (diluted, excluding GMP
equalisation and profit on disposal of property)

12,422

63.1p

63.0p

61.6p

61.5p

12,646

64.4p

64.1p

57.9p

57.6p

Consolidated Statement of Comprehensive Income

For the year ended 31 March 2019

£’000s

Notes

2019

Profit after tax
Other comprehensive income:
Actuarial (loss)/gain on defined benefit
pension scheme
Deferred tax relating to components of other
comprehensive income
Foreign translation charge

Other comprehensive income for the year,
net of tax

Total comprehensive income attributable to
the owners of the parent company

2018

12,646

12,422

(1,360)

7,948

314
(31)

(1,262)
-

(1,077)

6,686

11,345

19,332

JAMES LATHAM PLC ANNUAL REPORT 2019

Financial Statements

Consolidated and Company Balance Sheet

As at 31 March 2019

£’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

2019

2018

2019

2018

23
12
10
11
20

-
523
1,989
34,159
1,577

-
237
1
33,831
1,491

9,613
-
-

9,613
-
-
13 15
96 51

38,248

35,560

9,722

9,679

14
15

16
17

17
18
19
20

42,350
42,613
15,541
-

40,068
-
41,508 4,634
94
13,989
-
638

100,504

96,203

4,728

-
1,351
5,531
-

6,882

138,752

131,763

14,450

16,561

27,113
-
1,193

28,648
-
1,292

28,306

29,940

1,123
1,120
-

2,243

1,437
-
-

1,437

597
8,714

987
8,382
413 291
2,374

2,762

597
-

987
-
157 189
-

12,486

12,034

40,792

41,974

754

2,997

1,176

2,613

97,960

89,789

11,453

13,948

5,040
184

5,430
259

5,040
21
259 184
22
24 (923) (529) (923) (529)
-
9,253

3
93,191

3
85,091

-
6,687

5,430

Total equity attributable to
shareholders of the parent company

97,960

89,789

11,453

13,948

The Company’s profit for the year was £679,000 (2018: £1,481,000).

These accounts were approved and authorised for issue by the Board of Directors on 26 June 2019 and signed on its behalf by:

N.C. Latham
D.A. Dunmow

} Directors

The consolidated notes on pages 42 to 69 form part of these accounts.

JAMES LATHAM PLC ANNUAL REPORT 2019

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

108 (291)
-

Capital
reserve
£’000

3
-

Retained
earnings
£’000

68,398
12,646

Total
equity
£’000

73,258
12,646

- - 7,948 7,948

Balance at 1 April 2017
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
-
-
-

- (1,262) (1,262)

19,332

- (3,014) (3,014)
-
-
19
- (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)

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

Deferred tax relating to components
of other comprehensive income
Foreign translation charge

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
Purchase of preference shares
Change in investment in ESOP shares
Share-based payment expense

-
-

-
-
-
-
- (19)
-
-
-
- (82)
-
14
-
-
390 - (478)
- 152
-

-
-

85,091

89,789

12,422

- (1,360) (1,360)

- 314
314
- (31) (31)

11,345

- (3,363) (3,363)
-
-
- 31 31
-
- 82
- (14)
-
- (88)
-
- 152
-
94
-
-

Total transactions with owners

390

75 (394)

- (3,245) (3,174)

Balance at 31 March 2019

5,430

259 (923)

93,191

97,960

JAMES LATHAM PLC ANNUAL REPORT 2019

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

108 (291)

10,411

15,268

- 1,481 1,481

-
- (19)
-
-
- (414)
-
-
-
-
-

- - (3,014) (3,014)
-
-
- (43) (43)
414 -
-
- 161
95
-

- 161
-

15 (15)

Balance at 1 April 2017

Profit for the year

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

Total transactions with owners

- 76 (238) (2,639) (2,801)

Balance at 31 March 2018

5,040

184 (529) 9,253

13,948

Proﬁt for the year

Total comprehensive income for the year

679

679 679

-
- (19)
-
-
-
-
390
-
-

- - (3,363) (3,363)
-
19
31
- 31
- (82) 82
-
-
-
14 (14)
- (478) - (88)
- 152
- 152
94
-
-

Total transactions with owners

390 75 (394) (3,245) (3,174)

Balance at 31 March 2019

5,430

259 (923)

6,687

11,453

JAMES LATHAM PLC ANNUAL REPORT 2019

Financial Statements

Consolidated and Company Cash Flow Statement

For the year ended 31 March 2019

Group

Company

£’000s

Notes

2019

2018

2019

2018

Net cash flow from operating activities
Cash generated from operations
Interest paid
Income tax paid

10,267

11,251 (5,099) (178)
(8) (1) (6) -
(2,651) (2,797) (80) 182

Net cash inflow/(outflow) from operating activities

7,608

8,453 (5,185) 4

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

2
71
(1,604) - - -
(2,362) (10,840) (2) -

1,743 2,186 - -

Net cash (outflow)/inflow from investing activities

(2,152) (8,617)

Cash flows from financing activities
Dividend received
2,403
Purchase of treasury shares (478) - (478) -
Equity dividends paid (3,363) (3,014) (3,363) (3,014)
(63) (79) (63) (79)
Preference dividend paid

2,523

Net cash outflow from financing activities

(3,904) (3,093) (1,381) (690)

Increase/(decrease) in cash and cash
equivalents for the year

Cash and cash equivalents at
beginning of year

1,552 (3,257) (6,557) (684)

13,989

17,246

5,531

6,215

Cash and cash equivalents at end of year

15,541

13,989 (1,026)

5,531

Balance sheet cash and cash equivalents
Bank overdraft in current liabilities (note 17)

15,541
-

13,989

5,531

- (1,120) -

Cash and cash equivalents at end of year

15,541

13,989 (1,026)

5,531

JAMES LATHAM PLC ANNUAL REPORT 2019

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.

New and amended IFRS standards that are
effective for the current year
- IFRS 9 Financial Instruments. IFRS 9 replaces the
existing guidance in IAS 39 ‘Financial Instruments:
Recognition and Measurement’. IFRS 9 includes revised
guidance on the classification and measurement of
financial instruments and a new expected credit loss
model for calculating impairment on financial assets.
IFRS 9 is effective for annual reporting periods
beginning on or after 1 January 2018 and has been
adopted in these financial statements.

- The group’s financial assets (previously classified as
loans and receivables) and financial liabilities arising
from normal operations such as trade receivables,
amounts owed by group undertakings, trade payables
and accruals, continue to be recognised under the
amortised cost model and there was no adjustment to
amounts previously recognised on transition to IFRS 9.

The group has applied the consequential amendments
to IFRS7: ‘Financial Instruments Disclosures’ to both the
current and comparative period.

- IFRS 15 Revenue from Contracts with Customers.
IFRS 15 replaces IAS 18 ‘Revenue’. The group has
adopted IFRS 15 with effect from 1 January 2018 and has
assessed the impact of this standard on the Financial
Statements. The adoption has not had any impact on the
timing of recognition or amounts previously recognised
for revenue under IAS 18.

New standards, interpretations and amendments
not yet effective
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:

- IFRIC 23 – Uncertainty over income tax treatments

(effective for periods commencing on or after
1 January 2019).

- Annual improvements 2015-2017 cycle includes

amendments to IFRS 3 ‘Business Combinations’, IFRS 11
‘Joint Arrangements’ IAS 12 ‘Income Taxes’ and IAS 23
‘Borrowing Costs’ (effective for periods commencing on
or after 1 January 2019).

- Amendments to IFRS 9: Prepayment features with

Negative Compensation permits companies to measure
certain prepaid financial assets with negative
compensation at amortised cost (effective for periods
commencing on or after 1 January 2019).

- Amendments to IAS 19 Employee Benefits clarify that

if a plan amendment, curtailment or settlement occurs,
it is now mandatory that the current service cost and
net interest for the period after the remeasurement
are determined using the assumptions used for the
remeasurement. The amendments also include changes
to the recognition of a reduction in a surplus (effective
for periods commencing on or after 1 January 2019).

- 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.

JAMES LATHAM PLC ANNUAL REPORT 2019

Financial Statements

Notes forming part of the Group Accounts

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

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

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

1.5 Foreign currency translation
Transactions denominated in foreign currencies are
recorded at the rates ruling on 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.

The directors have not yet fully assessed 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.

Based on the current leases, adoption of the standard is
expected to show a balance sheet asset and liability in
the region of £5,200,000. The impact on the income
statement is expected to be a reduction in profit before
tax of £60,000.

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.

JAMES LATHAM PLC ANNUAL REPORT 2019

Financial Statements

Notes forming part of the Group Accounts

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.

1.9.1 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.

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.

1.9.2 Intangible assets – customer lists
Acquired customer lists 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 10 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.
Subsequent measurement of all recognised financial assets
within the scope of IFRS 9 are required to be measured
at amortised cost or fair value on the basis of the group’s
business model for managing financial assets and their
contractual cash flows. Where assets are measured at fair
value, gains and losses are recognised through profit or
loss (fair value through profit or loss, “FVTPL”).

1.11.1 Trade and other receivables
Trade receivables are classified as financial assets at
amortised cost 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. IFRS 9 establishes a new model for
recognition and measurement of impairments on
financial assets measured at amortised cost using the
“Expected Credit Losses” model. The assessment for the
expected credit losses has been carried out using the
Simplified Model and the impact on amounts previously
recognised as an impairment provision against trade
receivables is immaterial.

JAMES LATHAM PLC ANNUAL REPORT 2019

Financial Statements

Notes forming part of the Group Accounts

The Company’s group receivables represent trading
balances and interest free amounts advanced to other
group companies with no fixed repayment terms.
The measurement of impairment losses depends
on whether the financial asset is ‘performing’,
‘underperforming’, or ‘non-performing’ based on the
company’s assessment of increases in the credit risk of
the financial asset since its initial recognition and any
events that have occurred before the year end which have
a detrimental impact on cash flows. In assessing whether
credit risk has increased significantly, the company
compares the risk of default at the year-end with the risk
of default when the investment was originally recognised
using reasonable and supportable past and forward-
looking information that is available. No impairment
has been recognised against amounts due from fellow
subsidiaries at 31 March 2019.

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.

JAMES LATHAM PLC ANNUAL REPORT 2019

Financial Statements

Notes forming part of the Group Accounts

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 2019, 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.

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.

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

i. Post-employment beneﬁts
ii. Stock obsolescence provision
iii. Acquisition accounting and business combinations

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.

The key estimates regarding the acquisition is in respect
of the valuation of the customer lists. When valuing
the intangibles acquired in a business combination,
management estimate the expected future cashflows from
the asset and select a suitable discount rate in order to
calculate the present value of those cashflows.

JAMES LATHAM PLC ANNUAL REPORT 2019

Financial Statements

Notes forming part of the Group Accounts

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 twelve locations trading predominantly in the United Kingdom and the Republic or Ireland.

The geographical turnover is as follows:

Republic of Ireland
Rest of Europe
Rest of the World
United Kingdom

2019
£’000

2018
£’000

3,447

2,031
250 278
1,070
623
211,540
230,812

235,132

214,919

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.

3. Profit before tax

2019 2018

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 (note 11)
Proﬁt on disposal of property, plant and equipment
Amortisation (note 10)
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

£’000

18,102
(110)

16,530
(408)

185,015
2,008

168,839
1,941
(27) (168)
-

601
655

583
539

1,256

1,122

10 10

The audit of the company’s subsidiary pursuant to legislation
Tax services
Other

68
67
11 11
12
11

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

8
14,283

220,664

8
12,565

200,528

JAMES LATHAM PLC ANNUAL REPORT 2019

Financial Statements

Notes forming part of the Group Accounts

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

2019
Number

2018
Number

2019
Number

2018
Number

60
125
138
72

395

£’000

14,164
1,462
55
2,327
94

18,102

59
122
134
70

385

£’000

13,378
1,385
51
1,621
95

16,530

25
-
-
-

£’000

1,352
154
6
1,970
94

3,576

25
-
-
-

£’000

1,310
144
5
920
95

2,474

Of the above payroll costs, £4,109,000 (2018: £3,734,000) is included in cost of sales, £9,612,000 (2018: £8,496,000) is
included in selling and distribution costs, and £4,381,000 (2018: £4,300,000) is included in administrative expenses in
the income statement.

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

2019
£’000

2018
£’000

1
185 408
79

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.

256

488

JAMES LATHAM PLC ANNUAL REPORT 2019

Financial Statements

Notes forming part of the Group Accounts

7. Tax expense

The charge for taxation on proﬁt comprises:

2019
£’000

2018
£’000

Current year:
UK corporation tax at 19% (2018: 19%)
2,572
Deferred taxation - pension
190 50
- IBAs derecognised in current year (14) (16)
185 (36)
- other

2,552

Proﬁt before taxation

Tax at 19% (2018: 19%)

2,913

15,335

2,914

2,570

15,216

2,891

Tax effect of expenses/credits that are not deductible/
taxable in determining taxable proﬁt (172) (269)
IBAs derecognised in current year (14) (16)
Other 185 (36)

Total tax charge

2,913

2,570

8. Dividends

2019 2018

Ordinary dividends:

Final 12.1p per share paid 24 August 2019 (2017: 10.85p)
Interim 5.0p per share paid 25 January 2019 (2018: 4.5p)

2,379
984

2,129
885

£’000

£’000 £’000 £’000

3,363 3,014

The Directors proposed a final dividend for 2019 of 12.9p per share, that, subject to approval by the shareholders,
will be paid on 23 August 2019 to shareholders on the register on 2 August 2019.

Based on the number of shares currently in issue, the final dividend for 2019 is expected to absorb £2,537,000.

JAMES LATHAM PLC ANNUAL REPORT 2019

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

Net profit attributable to ordinary shareholders adjusted for
GMP equalisation cost and profit on disposal of property

2019
£’000

12,422

12,116

2018
£’000

12,646

11,370

Number
’000

Issued ordinary share capital
20,160
Less: weighted average number of own shares held in treasury investment (464) (494)
Less: weighted average number of own shares held in ESOP Trust (22) (26)

20,160

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

Weighted average share capital for diluted earnings per ordinary
share calculation

19,674
28

19,702

10. Intangible assets – Group

Trademark
£’000

Customer Lists
£’000

Cost:
At 1 April 2017
Additions

At 1 April 2018
Additions on acquisition

At 31 March 2019

Amortisation
At 1 April 2017
Charge for the year

At 1 April 2018
Charge for the year

At 31 March 2019

Net book value
At 31 March 2019

At 31 March 2018

At 31 March 2017

1
-

-
-

19,640
85

19,725

Total
£’000

1
-

1
2,016

2,017

-
-

-
28

-
-

-
2,016

2,016

-
-

-
28

1,988

1,989

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. The Customer Lists
relates to the purchase of Abbey Wood Agencies Limited during the year. The cost of the Customer Lists represents
the fair value of the assets at the time of the purchase.

JAMES LATHAM PLC ANNUAL REPORT 2019

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 2017
Additions
Reclassification as non-current asset held for sale
Disposals

At 1 April 2018
Additions
Acquisition
Disposals

At 31 March 2019

Depreciation:
At 1 April 2017
Reclassification as non-current asset held for sale
Disposals
Charge for the year

At 1 April 2018
Acquisition
Disposals
Charge for the year

At 31 March 2019

Net book value

At 31 March 2019

At 31 March 2018

At 31 March 2017

23,363
6,873

37,152
11,557
(765) - - (765)
(767)
- (2,519) (3,286)

13,174
4,684

615
-

615
28,704
-
55
- -

44,658
2,362
34
(5) - (576) (581)

15,339
2,307
34

28,754

615

17,104

46,473

2,924

10,840
(127) - - (127)
- (1,645) (1,827)
(182)
1,941
376

7,591

1,528

325

2,991

362
- -

10,827
34
(1) - (554) (555)
37 1,569 2,008

7,474
34

402

3,392

399

8,523

12,314

25,362

216

8,581

25,713

20,439

253

290

7,865

5,583

34,159

33,831

26,312

Included in freehold property is land with a book value of £8,519,000 (2018: £8,519,000) which is not depreciated.

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

Cost of sales
Selling and distribution costs
Administrative expenses

2019
£’000

1,302

599
107

2,008

2018
£’000

1,216
627
98

1,941

JAMES LATHAM PLC ANNUAL REPORT 2019

Financial Statements

Notes forming part of the Group Accounts

11.2 Company

Cost:
At 1 April 2017
Additions

At 1 April 2018
Additions

At 31 March 2019

Depreciation:
At 1 April 2017
Charge for the year

At 1 April 2018
Charge for the year

At 31 March 2019

Net book value

At 31 March 2019

At 31 March 2018

At 31 March 2017

Plant, equipment and vehicles
£’000

361
-

361
2

363

341
5

346
4

350

12. Goodwill

Cost:
At 1 April 2017 and 31 March 2018
Additions

At 31 March 2019

Impairment
At 1 April 2017 and 31 March 2019

Net book value
At 31 March 2019

At 31 March 2018

At 31 March 2017

Gateshead
£’000

Abbey Wood
£’000

Goodwill
£’000

362
-

362

125

237

-
286

286

362
286

648

125

523

237

The Gateshead 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.

The Abbey Wood goodwill arose upon the acquisition of the shares and assets of Abbey Wood Agencies Limited which
is now a trading subsidiary of Lathams Limited. The date of acquisition was 1 February 2019.

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.

JAMES LATHAM PLC ANNUAL REPORT 2019

Financial Statements

Notes forming part of the Group Accounts

13. Assets held for sale

Cost:

At 1 April 2017
Reclassification as non-current asset held for sale

At 1 April 2018
Disposal

At 31 March 2019

Depreciation:

At 1 April 2017
Reclassification as non-current asset held for sale

At 1 April 2018
Disposal

At 31 March 2019

Net book value

At 31 March 2019

At 31 March 2018

At 31 March 2017

Freehold property
£’000

-
765

765
(765)

-
127

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, net of
costs of £1,052,000.

14. Inventories

2019
£’000

2018
£’000

40,635
Finished goods and goods for resale
Less: provisions for slow moving and obsolete stock (656) (567)

43,006

42,350

40,068

The inventories impairment charge for the year ended 31 March 2019 was £582,000 (2018: £438,000). Impairment
charges reversed during the year were £493,000 (2018: £422,000). 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 2019

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

2019
£’000

39,592

1,011
-
-
2,010

3,021

2018
£’000

38,718

994
-
-
1,796

2,790

2019
£’000

10
3,189
1,360
21

4,580

42,613

41,508

4,634

2018
£’000

18
-
1,280
46

1,344

1,351

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

The group has recognised an impairment against specifically identified expected credit losses (“ECLs”) at year end of
£367,000 (2018: £132,000). In line with the Group’s historical experience, and after consideration of current credit
exposures, the Group does not expect to incur any ECL’s above those specifically identified and so has not recognised
any non-specific ECL’s in the current year (2018: nil).

At 31 March 2019, £38,484,000 (2018: £38,624,000) of trade and other receivables were denominated in sterling,
£1,973,000 (2018: £771,000) were denominated in Euros and £144,000 (2018: £317,000) were denominated in US
dollars and £2,000 (2018: £nil) were denominated in Canadian dollars. The Company balances are all denominated
in sterling.

JAMES LATHAM PLC ANNUAL REPORT 2019

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

2019
£’000

18,808
4,788
-
1,512
2,005

2018
£’000

20,120
5,308
-
1,469
1,751

2019
£’000

41
679
-
270
133

2018
£’000

78
606
392
276
85

27,113

28,648

1,123

1,437

Trade and other payables principally comprise amounts outstanding for trade purchases and ongoing costs.
The average credit period taken for trade purchases is 26 days (2018: 32 days). The directors consider that the
carrying amount of trade payables approximates to their fair value.

At 31 March 2019, £16,708,000 (2018: £18,370,000) of trade and other payables were denominated in sterling,
£1,288,000 (2018: £1,456,000) in US dollars, £2,324,000 (2018: £1,699,000) in Euros and £nil (2018: £64,000) 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 £361,000 (2018: £322,000).

17. Interest bearing loans and borrowings

Group

Company

Current liabilities
Bank overdraft

Non-current liabilities
Cumulative preference shares
of £1 each (note 21)

Total

2019
£’000

2018
£’000

597

987

2019
£’000

1,120

597

2018
£’000

987

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.

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

JAMES LATHAM PLC ANNUAL REPORT 2019

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

2019
£’000

8,714

2018
£’000

8,382

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. 53% of the
assets are invested in equities, with 48% under passive management by Blackrock and 5% in a Fund of Hedge funds
managed by Mesirow. 36% are held in bonds and gilts, with 21% in a Buy and Maintain Fund managed by Mercers,
7% in an Absolute Return Fund managed by Wellington and 8% in an Index Linked fund managed by Blackrock, with
the remaining 9% in a HLV Property Fund managed by Aviva and 2% in cash.

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 £2,327,000 (2018: £1,621,000). Of the charge, £396,000
(2018: £206,000) is included in cost of sales, £1,320,000 (2018: £668,000) is included in selling and distribution
costs, and £611,000 (2018: £747,000) is included in administrative expenses in the income statement. These charges
include a one off past service cost of £746,000 relating to the recent High Court case on GMP equalisation.

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.

JAMES LATHAM PLC ANNUAL REPORT 2019

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.

2019
£’000

2018
£’000

Change in beneﬁt obligation
72,992
Beneﬁt obligation at beginning of year
Service cost
723
Past service cost
-
Interest cost
1,796
Actuarial loss/(gain) 2,441 (6,767)
Beneﬁts paid (2,119) (2,288)
Premiums paid (11) (17)

66,439
623
746
1,700

Beneﬁt obligation at end of year

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

69,819

66,439

Change in scheme assets
Fair value of scheme assets at beginning of year
56,367
Interest income
1,388
Return on plan assets (excluding interest income) 1,081 1,181
Employers contributions (incl. employer direct beneﬁt payments)
1,433
- (7)
Administrative expenses
Beneﬁts paid from plan (2,119) (2,288)
Expenses paid (11) (17)

58,057
1,515

2,582

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

61,105

69,819
61,105

8,714

58,057

66,439
58,057

8,382

JAMES LATHAM PLC ANNUAL REPORT 2019

Financial Statements

Notes forming part of the Group Accounts

18.2. Group deﬁned beneﬁt pension scheme (continued)

2019
£’000

2018
£’000

Components of pension expense
Current service cost
723
-
Past service cost
1,796
Interest cost
Income on plan assets (1,515) (1,388)
7
-
Expenses paid

623
746
1,700

Total pension expense recognised in the income statement

1,554 1,138

Actuarial loss/(gain) immediately recognised 1,360 (7,948)

Total recognised in the statement of other Comprehensive income 1,360 (7,948)

Cumulative amount of actuarial loss immediately recognised

11,544

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

2019

53.3%
36.2%
8.9%
1.6%

100.0%

2019
£’000

32,575
22,109
5,417
1,004

61,105

2018

58.1%
31.1%
9.0%
1.8%

100.0%

2018
£’000

33,712
18,027
5,252
1,066

58,057

JAMES LATHAM PLC ANNUAL REPORT 2019

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

2019

2.40%
3.20%
3.20%
2.20%
2.20%

23.5
25.4
24.9
27.0

2.60%
3.05%

2018

2.60%
3.05%
3.05%
2.05%
2.10%

23.6
25.6
25.1
27.2

2.50%
3.15%

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

(2,883)
Discount rate increases by 0.25%
Inﬂation rate increases by 0.25%
2,057
Life expectancy increases by one year 2,851

History of plan assets and deﬁned beneﬁt obligation

Present value of deﬁned beneﬁt obligation
Fair value of plan assets

Net liability

2019
£’000

69,819
61,105

8,714

2018
£’000

66,439
58,057

2017
£’000

72,992
56,367

2016
£’000

60,164
50,507

2015
£’000

64,421
53,991

8,382

16,625

9,657

10,430

Contributions
The group expects to contribute £2,540,000 to the pension scheme for the year ending 31 March 2020.

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 £940,000 (2018: £879,000).

JAMES LATHAM PLC ANNUAL REPORT 2019

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

2019
£’000

413

2018
£’000

291

2019
£’000

157

2018
£’000

189

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

Intangible
assets
£’000

Total
£’000

As at 1 April 2017 asset
As at 1 April 2017 liability
(Charge)/credit to the income statement (35)
(Charge)/Credit direct to equity (1,378)

2,904
- (81) (1,577) (827) - (2,485)
- 2
- (1,304)

37
50

-
24

2,904

-
-

At 31 March 2018 asset
At 31 March 2018 liability

1,491

1,491
- (57) (1,577) (740) - (2,374)

- -

Charge to the income statement (176)
262
Credit direct to equity
-
Acquisitions

-
57
-

- (185)
-
83
-

- (361)
- 402
- (343) (343)

At 31 March 2019 asset

1,577

- - 1,577

At 31 March 2019 liability

- (1,577) (842) (343) (2,762)

* 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 2017
Charge for the year

At 31 March 2018
Charge for the year

At 31 March 2019

Post-
employment
beneﬁts
£’000

Accelerated
capital
allowances
£’000

Total
£’000

77
(28)

49
45

2
79
- (28)

2
51
- 45

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

JAMES LATHAM PLC ANNUAL REPORT 2019

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

2019, 2018 and 2017

Preference
shares

8% Cumulative Preference Shares of £1 each

2019, 2018 and 2017

Authorised Issued and fully paid

Number
1,500,000

£’000
1,500

Number
987,000

£’000
987

In the year ended 31 March 2019, 390,382 Cumulative Preference Shares were purchased by the Company for
consideration of £478,218. At 31 March 2019 these shares are held by the Company, the Company waived the right
to receive the 8% dividend during the year. The Company will cancel these shares following the 2019 Annual General
Meeting. In the meantime the shares held are categorised as follows:

Share Capital
Ordinary share capital
Preference shares

2019
£’000

5,040
390

5,430

2018
£’000

5,040
-

5,040

The balance of the 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 Ordinary share capital of the company in
either the year ended 31 March 2019 or 2018.

22. Equity-settled share option schemes

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

2019

2018

Number
of share
options

Weighted
average
exercise
price (£)

Number
of share
options

Weighted
average
exercise
price (£)

5.21
8.03
5.31
2.59

Outstanding at beginning of year
Granted during the year
Forfeited during the year
Exercised during the year

291,842
13,820
(8,458) 5.93 (22,237)
(18,979) 3.70 (28,290)

255,135
17,960

5.64
6.26

Outstanding at the end of the year

245,658

5.83

255,135

5.64

The weighted average share price for options exercised during the year was £6.86 (2018: £8.45).

JAMES LATHAM PLC ANNUAL REPORT 2019

Financial Statements

Notes forming part of the Group Accounts

22. Share-based payment (continued)

Details of the options outstanding at 31 March 2019 are shown below. 14,000 (2018: 11,000) of these options were
exercisable at the year end.

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

2019

2018

CSOP

£1.65-£8.03
84,401

SAYE

£5.65
161,257

CSOP

SAYE

£1.65-£8.03
89,261

£5.65

165,874

3.0

0.4

3.0

1.4

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

£6.26
£6.26
23.0%
5 years
1.2%
£1.44

2019

SAYE

-
-
-
-
-
-

2018

SAYE

-
-
-
-
-
-

CSOP

£8.03
£8.03
20.5%
5 years
1.3%
£1.68

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 £94,000 (2018: £95,000) 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 2019 was 163,299 (2018: 161,845).

JAMES LATHAM PLC ANNUAL REPORT 2019

Financial Statements

Notes forming part of the Group Accounts

23. Fixed asset investments – Company

Shares:
At 1 April 2017 and 31 March 2019

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%

Abbey Wood Agencies Limited *

Repubic of Ireland

€1.27 Ordinary 100%

Abbey Lumber Limited *

Northern Ireland

£1 Ordinary

100%

James Latham Trustee Limited

England and Wales

£1 Ordinary

100%

England and Wales
LDT Westerham Limited
Baüsen Limited
England and Wales
James Latham (Midland and Western) Limited* England and Wales
England and Wales
Advanced Technical Panels Limited*
England and Wales
Latham Timber Centres (Bridgwater) Limited
England and Wales
James Latham (Warehousing) Limited

£1 Ordinary
£1 Ordinary
£1 Ordinary
£1 Ordinary
£1 Ordinary
£1 Ordinary

100%
100%
100%
100%
100%
100%

* Indirectly held.

Importing and
distribution of timber
and panel products
Importing and
distribution of timber
and panel products
Importing and
distribution of timber
and panel products
Corporate Trustee
Company
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant

All companies operate within the United Kingdom and the Republic of Ireland. The registered office of these companies
is at Unit 3, Swallow Park, Finway Road, Hemel Hempstead, Hertfordshire, HP2 7QU, except for Abbey Wood Agencies
Limited, whose registered office is at Unit 143, Grange Drive, Baldoyle Industrial Estate, Baldoyle, Dublin, D13 W9V2,
and Abbey Lumber Limited whose registered office is at Forsyth House, Cromac Square, Belfast, BT2 8LA.

24. Own shares

Ordinary shares
£’000

Preference shares
£’000

Total
£’000

At 1 April 2017
Cost
291
414
Transfer of treasury shares
Transfer to employees (176)

-
291
414
-
- (176)

At 31 March 2018

529

82
Transfer of treasury shares
Purchase of treasury shares
-
Transfer to employees (166)

-
478

82
478
- (166)

At 31 March 2019

445

478

923

The investment in own shares represents 10,693 25p Ordinary shares (2018: 31,993 25p Ordinary shares) held on
behalf of the James Latham plc Employee Benefits Trust, a discretionary trust. This represents 0.05% (2018: 0.16%)
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 2019 459,200 (2018: 469,200) 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 10,000 shares were issued to
the James Latham Employee Benefits Trust.

JAMES LATHAM PLC ANNUAL REPORT 2019

Financial Statements

Notes forming part of the Group Accounts

25. Cash generated from operations

Group

Company

2019
£’000

2018
£’000

2019
£’000

2018
£’000

Proﬁt before tax

15,335

15,216 (2,195) (1,053)

Adjustment for ﬁnance income and expense
Depreciation and amortisation

185
2,036

451 (5) 2
5
4

1,941

-
Proﬁt on disposal of property, plant and equipment (1,079) (1,444)
Increase in inventories (2,282) (4,560)
-
(Increase)/decrease in receivables (1,105) (1,432) (2,802)
(Decrease)/increase in payables (1,825)
1,526 (347)
Retirement beneﬁts non cash amounts (1,213) (703)
-
Translation non cash amounts (31)
-
-

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

95
152 161

94
152

-
-
30
582
-
-

95
161

Cash generated from operations

10,267

11,251 (5,099) (178)

Analysis of net debt

As at
1 April
2018
£’000

Cashflow
£’000

Non cash
movement
£’000

As at
31 March

2019
£’000

Cash and cash equivalents

13,989 1,552

15,541

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

2019
£’000

654
523

1,177

796
2,945
243

3,984

2018
£’000

504
607

1,111

595
2,349
456

3,400

2019
£’000

17
23

243
974
243

2018
£’000

12
20

221
884
405

1,460

1,510

JAMES LATHAM PLC ANNUAL REPORT 2019

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.

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

2019
£’000
1,109
146
132
9

1,396

2018
£’000
1,103
139
127
9

1,378

There are 4 (2018: 5) directors to whom retirement benefits are accruing under defined benefit schemes, and 4
(2018: 5) directors that exercised share options during the year.

Emoluments for the highest paid director totalled £228,000 (2018: £221,000). The highest paid director also exercised
1,262 CSOP share options during the year at a gain of £3,000. The highest paid director had an accrued defined benefit
pension of £59,000 (2018: £54,000) at the balance sheet date.

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.

The company undertakes the following transaction with the active subsidiary companies:

• Paying interest totalling £6,000 (2018: £nil).
• Receiving an annual management charge to cover services provided of £2,121,000 (2018: £2,056,000).
• Corporation tax for the Parent and Subsidiary and paid through the parent company and recharged to the subsidiary.

The timing of the repayment will affect the balances outstanding.

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 2019, there were capital commitments contracted for but not provided in the accounts of £1,266,000
(2018: £171,000).

JAMES LATHAM PLC ANNUAL REPORT 2019

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

2019
Trade payables
Accruals
Other payables
Cumulative preference shares of £1 each

Total

2018
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

18,808
1,830
1,512
-

22,150

20,120
1,719
1,469
-

23,308

-
175
-
-

175

-
-
-
-

-
180
-
-

180

-
-
-
-

-
-
-
597

18,808
2,185
1,512
597

597

23,102

-
-
-
987

20,120
1,719
1,469
987

987

24,295

Less than
6 months
£’000

Between
6 months
and 1 year
£’000

Between
1 and
5 years
£’000

More than
5 years
£’000

41
133
270
-

444

78
53
392
276
-

799

-
-
-
-

-
-
-
-
-

-
-
-
-

-
-
-
-
-

Total
£’000

41
133
270
597

1,041

78
53
392
276
987

-
-
-
597

597

-
-
-
-
987

987

1,786

COMPANY

2019
Trade payables
Accruals
Other payables
Cumulative preference shares of £1 each

Total

2018
Trade payables
Accruals
Amounts owed to subsidiaries
Other payables
Cumulative preference shares of £1 each

Total

JAMES LATHAM PLC ANNUAL REPORT 2019

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 2019 was £195,000 in US Dollars (2018 £201,000), £525,000 in
Euros (2018: £78,000) and £56,000 in Canadian dollars (2018: £nil), at variable interest rates.

Based on the balance sheet value of cash and cash equivalents, as shown above, a 10% change in the currency
exchange rate would lead to an increase or decrease in income and equity of £78,000 (2018: £28,000).

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

2019
£’000

2018
£’000

2019
£’000

2018
£’000

Fixed rate instruments
Cumulative preference shares of £1 each (597) (987) (597) (987)

Variable rate instruments
Cash and cash equivalents
Bank overdraft

15,541
-

13,989

94
- 1,120

5,531
-

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 £155,000 (2018: £140,000)
in the group and £10,000 (2018: £55,000) in the company.

JAMES LATHAM PLC ANNUAL REPORT 2019

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 0.23% 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:

Financial assets measured
at amortised cost

Trade receivables
Other receivables
Amounts owed by subsidiaries
Cash and cash equivalents

Total

Group Company

2019
£’000

39,592
1,011
-
15,541

56,144

2018
£’000

38,718
994
-
13,989

53,701

2019
£’000

54
10
3,189
94

3,347

2018
£’000

7
18
-
5,531

5,556

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

2019
£’000

18,808
1,512
-
2,185
-

22,505

2018
£’000

20,120
1,469
-
1,719
-

23,308

2019
£’000

41
270
-
133
1,120

1,564

2018
£’000

78
276
392
53
-

799

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

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

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

JAMES LATHAM PLC ANNUAL REPORT 2019

Financial Statements

Notes forming part of the Group Accounts

30. Business Combinations

On 1 February 2019 the Group acquired 100% of the issued share capital of Abbey Wood Agencies Limited, a
company incorporated in the Republic of Ireland whose principle activity is the importing and distribution of timber.
The acquisition will provide the company with a base in Ireland and enable us to supply additional products to their
existing customer base.

2019
£’000

The fair values are as follows:

Intangible assets – customer lists
Inventories
Trade and other receivables
Cash
Trade and other payables
Deferred tax liability

2,016
1,054
1,715
321
(2,788)
(343)

Net assets acquired
Goodwill

Consideration

1,975
286

2,261

The consideration of £2,261,000 (€2,571,000) was satisfied by cash payments of €1,825,000 during the year with
a further €346,000 to be paid in April 2019, €200,000 to be paid in February 2020 and €200,000 in February 2021.
The two payments of €200,000 are dependant upon turnover targets that are expected to be achieved.

Deferred tax at 17% has been provided on the value of intangible assets. Acquisition costs of £47,000 were incurred
and have been charged to the income statement.

Since the acquisition date, Abbey Wood Agencies Limited has contributed £1,073,000 to group revenues and £20,000
to group profit. If the acquisition had occurred on 1 April 2018, group revenue would have been £241,514,000 and
group profit would have been £12,602,000.

JAMES LATHAM PLC ANNUAL REPORT 2019

Notice of Annual General Meeting

Notice is hereby given that the one hundred and
twentieth Annual General Meeting of the Company will
be held at Unit 1 Swallow Park, Finway Road, Hemel
Hempstead, Herts, HP2 7QU on Wednesday 21 August
2019 at 12.30pm. Resolutions 1 to 7 inclusive will be
proposed as ordinary resolutions, and resolutions 8 to 10
will be proposed as special resolutions.

8. Disapplication of pre-emption rights: To consider, and if
thought fit, pass the following resolution: “THAT subject
to the passing of the previous Resolution 7, 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 7:

(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.”

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

Accounts for the year ended 31 March 2019 together
with the Independent Auditor’s report thereon.

2. To declare the final dividend recommended by the
directors on the ordinary shares of the Company.

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

by rotation.

4. To re-elect Paula Kerrigan as a director, who retires

by rotation.

5. To re-elect Nick Latham as a director, who retires

by rotation.

6. 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
7. 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.”

JAMES LATHAM PLC ANNUAL REPORT 2019

Notice of Annual General Meeting

9. 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

conclusion of the next Annual General Meeting of
the Company or 15 months from the date of the
passing of this resolution.”

10. To cancel 391,115 £1 8% Preference Shares which are
currently held by the Company as Treasury Shares.

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

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

26 June 2019

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 19th August 2019
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 25th June 2019, the Company’s issued share capital
consisted of 20,160,000 shares of which 459,200 shares
are held in Treasury. Each share not held in Treasury
carries one vote. The total number of voting rights are
therefore 19,700,800.

JAMES LATHAM PLC ANNUAL REPORT 2019

Notice of Annual General Meeting

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% plus £50. There
are no forms to complete and the share price at which
you deal will generally be confirmed to you whilst you are
still on the telephone. The service is available from 8am
to 4.30pm Monday to Friday excluding bank holidays on
telephone number 0370 703 0084. Please ensure you have
your Shareholder Reference Number (SRN) ready when
making the call. The SRN appears on your share certificate.
In addition an internet share dealing service is available
by logging into your account on www-uk.computershare.
com/investor. The fee for this service will be 1% of the
value of each sale or purchase of shares, subject to a
minimum of £30. There are no additional charges for limit
orders (available for sales only). No stamp duty is currently
payable on share transfers.

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

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

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

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

JAMES LATHAM PLC ANNUAL REPORT 2019

James Latham Distribution Sites

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, Hampshire 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
Email: timber.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, 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,
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

PEFC/16-37-046

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

Distribution Facilities

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: 0207 288 6417
E-mail: BDC@lathams.co.uk

James Latham –
Manchester Showroom
U31a Tib Street, Manchester, M4 1LX
Tel: 0161 537 1185
Email: pssm@lathams.co.uk

Abbey Woods – Ireland, Dublin
Unit 143, Grange Drive, Baldoyle
Industrial Estate, Dublin 13 D13 W9V2
Tel: 01 839 3435
Fax: 01 832 5968
Email: sales@abbeywoods.ie
Website: www.abbeywoods.ie

Abbey Woods – Ireland,
Co. Cork
Unit 16/17,
Westlink Business Park,
Old Mallow Road,
Co. Cork T23 XW31
Tel: 021 421 1788
Fax: 021 421 1786
Email: sales@abbeywoods.ie
Website: www.abbeywoods.ie

Accounts/Credit Control/Administration
James Latham, Unit 3, Swallow Park, Finway Road,
Hemel Hempstead, Herts HP2 7QU
Tel: 01442 849100 Fax: 01442 239696

Marketing Tel: 0116 257 3415

Email: marketing@lathams.co.uk

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

GDA Design

and printed on:

GalerieArt Satin Elliott Baxter & Company Ltd

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