LPA GROUP PLC Annual Report & Accounts 2021 LPA Group Plc Manufacturing the future LPA GROUP Is a market leading designer, manufacturer and supplier of high reliability LED lighting, electronic and electro- mechanical systems, and a distributor of engineered components Isknownforinnovatingcost-effectiveengineering solutions (in hostile and challenging applications) to improve product reliability, reduce maintenance and life cycle costs Employs 155 people at three locations in the UK Is focussed on rail, aviation, defence, infrastructure and industrial markets Has developed a successful export capability and global distribution network. Around a third of turnover is exported to over 50 countries Supplies to a wide range of leading organisations including Alstom, Avanti, BAA, BAE Systems, CAF, Compin, CRRC, Downer EDI, First Group, Grammer, Heathrow Airport, Hitachi, ITW GSE, Kinki Sharyo, Knorr Bremse, Leonardo, Omer, Shanghai Pudong Airport, Siemens, SNCF, Stadler, Spirit Aerospace, Taiwan Rolling Stock Company, Transport for London, Unipart Rail and Wabtec Financial & Operational Highlights For the Year ended 30 September 2021 Order Entry Revenue Underlying Operating (Loss)/Profit* Share Based Payments & Exceptional Costs (Loss)/Profit before Tax (Loss)/Earnings Per Share Gearing 2021 £000 23,163 18,265 (274) (74) (387) (0.27)p 11.6% 2020 £000 21,863 20,711 783 (167) 551 4.82p 21.1% *Operating(Loss)/ProfitbeforeShareBasedPaymentsandExceptionalCosts Through the year to 30 September 2021, we announced several significant contract awards and business developments, which are summarised below: Two awards with a combined value over £4m from Siemens Austria for the design and supply of interior lighting, and door status lights for the London Underground Deep Tube upgrade programme. These initial awards are for 94 newly designed train sets for the Piccadilly Line, with an option for a further 216 sets for the other London Underground deep tube lines. An award to supply seat automation, control, diagnostics, lighting and power electronics for an initial 50 double decker train sets for the Avelia Horizon high speed TGV trains, under construction with Alstom France for the French rail networkSNCF.ThisisasignificantawardincorporatingtheGroup’snewinnovativeelectronicstechnologywithintrain seats. The contract includes an option for a further 50 trainsets. Two contract awards for the supply of interior lighting and, separately, inter-car power connection systems forthenewHitachiAT300trains.ThesearetobeoperatedbytheWestCoastPartnershipontheUK’sprestigiousWest Coast Mainline. The combined award value is £1.9m. Anawardforthesupplyoflightingsystemsfor165newbuildcarriagesontheUK’sEastMidlandsRailwayAurora Intercityfleet.ThesenewtrainssetsarebeingbuiltbyHitachiintheUK. A 10 year framework agreement was signed by the Group to take over the business for manufacture and supply of bespoke inter-car connection systems. This provides access to an additional 3,000 passenger carriages for our UK Rail Generalroutinebusiness.Thisfitsstrategicallywithinourexistingoperationsandseesacompetitorexitthissector. SignificantexpansionofourdistributionpartnernetworkinsupportofarenewedfocusontheGroup’saviationground power products. 1 ANNUAL REPORT & ACCOUNTS 2021 2 ANNUAL REPORT & ACCOUNTS 2021STRATEGIC REPORT | CHAIRMAN’S STATEMENT Contents FINANCIAL & OPERATIONAL HIGHLIGHTS STRATEGIC REPORT Chairman’sStatement Business Model and Strategy Environmental, Social and Governance ChiefExecutiveOfficer’sReview Financial Review Principal Risks and Uncertainties Key Performance Indicators BOARD REPORTS Audit Committee Report Remuneration Report Corporate Governance Report Directors’Report COMPANY INFORMATION GROUP FINANCIAL STATEMENTS IndependentAuditor’sReport Consolidated Income Statement Consolidated Statement of Comprehensive Income Consolidated Balance Sheet Consolidated Statement of Changes in Equity Consolidated Cash Flow Statement Notes to the Financial Statements COMPANY FINANCIAL STATEMENTS Company Balance Sheet Company Statement of Changes in Equity Company Notes to the Financial Statements OTHER INFORMATION Five Year Summary Alternative Performance Measures Glossary NOTICE OF MEETING 1 5 5 7 9 11 13 18 20 21 22 23 26 33 38 41 42 49 50 51 52 53 56 89 90 91 92 99 100 101 102 3 ANNUAL REPORT & ACCOUNTS 2021 STRATEGIC REPORT 4 ANNUAL REPORT & ACCOUNTS 2021STRATEGIC REPORT | CHAIRMAN’S STATEMENT Chairman’s Statement STRATEGIC REPORT Overview We have had a busy period since I took over as Chairman in August. We have worked hard on operational matters, which I will touch on later, whilst having a deeper look at our Strategic plan for the next 5 years. The continuing trend of customer delay in our project-based work has put strain on our ability to fully recover our overhead in whatareourfirst-classmanufacturingfacilities.Wehave created a strategic road map to rebalance our business to become less dependent on the timing of long-term project based work, recognising that we have the highest order bookwehaveeverhadyetspreadover3financialyears. The Executive team have worked hard on the strategic map, a new business plan for 2022 and a refresh of our vision and mission. We have relooked at our corporate values statement and begun the process of realigning our processes and resources in line with our plans. We are looking actively at the aftercare market and for business opportunities that can be injected into our facilities. We have had some success in 2021 when we acquired a revenue source from a competitor for whom rail is not part of their strategy moving forward. We will look for more such opportunity. As a market leading designer and manufacturer of high reliability electronic and electro-mechanical systems we pride ourselves on our capabilities and our facilities, which have remained open throughout and we have retainedmostofourkeystafftooperatethosefacilities. TheincidenceofCovid-19amidstourstaffhasbeenlow but we continue to have a strong welfare interest in our workplacetoensurethatstaffareprotectedasfaras can be possible whilst at work. We will continue to follow Government guidelines closely. Ourcustomersandsuppliershavesufferedand continuetosufferdisruptionastheylooktotheir own business interests. We have seen evidence of destocking by some of our customers, assumedly to preserve cash, while nearly all are reporting some form of broken supply chain issue and accordingly delay in their projects. Our own supply chain has been strained and we have instances of being forced to redesign product to get around a supply chain problem, but in general we remain resilient. We have a great team, good experience of our industries and we are led by competent Executive Directors. Our customer and supplier relationship programmes have served us well to meet the challenges and we anticipate that our order book will grow still further over the coming months. Orders entered during the year, amounted to £23.2m (2020: £21.9m), and the order book at the end of the year was 21% higher at £27.3m than it was at the equivalent time last year (2020: £22.5m). Operationally it has been a tough year as we had budgeted for success built on our orderbook only to findthat3majorlong-termprojectswereputonhold in the second half of the year leaving us little or no manoeuvrabilitytoreplacetheworkflow.Theprojects are beginning to get going and we hope to see good call offduringthesecondhalfofournewfinancialyear. Shareholders and Investors The Board ensures it is always available to its key shareholders and works closely with its Brokers and advisers to ensure regular and open dialogue. My predecessor, who was also Chief Executive for over 20 years, had strong ties to a number of our shareholders that are the original family members who founded the Plc Group. With his departure we as a Board are creating a plan for reaching out to all our shareholders. We want to communicate our long-term plans to deliver shareholder value in line with our vision and mission and our continuing commitment to our reputation. Importantly, we have stakeholders, in the wider sense, all over the world and we have struggled in the last 18 months to see them. The Group is in the business of long-term contracts and projects that we exportwidelyandthisneedstobereflectedinour stakeholder relationships which must be proactive, long term, visible and embedded into our corporate culture.Ourstaffneedtobeabletotravelandmeetour customersfirsthand,asmuchofwhatwedoissolutions basedandflowsfromtheseinteractions. Dividends No dividends were declared in 2020 and no interim orfinaldividendshavebeendeclaredin2021. The Board believes in a progressive dividend policy and will keep the policy under review, however, given the ongoing economic and market challenges, we believe it remains appropriate to defer any resumption of the policy at this time. 5 ANNUAL REPORT & ACCOUNTS 2021 factory operations and we are committed to keeping themintacttofulfilourrecordorderbook.Wedo maintainflexibilitythroughuseofagencyandtemporary contracts, but we have no zero-hour contracts. I should like to thank all our employees, past and present, for their hard work and diligence during another challenging year. Outlook The work in this last year for the Executive team, notwithstanding all the additional work that a new Board brings to scrutiny of long-term planning, should not be underestimated. The Executive team have a strong order book to work with, a solid balance sheet, tightly managedcashflowandaplan.TheCompanyhascome throughthisdifficultperiodandwhilstweanticipatea toughfirsthalf,wecanforeseeabrightfuturebuilton our capabilities and great customer relationships. Robert B Horvath Chairman 27 January 2022 Board and Management Boardmembers’biographiesandrelevantexperience are set out within Company Information on page 34-35 oftheAnnualReportandarepublishedontheGroup’s website www.lpa-group.com. Following a number of years of succession planning andboardretirements,thefinalstageofthiscompleted in the year when Peter Pollock retired ahead of his 75th birthday from the position of Chairman. Peter held the role as Chief Executive for 21 years ahead of his move to Executive Chairman in 2018. We remain grateful to Peter for his long service and commitment to the Group. The Executive Team of Paul Curtis (CEO) and Chris Buckenham (CFO) remained unchanged through the year. Andrew Jenner was appointed to the Board on 1 September 2021, succeeding Len Porter as Senior Independent Director. Len Porter retired on 31 December 2021 at the end of his term and I would also like to thank him for his commitment to LPA over his tenure. Gordon Wakeford served through the year as Independent Director. I was appointed as Chair elect on 1 February 2021, assuming the position of Chairman on 9 August 2021. I serve on both Board Committees alongside Andrew andGordon.Effective1September2021,Andrew now chairs the Audit Committee and Gordon the Remuneration Committee. Our trading activities continue to be managed independently through local Executive Teams, who hold local Executive meetings to govern the sites. The principals at each site, together with the CEO and CFO regularly hold governance meetings as the Group’sExecutive. Employees Our people are our most important asset, and investmentinourstaffiscriticaltoourfuturesuccess. Their skills alone are not enough without a commitment to the style and corporate values that the Board are committed to promoting. The impact we experienced through Covid-19 on the business and on the general health, and wellbeing of our employees personally, cannot be underestimated. We have invested in external support to assess the impact on the mental health of those of our employees who have been working at home. Generally, people issues and managing our employee numbers and the cost base of our business during the pandemic has beenparticularlydifficultwhenourcustomershave slowed down projects that we had planned to deliver. We pride ourselves on our engineering skills and our 6 ANNUAL REPORT & ACCOUNTS 2021STRATEGIC REPORT | CHAIRMAN’S STATEMENT Business Model and Strategy STRATEGIC REPORT The Group is a quoted Small and Medium-sized Enterprise (SME) listed in the Electronic and Electrical section of the Alternative Investment Market (AIM) of the London Stock Exchange. LPA is a market leading designer, manufacturer and supplier of high reliability, LED based lighting, electronic systems, electro-mechanical systems and a distributor of engineered components supplying markets operating within high dependency, hostile and benign environments which focuses on the market segments of rail, rail infrastructure, aviation, airport infrastructure and defence. These are viewed as stable / growth markets both in the UK and globally. All Group activities serve the same markets (to a greater or lesser extent), have a mutual dependence on transportation (which accounts for more than two thirds of Group turnover), share resource and frequently work on the same projects. The Group has a reputation for innovation, providing costeffectivesolutionstocustomers’problems,inboth benign and hostile environments, which aim to improve reliability and reduce maintenance and life cycle costs. Three distinct sites across the UK are operated, namely: LPA operations Market segment Products, solutions, and technologies LPA Connection Systems Electro-mechanical systems • Auxiliary battery power systems Light & Power House Shire Hill SaffronWalden CB11 3AQ, UK +44 (0)1799 512800 enquiries@lpa-connect.com LPA Channel Electric Bath Road Thatcham Berkshire RG18 3ST, UK Tel: +44 (0)1635 864866 enquiries@lpa-channel.com LPA Lighting Systems LPA House Ripley Drive Normanton West Yorkshire WF6 1QT, UK Tel: +44 (0)1924 224100 enquiries@lpa-light.com A designer and manufacturer of connection systems for the rail, aircraft ground support and infrastructure markets. • Control panels & boxes • Enclosures, fabrications, form & weld • Laser cutting • Rail, aircraft & industrial connectors • Shore supply systems • Transport turnkey services Engineered component distribution High value, high level service distributor and added value solutions provider to the rail and aerospace & defence markets. • Circuit breakers • Connectors • Fans & motors • Relays & contactors • Switches • USB charging LED lighting and electronic systems A designer and manufacturer of LED lighting and electronic systems which serve the rail, infrastructure, and other industrial markets. • Electronic control systems • Electronic monitoring systems • Emergency lighting systems • Fluorescent and dichroic lighting systems • Inverters • LED lighting systems • Power supply units 7 ANNUAL REPORT & ACCOUNTS 2021 STRATEGIC REPORT | BUSINESS MODEL AND STRATEGY Group revenues are derived from both large value projects and smaller value routine orders with the route to market a combination of direct and indirect for most products. Agents and distributors may be used, particularly in overseas markets, although larger projects continue to require direct contact in most cases. A wide range of leading organisations form our customer base, including: Alstom, Avanti, BAA, BAE Systems, CAF, Compin, CRRC, Downer EDI, First Group, Grammer, Heathrow Airport, Hitachi, ITW GSE, Kinki Sharyo, Knorr Bremse, Leonardo, Omer, Shanghai Pudong Airport, Siemens, SNCF, Stadler, Spirit Aerospace, Taiwan Rolling Stock Company, Transport for London, Unipart Rail and Wabtec. ItisourintentiontostrengthentheGroup’sposition within the global marketplace by growing our customer base, alongside the addition of new products and the undertaking of selected strategic acquisitions. This is underpinned by our Vision, Mission and Objectives as detailed below. Vision, Mission & Objectives (VMO) Vision To be a market leading electronic / electro-mechanical engineering Group, supplying high quality components and systems to customers in safety critical and challenging markets. Mission • Provide sustainable growth and returns to shareholders. • Grow organically and by acquisition. • Beourcustomers’firstchoiceforproducts and services. • Be an ethical and responsible employer. 8 Objectives • Promote and build on the history and brand of LPA. • Ensure all companies within the Group deliver ‘best inclass’productsandservices. • Focus on reducing dependency on transportation market. • Continuous innovation and product development. • Improved sales channels for export. • Targeted acquisitions to bring growth, technology, or access to markets. • Work together across the Group and maximise opportunities. • Exploit Group capability and technology to create new products and service new markets. • Be an employer of choice. Values and Culture Investment in our people is paramount to our success and we have created clear communication and development strategies to enhance skills and ensure that we all understand and align to Group values, culture and best practice. This is supported by the Board and Executive teams and demonstrated by their visibility and accessibility across the Group. We have reviewed our core values during the year to provide enhanced clarity to all our stakeholders. These are set out below and published on our website www.lpa-group.com. LPA Core Values Leadership – you do not need to be in a position of power to lead in what you do. Passion – love what you do, use it to drive both yourself and the business forward. Accountability – whatever you do, own it and do it well. Continuous Product Improvement – staying ahead of the competition. Personal Growth – always seek to learn and improve. Diversity – everyone deserves a chance and a voice. Fun – yes, it is work, but it does not mean we cannot enjoy it! Innovation – technology is everything to us, look forward and push the boundaries. Integrity – honesty and respect are key to who we are. Teamwork – work with your colleagues not against them. ANNUAL REPORT & ACCOUNTS 2021 Environmental, Social and Governance STRATEGIC REPORT Environmentremainshighoneveryone’sagenda. The board is committed to minimising its impact on the environment and ensure that each of our sites provide a positive impact on their local environment. The product ranges of the Group have long been focused on long life reliability, reducing waste and recycling for our customers. Our manufacturing sites are modern withefficientheatingandventilationsystemsinstalled that assist to minimise the carbon footprint, whilst our machinery and processes do not require high energy inputs, thus our Co2 outputs are minimised. One of our manufacturingsitesiscertifiedunderISO14001and carbon neutral, whilst our second is actively working to achieve this. Throughour2020financialyear,eachofoursites were tasked to embed reporting related to carbon consumption to promote best practice across the business activities. The 2021 year naturally reported a downturn in carbon consumption due to reduced outputs, combined with reduced travel and external activities because of travel restrictions. We anticipate our carbon footprint to increase as trading recovery is achieved, travel returns and output recovers. However, like all, LPA seeks to support the carbon neutral activities that we all strive for to ensure our environment is sustainable. Through2021ourvehiclefleethasmovedtowardshybrid orelectricvehicles.Weanticipateourcarfleettobefully electric/hybrid over the coming 12 months. Additional chargingpointswereinstalledtoreflecttheincreased useofEV’swithinourfleetandthoseofourvisitors. Our energy use is relatively low with primarily modern machinery and facilities, our combined Scope 1 to 3 Co2 at 459 tonnes in the year, down 14% on 2020 (534 tonnes). The impact of energy price rises has been assessed and whilst unwelcome, these costs are notsignificanttotheGroup.Continuityofsupplyis essential and there remains a reliance on the grid for both gas and electricity. We are evaluating a project to installsolarpanelsatourSaffronWaldensitethrough 2022, providing renewable energy, surety of supply and mitigation to rising energy costs. A focus on packaging and waste has become a core part of our new product design as we progress our new product development activities. These activities are focused on the reduction of customer product failures and extending the life of products yet further. Also introducing SMART monitoring features that assist our customers to pre-empt issues in the wider systems, that can be addressed before component failures and ultimately disposal of damaged or failed items. LPA Connection Systems participates on the CharIN group, a body dedicated to the development of alternative energies including electric charging applications. SocialactivitieshavebeenstifledthroughCovid-19 but the Group continues to support local causes where possible. The return of our annual charity golf day was a welcome return to our calendar, through which record levels of donations were achieved matched by the Group supporting three charities covering youth sport; engineering education and a cancer hospice. We continue to review our marketing activities to combine business promotion with support for our local communities. Governance is outlined across our Annual Report and remains a core value of the Group, both as an AIM listed entity, but as part of the DNA of our activities. These areas have long been core to the Company. Additional areas of focus in recent years have included risks posed through digital and cyber channels. The Group maintains CyberEssentialscertificationandcontractsexternalIT support to ensure current and constant IT support, with monitoring and prevention paramount to the continuance of our business and safeguarding of our data, assets and those of our customers and employees. Our Corporate and Social Responsibility (CSR) policy sets out the basis on which the Group seeks to be a responsible business that meets the highest standards ofethicsandprofessionalism.Ourcompany’ssocial responsibility falls under two categories: compliance andproactiveness.Compliancereferstoourcompany’s commitment to legality and willingness to observe community values. Proactiveness is every initiative to promote human rights, help communities, protect our natural environment and resources. ThefullCSRpolicyissetoutontheGroup’swebsite– www.lpa-group.com with other key governance policies includingtheGroup’sapproachtoethicaltrading, code of conduct, Criminal Finances Act 2017 and Whistle Blowing. 9 ANNUAL REPORT & ACCOUNTS 2021 STRATEGIC REPORT | ENVIRONMENTAL, SOCIAL AND GOVERNANCE Health, Safety & Wellbeing It is Group policy to provide and maintain healthy and safe working conditions and to consider its employees wellbeing, whilst operating in a responsible manner to the environment. The Group operates Health & Safety Committees to encourage and facilitate participation by all its employees in improvement, awareness and development of a safe working environment. Reporting of opportunities for improvement and near misses, including suggestions, observations, concerns, or potential improvements are encouraged and requested from all staffandvisitorstooursites.Monthlyreportingoutlining all accidents or matters reported are KPIs, published through use of health & safety notice boards, together with site committee meeting activities. Each site has volunteerfiremarshalsandfirstaiderswhoareprovided withtherequisitetrainingandaqualifiedhealthand safety representative, supported by external expertise. ThewellbeingofourstaffisparamounttotheGroup. During the year additional provisions were introduced that provide all employees and their families direct access to wellbeing, medical and advisory services, linked to our Group Life Assurance provisions. Flexible working has not been enforced as our sites remained open and as a manufacturer, it is essential that a critical massofstaffremainonsite.Wherepossible,wehave providedflexibilitytoworkfromhomethroughthe pandemic and this remains the case. To ensure the mental wellbeing of all, an independent third party psychologist was provided, ensuring any individuals concerns were captured and independently assessed, focusingonthoseemployeesaffectedbychangesto their working patterns or interactions. The Group encourages employees to plan for their futureandprovidesadefinedcontributionpension provisionwhichmeetsorexceedstheUK’sAuto Enrolment requirements. Where possible, salary sacrificeisprovidedwith100%oftheemployersbenefit added to the contributions. The Group funds advisory sessions, arranges onsite access to its advisors and induction sessions for all employees to discuss their retirement provisions and provide full explanation of the Group’spensionprovision. Employment Policies The importance of promoting and maintaining good communicationswiththeGroup’semployeesis recognised and its policy is to keep employees regularly informed on matters relating to their employment throughcircularsandteambriefings. Applications for employment from all, regardless of disability, ethnicity, gender or beliefs are considered without prejudice, bearing in mind the aptitudes of the applicant concerned. In the event of members of staffbecomingdisabledorwhereindividualsrequire reasonableadjustment,everyeffortismadetoensure that their employment with the Group continues, and that appropriate adaptation and training is provided. It is the policy of the Group that the training, career development and promotion of disabled persons should, as far as possible, be identical with that of other employees. 10 ANNUAL REPORT & ACCOUNTS 2021 Chief Executive Officer’s Review STRATEGIC REPORT Trading Results A slower than anticipated rebound to major projects within our customer base resulted in revenue for the year at £18.3m (2020: £20.7m) with an underlying operatinglossof£0.27m(2020:profit£0.78m).Order entry slowed in the second half of the 2021 year under review but it was still an increase of 32% over H2 2020 at£9.9m(2020:£7.5m).Attheendofthefinancialyear we generated £23.2m, (2020: £21.9m) of new business opportunity (order entry), an overall increase on the prior year of 5.9% notwithstanding the impact of a full yearofoursalesstafftryingtogeneratenewwork during Covid-19. 2021 Summary Order book increased 21.3% at £27.3m (2020: £22.5m); Improved order entry at £23.2m (2020: £21.9m); Revenue at £18.3m (2020: £20.7m); Underlying Operating Loss of £0.27m (2020: Profit£0.78m);and Netcashinflowfromoperatingactivities£1.2m (2020: £0.8m). Added Value (described on page 20) for the year was ahead of expectations at 50.5% (2020: 48.6%). Our drivetoautomateandgainefficienciesacrossallareas of the business continued throughout the year and was supported by investment in further capital equipment. The workforce was realigned and reduced overall by c.11%, partially to address project delays from the marketbutalsoreflectingthenewlevelsofefficiency within operations. To compensate for the delayed larger projects we sought and carried out more routine and adhoc work, which generally attracts higher return, enhancing our Added Value. Markets Aviation (aircraft) build programmes were maintained for the majority of our 2021 year but at the lower levels we had experienced in the second half of the prior year. However,someconfidencehasreturned,andcurrent schedules are showing increasing volumes through totheendof2022andbeyond.TheGroup’sAviation new build work is predominantly on the A220 and A350 programmes, both of which have strong order books to deliver over the coming years. Aviation (infrastructure) has seen excellent progress in the year and we welcome enthusiasm from customers in relation to the quality and performance of our new Plane Power products. This, combined with substantial growth in the number of distribution partners, has led to increased levels of business beginning to be realised and confirmsthestrategybeingundertakenforthissegment of our business. We have targeted the coming year for further product launches within the range and this, combined with further growth and management of our distribution network, will help transition this segment into a more visible and resourced part of the Group. The Rail industry is generally blighted by project delays, andthiscontributedtotheyearfinishingconsiderably below revenue expectations. It has however been a more successful year for orders, with very few being lost, and several key and substantial programmes being won throughout the period. This success further strengthens both our technical capability and our worldwide reputation and is an area we will continue to build on over the coming years. Operational review Our2021financialyearwasatimeoffocusingonwhat we could control whilst managing the situations we could not. Throughout the period both the Rail and Aviation sectors experienced substantial disruption to programmes and struggled to rebound as quickly as other market sectors across the globe. Although these delays have impacted our results, the mass movement of people is still seen as a key requirement of any modern society and, as such, the transportation market remains a key sector for us. It is, however recognised that dependency on the rail sector is a principal risk and with that delays in major transportation projects are a factor. This is an area we are committed to addressing as we move forward. The development of our standard products, sold through a managed worldwide network, is a key development for our electro-mechanical business and will create a separate business model to work alongside that of the project model that exists today. The Plane Power range isthefirsttoundergothistransformationandwillbe the paradigm as we move forward in the development 11 ANNUAL REPORT & ACCOUNTS 2021 With Brexit now complete and a plethora of issues caused by Covid-19, it seems that in-country engineering and supply has become of interest to many companies within theUKmarketplace.Ourfacilitieshavebenefitedfrom much investment over the years and are well suited to this development. We are therefore looking to resource accordingly to ensure we capitalise on opportunities that may develop in both the immediate and the longer term. Outlook Although some improvement has been seen, and clarity on projects and schedules is improving, it is still envisaged that the coming year will be one of recovery and enhanced investment in our people and systems. That said, the renewed focus on strategic development at both Group and site level – alongside the security of a record orderbook, excellent technology, invested capability and a respected name in our market segments–meansthatweareconfidentinourvision for the Group. Paul Curtis ChiefExecutiveOfficer 27 January 2022 STRATEGIC REPORT | CHIEF EXECUTIVE OFFICER’S REVIEW of both existing and new product ranges. Electro- mechanical represented 42% of Group revenues in the year (2020: 45%). Engineered component distribution activity remained flatfollowingaslowdowninH22020,withrevenues contributing 19% to Group revenue (2020: 21%), a decrease of £1.0m. We witnessed delays to projects acrossthewidermarketandthiswasreflectedina reduced level of general business and stock levels across our customer base. Much work, however, was thenundertakenonwideningourproductofferingand we signed a number of new franchises in the period. These additional franchises have been brought on withtheviewofincreasingourproductofferingto existing markets and the opening and developing of new markets outside of our traditional sectors. It is envisaged that, as the Rail and Aviation markets bounce back over the coming year, the Company will continue to push new products and market sectors to further drive growth and reduce some of the dependency on historic market segments and products. Our Lighting and Electronics business, which contributed 39% of Group revenues (2020: 34%), continues to grow and strengthen its position in the worldwide marketplace. The year enjoyed, not only prestigious contract wins for our lighting technologies, but also substantial contracts for the design and manufacture of electronic control systems used in other areas within a train, a new area for us. These new contract wins are testament to the electronic and software design skills that now reside within the company and is an area we will look to grow further over the coming years. As we continue to increase our global presence, we will focus on leveraging these skills and resources across the Group to drive our productofferingandportfoliopotential. 12 ANNUAL REPORT & ACCOUNTS 2021 Financial Review Set out are the key drivers related to the business performance in the year and position at 30 September 2021,togetherwithexplanationofthefinancialKey Performance Indicators as summarised on page 20. Trading Performance Macro-economic factors Covid-19 has continued to dominate the world through thefinancialyearwheresupplychainshavecontracted, stocks depleted and reigniting these in unison worldwide has proven to be challenging for economies. The results have delayed supplies and reduced the availability of labourandskills,combinedwiththeeffectsofBrexit. Our customer projects, in particular rail, are complex and dependantonasignificantnumberofcomponentsto achieve the ultimate build. The aerospace and defence sectorcontinuedtobeimpactedwithreducedflightsand countrylockdownsaffectingconfidence. The2021financialyearhasseenc£8mofexpected revenues deferred into FY22 and beyond with sequential knock on. This resulted in operating losses through H2 2021 with continued delays and short term visibility from customers. These are levels of disruption that could not have been anticipated as we entered the year and remain unprecedented. Short notice delays towards yearendprovidedlimitedabilitytoflexthecostbase, whilst a focus to retain skills and capabilities to deliver the increasing order book and future growth aspirations resulted in higher costs. The rail market slowed more graduallythanothersasweenteredthefirstphase of Covid-19 in H2 2020 and is set to recover behind the curve seen by other markets. This has positively impacted our order book, which with continued strong intake through the year has reached record levels, despite challenges for our business teams in accessing customers and opportunities. The order book and activitylevelsunderpinconfidenceforthemediumterm. Rail projects continue to be awarded, with long gestation periods and a continued demand for greener travel and enhanced customer experience driving future demand. Aviation (infrastructure) activity continued at modest levels through the year, new airport builds globally driving demand alongside the gradual introduction of a new ground power connector range stimulating activity. Electronic and lighting systems activity matched that of 2020 but reported down on expectations through rail project delays. STRATEGIC REPORT Staffturnoverremainedhigherthanhistoricallevels, in part attributable to retirements, and in part through a desire for change, with employees assessing their personal outlooks considering the impacts of Covid-19. Brexitintroducedamorefluidjobmarketandinflationary pressureslatterly,lessskilledopportunitiesaffording shorttermgainsforindividuals,assistingoffset inflationarypressureswhichconsumershaveandareto bear as the cost of the pandemic impacts. The Company hascontinuedtoupskill,mitigatingagainstinflationary pressures and skills shortages whilst sought to retain skills and capabilities in the year, thus reporting a higher cost base, to meet future demand and development. Headlines • Order entry remained buoyant at £23.2m (2020: £21.9m) driven by rail projects, resulting with a record level order book of £27.3m (2020: £22.5m), an increase of 21.3%; • Revenue of £18.3m down 11.8% (2020: £20.7m) with electro-mechanical systems revenues down £1.4m and engineered component distribution down £1.0m, lighting and electronics unchanged; • Added Value up 1.9% at 50.5% (2020: 48.6%) through reduced project activity coupled with continued purchasing enhancements; and • Gross margins resulted at 20.3% (2020: 22.7%), down 2.4% despite the increase in Added Value. The measure is impacted through increased direct labour and production overheads, up 2.9% on 2020. These increased through: furlough leave with CJRS grant offsetreflectedseparatelyinotherincome;fixed overheadsunabletoflexwiththereducedrevenues; and additional engineering resources to develop technologies, contract delivery and support our commercial teams in new business tendering. By comparison to 2020, H1 2021 revenues decreased by 13.8% at £9.3m (2020: £10.8m), delivering an underlying operatingprofitof£154,000(2020:£234,000).H2 revenues were anticipated to accelerate as customer production recovered from lockdown disruption. H2 delivered revenues of £9.0m (2020: £9.9m), representing a decrease of 9.7% against H2 2020 sales. Other operating expenses reduced by 3.1% to £4.3m (2020: £4.4m), a continued focus on costs, balanced 13 ANNUAL REPORT & ACCOUNTS 2021 STRATEGIC REPORT | FINANCIAL REVIEW with additional areas of investment focused on products, market and delivery of our future order book. Group employment costs reduced by £156,000 to £6.32m (2020: £6.47m) inclusive of exceptional costs, as outlined below. Included are share based payments of £28,000 (2020: £36,000) relating to the award of shareoptionsthroughtheGroup’sLongTermIncentive Plan, these calculated using the Black-Scholes model. No Executive bonuses were awarded in 2021 or 2020. Other operating income of £217,000 (2020: £333,000) represents CJRS grant receipts, which are not directly offsetagainstthewagecoststowhichtheyrelate. Exceptional costs and Non-Underlying Items Exceptional costs in the year totalled £46,000, (2020: £131,000). Key items comprised: i. £46,000 dual running management costs (2020: £9,000).Thesecostsreflectextendedcrossover periods for appointments and retirements for theGroup’sdirectors,atransitionprocesswhich commenced in 2017 and completed on 31 December 2021. ii. reorganisation costs in 2020 of £122,000 (2021: nil) – associated with cost base reductions. Finance Costs and Income Withinfinancecosts,theinterestonborrowings decreased to £86,000 (2020: £106,000). The weighted average interest rate reduced by 0.2% from 2.9% to 2.7% through reduced borrowings and lease liabilities. TherewasnoutilisationoftheGroup’soverdraftfacility in the year. The UK base rate was unchanged throughout the year, reducing through 2020 to 0.10%. Finance income, which comprises the net interest income on the pension asset, was £47,000, an increase of 14.6% (2020: £41,000). Profit before Tax, Taxation and Earnings Per Share Afternetfinancecostsof£39,000(2020:£65,000)a lossbeforetaxof£387,000wasrecorded(2020:profit £551,000). A tax credit of £353,000 (2020 recovery: £44,000) is provided, reporting a loss after tax of £34,000(2020:profit£595,000).Alosspershare of 0.27p results (2020: earnings per share 4.82p). TaxreflectstheUKcorporationtaxrateof19.0% (2020:19.0%).Theeffectivetaxrateislargelythe consequence of tax loss utilisation and recognition, enhanced through an increase in deferred tax rates to 25%from19%reflectingtheUKcorporationtaxrise from 1 April 2023, resulting in a tax credit of £71,000 (2020:nil).Furtherbenefitswereachievedthrough 14 qualifying R&D expenditure including prior year increases on estimate and recognition of trading tax losses from previous years. Treasury TheGroup’streasurypolicyremainedunchanged intheyear.FurtherdetailsontheGroup’sborrowings, financialinstruments,anditsapproachtofinancial risk management are given in notes 15 and 17 to the Annual Report. Balance Sheet Shareholders’fundsincreasedby£1.6m(12.4%)inthe year to £14.1m (2020: £12.5m), including: • anincreaseinthedefinedbenefitpensionasset,net of a deferred tax charge, of £1.4m (2020: decrease £0.3m); and • an increase in ordinary share capital of £79,000 following exercise of share options and issue of 790,000 new shares with a share premium recognised of £221,000 (2020: nil). This has resulted in an increase to the net asset value per ordinary share to 105.0p (2020: 99.2p). Adjusted net asset value per share (calculated excluding goodwill and the pension asset net of deferred tax) was 74.4p (2020: 77.5p). Gearing (net debt as a % of total equity) reduced 45% to 11.6% (2020: 21.1%) through a combination of: • net debt decreasing by 38% to £1.63m (2020: £2.65m); • working capital reducing 10.8% to £4.69m (2020: £5.25m); and • net pension asset increasing 85.9% to £2.96m (2020: £1.59m). Shareholders’fundsincludeInvestmentinOwnShares (Treasury Shares), unchanged at £0.32m, representing ordinary shares held in the Company by the LPA Group PlcEmployeeBenefitTrust(“EBT”). Intangible assets, which comprise goodwill related to the Groups investment in Excil Electronics Ltd, capitalised development costs and software purchases were £1,405,000 (2020: £1,386,000). After assessment for impairment the goodwill remains unchanged at £1,149,000. Development costs capitalised in the year, representing the continued development of the Group’stechnologiesandnewproductdevelopment (“NPD”),were£167,000(2020:£100,000).Capitalised developmentassetswerewrittenoffintheyear, replaced with new technologies and products resulting in a loss within cost of sales of £53,000 (2020: nil). ANNUAL REPORT & ACCOUNTS 2021 The net book value of property, plant and equipment as at 30 September 2021, including Right of Use Assets, totalled £6,433,000 (2020: £6,984,000), of which property represented £4,115,000 (2020: £4,145,000), plant, equipment and motor vehicles £2,318,000 (2020: £2,839,000). Additions in the year were reduced following previous years of capital investment, at £215,000 (2020: £623,000). Disposals in the year totalled £368,000 with a net book value of £9,000 including Right of Use lease terminations (2020: £577,000 with a net book value of £67,000). Thedepreciationchargeincreased3.0%reflectingprior levels of investment at £757,000 (2020: £735,000). Nettradingassets(definedasinventoriesplustrade and other receivables, less trade and other payables and current tax) were 10.8% lower at £4,686,000 (2020: £5,252,000), predominantly because of reduced activity leadingintothefinancialyearendandenhancedcash collections through the year. Net debt and financing TheGroup’smainbankfinanceisabankloandrawn down in 2019 at £2.6m and repayable over 5 years. Repayments are quarterly over the term with a bullet repayment in March 2024 of £1.8m (quarterly repayments calculated at draw down on a 15 year repayment term). As at September 2021 the amount outstanding was £2.3m (2020: £2.5m). Interest is payableatbaserateplus2.25%.Nofinancialcovenants applied following agreement with the bank to remove the net debt service covenant for the year ended 30 September 2021. Cash Flow Netcashinflowfromoperatingactivitieswas £1,189,000 (2020: £773,000) made up of a trading cash inflowof£601,000(2020:£1,543,000);adecreasein working capital of £594,000 (2020 increase: £801,000); tax refunds of £77,000 (2020: £131,000) and voluntary definedbenefitpensioncontributionsof£100,000, shown net of £17,000 settlement costs funded through thedefinedbenefitscheme(2020:£100,000).Overall, therewasanetincreaseintheGroup’scashposition of £513,000 (2020: decrease of £44,000), which included £300,000 receipts from the exercise of share options (2020: nil). Capitalexpenditureoutflowsonproperty,plantand equipment reduced to £100,000 (2020: £150,000), excludingRightofAssetadditionsfinancedthrough operatingorfinanceleases.Capitaliseddevelopment expenditure amounted to £167,000 (2020: £100,000), including expenditure to develop a new range of aircraft ground power support products and further product developments focused on Smart Lighting and electronic systems, including rail seat electronics. STRATEGIC REPORT | FINANCIAL REVIEW In the year new lease liabilities were drawn to fund Right of Use additions of £115,000 (2020: £506,000). Interestat3.6%waschargedonfixedrateborrowings (2020:3.9%).InterestontheGroup’soverdraftfacility is payable at base rate plus 2.0%. The facility was unutilised as at 30 September 2021 and 2020. The composite interest rate across both borrowings and lease liabilities was 2.7% (2020: 2.9%). Capital loan repayments of £187,000 were made (2020: £84,000).Outflowsrepayingtheprincipalelementsof lease liabilities were £420,000 (2020: £367,000). Interest payments on borrowings amounted to £86,000 (2020: £100,000). TheGroup’sdividendpolicywaspausedin2020as a safeguard to secure cash reserves through the Covid-19 challenges, this continuing through 2021 with no distributions. Defined Benefit Pension Asset DuringtheyearchangesweremadetotheGroup’s closeddefinedbenefitpensionarrangement(“DB Scheme”)bythetrustee,theseincludedtransfertoa Master Trust structure, change of adviser for the trustee and transfer of scheme administration externally, including pensioner payroll. These changes incurred additionalone-offcostsrecognisedinthestatement of comprehensive income in the year. Included within the total pension costs of £190,000 (2020: £104,000), inclusiveofcostsrelatedtotheGroup’sDefined Contributionprovisions,arecostsforthetrustee’slegal advice, Employer legal advice, Scheme windup costs, pension and actuary advice and Winding Up Lump settlements (WULS). These activities are expected to reduce costs going forwards and enhance members service, whilst attributing to the increased pension 15 ANNUAL REPORT & ACCOUNTS 2021 wascashgenerativethroughthe2021financialyear, with a positive EBITDA and strong cash management, benefitingfromapolicyofcashretentionatthistime;(iii) hasastrongandrecordlevelorderbookwithsignificant further opportunities in its market place; and (iv) has proven adaptable in past periods of adversity, as again proven through the 2021 challenges. Therefore, the directors believe that it is well placed to manage its business risks successfully. TheGroupbenefitedfromCJRSgrantsthroughout 2021, utilising this support to retain jobs and skills which contributes to higher wage costs reported. Supply chain delays now widely seen, aligned with price pressures in the supply chain, covering commodities, utilities andwageinflationallposeriskstoUKmanufacturing businesses.Offsettingthese,on-shoringopportunities and the supply chain delays and shortages themselves offernewopportunitiestotheGrouptoassistoffset some of the project delays. The directors recognise that the ongoing support ofitsbankisakeyfeaturetotheGroup’ssuccesswhich provides for the funding and working capital facilities as outlined in note 17. Should there be additional significantdelaysinourproject-basedworkthenthere is an increased risk of covenant breach. Whilst actions are available to management to mitigate any shortfall, we expect that if required the bank would remain supportive and a suitable agreement would be reached toprovidethegroupwithsufficientfinancing. After making enquiries including but not limited to compiling updated forecasts; sensitivities; and expectations, reviewing liabilities and risks andfollowingconfirmationofongoingsupportfrom theGroup’sbank,thedirectorshaveareasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the annual report and accounts. Chris Buckenham ChiefFinancialOfficer 27 January 2022 STRATEGIC REPORT | FINANCIAL REVIEW asset at year end through a reduction in membership and technical provisions. The changes are expected to provide an enhanced members service and administration provision, coupled with a de-risked scheme asset with a reduced membership. Membership benefitsareunaffected. Following a strong year of asset value increments, the trustee has undertaken a review of the investment strategy, realigning the asset match with liabilities from January 2022 to lock in the gains and de-risk the scheme. As a result, it was agreed with the Company that the annual voluntary contributions paid over the past 10 years would no longer be required, previous commitmentshavingbeensatisfied. The IAS19 actuarial surplus recognised at 30 September 2021 was £3.94m (2020: £1.96m). Changes over the course of the year comprised an income statement credit of £47,000 related to interest (2020: £41,000). Voluntary employer contributions received from the Company of £100,000 (2020: £100,000) plus an actuarial gain of £1.85m (2020: loss £0.43m) recognised in the statement of comprehensive income, benefitspaidfromtheschemetotalled£0.45m(2020: £0.51m). £17,000 (2020: Nil) of cost was recognised through the consolidated income statement in the yearasoneoffpastserviceWULSsettlements,these contributing to the increase in governance costs recognised, but settled by the scheme. Going Concern A statement regarding the going concern of the Group is set out in accounting policies on pages 56 to 57. In assessing going concern, including impacts of Covid-19,Brexit,supplychainshortagesandinflationary pressures seen latterly, the directors note that current economic conditions are continuing to create uncertainty. Such uncertainties have and continue to make forecasting extremely challenging, with these multiple factors causing delivery schedule delays. InassessingtheGroup’sgoingconcernthedirectors also note that (i) despite reporting an operating loss in the current year and anticipating a challenging start to the 2022 year, the Group is expected to return to profitabilityinthenearterm;(ii)hasinplaceadequate working capital facilities for its forecast needs and 16 ANNUAL REPORT & ACCOUNTS 2021 17 ANNUAL REPORT & ACCOUNTS 2021STRATEGIC REPORT | CHAIRMAN’S STATEMENT STRATEGIC REPORT Principal Risks and Uncertainties TheGroup’sapproachtoriskmanagementisdetailedwithintheCorporateGovernanceReport.Theprincipalrisks confronting the Group, where adverse changes could impact results, are summarised below: Principal Risk or Uncertainty Description and Mitigation Rail market dependency including both the UK rail market and worldwide rail projects. Ability to operate and retain sites as operational during Covid-19. • The Group maintains close working dialogue with its customers, suppliers and government agencies. • Diversificationremainsafocus.Railwillcontinuetofeatureasacore market and remains an attractive sector for the Group. • The Group continues to focus on non-project work to alleviate the effectsofprojectdelaysandunderpinroutineworkflows. • As a manufacturer, ensuring sites remain open is paramount. This has been achieved throughout the pandemic with UK Government support as a manufacturer and supplier to the transportation sector. • High rates of absenteeism remain a risk. Deployment of safe working practices and ensuring distancing and pandemic protocols are adhered to and remain a key mitigation. Certainactivitiesbenefitfromlong standing commercial relationships with key customers and suppliers. • The Group devotes resource to ensure that good customer relationships are maintained while continuing to build relationships with newcustomersacrossdifferentbusinesssectorsandgeographies. • Developing and maintaining relationships through periods of lockdown and travel restrictions are more challenging, mitigation achieved through the use of alterative platforms and working practices. The Group activities operate in competitive markets which are subject to product innovation, technical advances and intensive price competition. • The Group invests in research and development to establish new technologies and products to sustain its competitive position. • New product developments have seen the successful launch of new ranges, including ground power connectors and contract awards, including seat electronics and SMART lighting systems. The Group is exposed to several financialmarketrisksincludingliquidity and credit risk, and through movements in foreign exchange and interest rates. • Forex exposure, predominantly Euros, is mitigated where possible through natural hedging across the Group. • FurtherdetailastotheGroup’sapproachtomanagingthisriskis describedinnote17tothefinancialstatements. Poor investment returns and longer life expectancy may result in an increased costoffundingtheGroup’sdefined benefitpensionarrangement. • The Group and the trustee of the scheme review these risks with actuarial and investment advice as appropriate and take action to mitigate the risks where possible. • Thetrusteeagreedarebalancingoftheschemeassetseffective January 2022, following high returns through 2021 and a change in approach to the structure and administration, de-risking the assets with a closer match the liabilities. • The scheme is currently in surplus and closed to future accrual. 18 ANNUAL REPORT & ACCOUNTS 2021 STRATEGIC REPORT | PRINCIPAL RISK AND UNCERTAINTIES Principal Risk or Uncertainty Description and Mitigation The Group is exposed to supply chains across the globe which can cause delays to product supplyandinflationarypressures. • Inflationarypressureshaveincreasedthrough2021into2022. TheGroupseekstooffsetsuchpressuresthroughitspricing strategies and forward purchase agreements. Additional stocks have been held through 2021 and into 2022 to safeguard against short term supplyissuesandinflationarypressures. • Non-availability of products, in particular electronics has become a higher risk. The Group maintains a portfolio of suppliers and continues to work closely with all, to ensure continuance of supplies. • Products, particularly electronic systems, are subject to redesign to ensure compatibility with suitable alterative components is achieved. The ability to attract and retain skillsandstaff. • StaffretentionandsourcingisanareawheretheGroupenvisages higher risks into 2022 and beyond. • TheGroupmonitorsstaffmovementscloselywhilstseekingtoupskill roles to automate areas where the labour pool is challenged and promote personal development and progression. 19 ANNUAL REPORT & ACCOUNTS 2021 STRATEGIC REPORT Key Performance Indicators TheGroupusesthefollowingkeyperformanceindicatorstoassesstheprogressioninitsbusiness:factorsaffecting themarediscussedintheChairman’sStatement,theChiefExecutiveOfficers’ReviewandtheFinancialReviewon pages 5 to 20 with an Additional Performance Measures glossary on page 101. KPI Basis of measurement 2021 2020 Health & Safety Riddors • reportable incidents of disease or danger occurrences None None Accidents • events that cause impact, damage or injury involving a person or infrastructure, which are not a Riddor Near misses • events that occurred which have not caused an accident 13 15 12 16 Employment Staffturnover • being leavers (excluding those through restructuring 13.1% 12.4% programmes) as a percentage of the average total employed Financial Orders to revenue • orders for the year expressed as a multiple of revenue as a 1.27 1.06 measure of prospective growth Order entry • orderintakeconfirmed £23.2m £21.9m Order book • the measure of opening order book, plus order entry, £27.3m £22.5m less revenue Revenue growth • (decrease)/increase year-on-year as a percentage of prior year (11.8%) 6.0% Added Value • the margin generated on revenue after deduction of material 50.5% 48.6% costs but before other costs of sale and conversion Gross margin • as a percentage of revenue 20.3% 22.7% Profitability • UnderlyingOperating(Loss)/Profitasareturnontrading (1.5%) 3.8% activities to revenue Cash generation • Nettradingcashflowasthenetincreaseincashaftercapital investments, before the drawdown / repayment of borrowings and issue or acquisition of equity £0.9m £0.5m Gearing • the measure of net debt being borrowings and lease liabilities 11.6% 21.1% less cash balances, to net assets The Strategic Report on pages 5 to 20 was approved by the Board on 27 January 2022 and signed on its behalf by: Paul Curtis ChiefExecutiveOfficer 20 ANNUAL REPORT & ACCOUNTS 2021 BOARD REPORTS Audit Committee Report Remuneration Report Corporate Governance Report Directors’Report 22 23 26 33 21 ANNUAL REPORT & ACCOUNTS 2021BOARD REPORTS | CHAIRMAN’S STATEMENT BOARD REPORTS Audit Committee Report The Audit Committee monitorstheintegrityoffinancial statements, oversees risk management and control, monitorstheeffectivenessofinternalcontrolsand reviews external auditor independence. Andrew Jenner is Chairman of the Audit Committee, which normally meets three times a year. The Committee exists to scrutinise and clarify any qualifications,recommendationsandobservations within the audited accounts and report of the Company’sauditor.Whensatisfied,theCommittee presents the audited accounts and report to the Company’sBoardandreviewstheeffectivenessof resultant corrective and preventative measures. In performing this function, the key duties of the Committee are to: • EnsurethattheGroup’sarrangementsforits employeesandcontractorstoconfidentially raise concerns about possible wrongdoing allow proportionate and independent investigation and appropriate follow up action; • Consider the need to implement an internal audit function; • Make recommendations to the Board and the Company’sshareholdersregardingtheappointment, re-appointment,andremovaloftheCompany’s external auditor. It ensures that at least once every ten years the audit services contract is put out to tender to enable the Committee to compare the qualityandeffectivenessoftheservicesprovidedby the incumbent auditor; • OverseetheCompany’srelationshipwiththe • Monitortheintegrityofthefinancialstatements external auditor. Andrew Jenner Chairman of the Audit Committee 27 January 2022 of the Group and any formal announcement relating toitsfinancialperformance; • Withregardstofinancialreporting,reviewand challenge the consistency of accounting policies, the use of accounting methods over alternatives, whether the Group has followed appropriate accounting standards, the clarity of disclosure, and all material information relating to the audit and risk management; • Monitortheadequacyandeffectivenessofthe Group’sinternalfinancialcontrols,includingthe internal control and risk management systems. TheGroup’skeyrisksarereviewedateachmeeting of the Board whilst a continuous oversight of internal controls and risk management is applied by the CFO whoreportsanykeyfindingsorconcernstotheAudit Committee, these including six monthly site visits to ensure sound systems of internal control and risk management are in place. All governance issues or unexpected outcomes are brought to the attention of the Board; 22 ANNUAL REPORT & ACCOUNTS 2021 Remuneration Report This report has not been prepared in accordance with the Companies Act 2006 because as an AIM listed company LPA Group plc does not fall within the scope of the Regulations. Unaudited information Remuneration Policy TheCompany’spolicyistodesignexecutive remuneration packages to attract, motivate and retain high calibre directors and to reward them for enhancing value to shareholders. The performance measurement of the executive directors and the determination of their annual remuneration package are undertaken by the Remuneration Committee. There are four main elements of the remuneration packages of the executive directors: basic annual salary andbenefits;annualbonuspayments;shareoption incentives; and pension arrangements. TheCompany’spolicyisthataproportionofthe remuneration of the executive directors should be performance related. Executive directors may earn annual incentive payments, based on achievement ofprojectionsforthefinancialyear,togetherwiththe benefitsofparticipationinshareoptionschemes.The Company does not operate any long-term incentive schemes other than the share option schemes noted. Executive directors are entitled to accept appointments outsidetheCompany,providingthattheChairman’s permission is granted. Executive Directors’ Remuneration and Terms of Appointment Executivedirectors’basicsalariesarereviewedbythe Remuneration Committee annually, usually in December forimplementationinJanuary,andaresettoreflectthe directors’responsibilities,experienceandmarketability. Regard is also given to the level of rewards made in the yeartostaff.Theobjectivesthatmustbemetforthe financialyearifabonusistobepaidareconfirmedat the same time. BOARD REPORTS Paul Curtis, CEO, has a service contract dated 26 September 2018, amended 24 March 2020 with a notice period of 6 months. As at 1 January 2022 his annual salary was £193,325 (January 2021: £193,325), he receives 10% employerpensioncontributionstotheGroup’sdefined contribution scheme, private health insurance and he is entitled to the provision of a car, or car allowance with insurance and break down cover. In addition, he may also begrantedoptionsundertheCompany’sshareschemes and,subjecttotheachievementoftheGroup’sobjectives, isentitledtopaymentsundertheCompany’sdiscretionary bonus schemes. Chris Buckenham, CFO and Company Secretary has a service contract dated 22 March 2018, with a notice period of 6 months. As at 1 January 2022 his annual salary was £151,341 (January 2021: £151,341) he receives 10% employer pension contributions to the Group’sdefinedcontributionscheme,andheisentitled to the provision of a car, or car allowance and private health insurance. Included within his salary he receives a fee of £5,000 pa, as Director of the LPA Industries Ltd Trustees. In addition, he may also be granted options undertheCompany’sshareschemesand,subject totheachievementoftheGroup’sobjectives,isentitled topaymentsundertheCompany’sdiscretionary bonus schemes. Peter Pollock resigned as Chairman on 8 August 2021. He had a service contract dated 19 January 2007 (amended 3 October 2018, updated 25 March 2019 consolidating all previous amendments). As at 1 January 2021PeterPollock’sannual(parttime)salarywas £65,564 and he was entitled to the provision of a car allowance, car insurance and private health insurance. Independent Directors’ Remuneration and Terms of Appointment The remuneration of the non-executive directors is determined by the Board as a whole and the policy is to pay an appropriate level of remuneration for their work on the Board and its committees. Non-executive directors are normally appointed for an initial period of three years. Appointments are made under a letter of appointment subject to retirement by rotation or removalundertheCompany’sarticlesofassociation. Non-executive directors do not participate in the Group’sshareoptionarrangementsorbonusschemes. 23 ANNUAL REPORT & ACCOUNTS 2021 BOARD REPORTS | REMUNERATION REPORT Robert B Horvath, Independent Chairman from 9 August 2021, was appointed on 1 February 2021 as NED and Chairelect.Hehasatermofofficeassetoutinhisletter of appointment dated 10 January 2021, which expires on 31 January 2024, with up to one triennial extension. As at 1 January 2022 he receives a fee of £60,000 per annum (February 2021: £50,000). Andrew Jenner was appointed on 1 September 2021 as Senior Independent Director and Chair of the Audit Committee.Hehasatermofoffice,assetoutinhis letter of appointment dated 14 June 2021, which expires on 31 August 2024, which up to two triennial extensions. As at 1 January 2022 he receives fees of £37,000 per annum (September 2021: £37,000). Information Subject to Audit Directors’ Remuneration Directors’remunerationfortheyearwasasfollows: GordonWakefordhasatermofoffice,assetoutinhis letter of appointment dated 3 February 2020, which expiresattheconclusionoftheCompany’sannual general meeting to be held in the spring of 2023, with up to two triennial extensions. As at 1 January 2022 he receives fees of £35,000 per annum (January 2021: £32,960 increased to £35,000 from 1 April 2021 following appointment as Committee Chair). LenPorter’stermofofficeexpiredon31December 2021 as set out in his letter of re-appointment dated 18 March 2020. As at 1 January 2021 he received fees of £38,246 per annum. Peter Pollock (to 08/08/21) Paul Curtis Chris Buckenham Executives Robert B Horvath (from 01/02/ 21) Andrew Jenner (from 01/09/21) Gordon Wakeford (from 01/04/20) Len Porter Michael Rusch (to 20/06/20) Independents Total Salaries and Fees £000 Bonus Benefits £000 £000 LTIP* £000 Pension £000 55 191 149 394 33 3 34 38 - 108 503 - - - - - - - - - - - 23 14 9 46 - - - - - - 1 7 5 14 - - - - - - - 24 17 41 - - - - - - 46 14 41 Total 2021 £000 79 236 180 495 33 3 34 38 - 108 603 Total 2020 £000 126 215 175 516 - - 16 37 38 91 607 *LTIP: Relates to the valuation attributed to the Directors share option awards under the PSP 2018 Scheme, in the current and past years calculated by reference to the Black Scholes model. During the year Peter Pollock received gains of £271,500 on exercise of 790,000 share options (2020: nil). Directors’ Pension Arrangements During the year ending 30 September 2021 Peter Pollock was in receipt of a pension from the LPA Industries Limited PensionScheme:nofuturepensionbenefitsarebeingaccrued.PaulCurtisandChrisBuckenhamreceivedemployer contributionstotheGroup’sdefinedcontributionschemeunderasalarysacrificearrangement. 24 ANNUAL REPORT & ACCOUNTS 2021 Directors’ Shareholdings Shareholdings of those serving at 30 September 2021: Paul Curtis Robert B Horvath Len Porter Gordon Wakeford Chris Buckenham BOARD REPORTS | REMUNERATION REPORT Number of Ordinary Shares 30 September 2021 30 September 2020 38,300 30,000 25,000 21,700 10,000 125,000 38,300 - 25,000 15,000 10,000 88,300 During the year Robert B Horvath acquired 30,000 and Gordon Wakeford acquired 6,700 Ordinary Shares in the Company. (2020: Chris Buckenham acquired 5,000 and Gordon Wakeford 15,000 Ordinary Shares). Directors’ Interests in Share Options The Company operates a share option scheme, the Performance Share Plan 2018 (PSP 2018) which was established during2018.AnEmployeeBenefitTrust(EBT)wasestablishedin2018andisoperatedthroughathird-partytrustee. TheobjectiveoftheEBTistobenefittheGroup’semployeesandinparticular,toprovideamechanismtosatisfy share option exercises and reduce dilution for shareholders. Requests made to the EBT trustee are approved by the Remuneration Committee. Details of the share option schemes in operation during the year are given in note 20. Date of Grant Option Price (p) Earliest Exercise Date Latest Exercise Date At 30 September 2021 At 30 September 2020 Paul Curtis PSP 2018 PSP 2018 PSP 2018 PSP 2018 Chris Buckenham PSP 2018 PSP 2018 PSP 2018 PSP 2018 Aug 18 104.80 02/08/21 01/08/28 Feb 20 109.33 20/02/23 19/02/30 July 20 63.17 23/07/23 22/07/30 Mar 21 83.50 02/03/24 01/03/31 Aug 18 104.80 02/08/21 01/08/28 Feb 20 109.33 20/02/23 19/02/30 July 20 63.17 23/07/23 22/07/30 Mar 21 83.50 02/03/24 01/03/31 60,000 50,000 30,000 30,000 60,000 50,000 30,000 - 170,000 140,000 60,000 40,000 25,000 20,000 145,000 315,000 60,000 40,000 25,000 - 125,000 265,000 During the year 50,000 share options were awarded to Directors as one award at an exercise price equivalent to the previous three day average market price to the Remuneration Committee meeting at which the awards were proposed, representing an exercise price of 83.5p (2020: two awards with a compositive average exercise price of 92.0p). Gordon Wakeford 27 January 2022 25 ANNUAL REPORT & ACCOUNTS 2021 BOARD REPORTS Corporate Governance Report Section 172 TheboardofDirectorsconfirmthatduringtheyearunderreview,ithasactedtopromotethelong-termsuccessofthe Companyforthebenefitoftheshareholders,whilehavingdueregardforthematterssetoutinsection172(1)(a)to(f) of the Companies Act 2006, these being: Matter Detail Referenced on Page(s) a. The likely consequences of any decision in the long term; • Company purpose • Business model and strategy • 7-8 • 7-8 b. Theinterestsofthecompany’s employees; • Longer term viability • 9, 12, 16 & 28 • Dividend policy • 5 • Risk appetite and risk management • 18-19 & 28 • Pension obligations • 10, 15-16 & 18 • Health, wellbeing and safety of our people • 10 • Engaging our people • Developing our people • Board employee engagement • Diversity and inclusion • 6 & 8 • 8 • 8 • 10 c. d. e. Theneedtofosterthecompany’s business relationships with suppliers, customers and others; • Business ethics & code of conduct • 9 & 31 • Corporate culture and ethical values • 6, 8, 9 & 31 Theimpactofthecompany’s operations on the community and the environment; • Environmental responsibility • 9 & 28 • Emission and energy management • Supporting our communities • 9 • 9 The desirability of the company maintaining a reputation for high standards of business conduct; and • Stakeholder propositions • 27-28 • Sustainability of our business model • 27 • Values statements and our culture • Our approach to a sustainable business • 8 • 7 • Internal controls • 9, 28-29 & 31 f. The need to act fairly between members of the company. • Investor engagement • Annual General Meeting • 5 & 32 • 32 & 36 26 ANNUAL REPORT & ACCOUNTS 2021 The Chairman is responsible for oversight, adoption, and communicationoftheGroup’sCorporateGovernance Model. Compliance is reviewed every six months and updated as necessary and appears on pages 27 to 32 of this report and on the website www.lpa-group.com. Despite being a micro-cap company with large founder family shareholders, the Group has consistently applied high standards of Corporate Governance for a number of years. In complying with Article 26 of the London Stock Exchange rules applicable to AIM listed entities, which requires AIM listed companies to apply a recognised Corporate Governance Code, the Group complies as far as is practicable with the Quoted CompanyAlliance’sCorporateGovernanceCode(the Code) and where we fall short of full compliance, explain what is required to achieve full compliance. No shortfalls havebeenidentified.Thisdocumentisanintegralpart oftheCompany’sAnnualReport,whichtheBoard considerstobea‘DocumentofRecord’subjecttosix monthlyreviews,whichwillberecordedontheGroup’s website, www.lpa-group.com. The Code The Code comprises ten principles, which are listed below,togetherwithastatementoftheGroup’scurrent position and, where this deviates from the code, an element of a Road Map to full compliance. Having rejuvenated the Board, the Group is committed to improving liquidity and the nature of the shareholder base to better equip the business with sources of equity funding, supporting its growth plans. In recent years the Group has relied upon debt funding to support its capital investments into capacity and capabilities and fund working capital requirements of full compliance. Inaddition,theGrouphasadopteda‘NorthStar’or ‘GuidingLight’principle,whichmaybeconsideredtobe a precis of the corporate governance principle. North Star Guiding Light • Conduct our business honestly, ethically and in sympathy with the environment • Innovate, design, procure and manufacture for long life, reliability and sustainability • Base our business in the UK • Provide employment, training and personal development • Engage with local communities • Engage with organisations representing the industries we serve and local and national government • Endeavour to be a good citizen BOARD REPORTS | CORPORATE GOVERNANCE REPORT Principle 1 Establish a strategy and business model which promote long-term value for shareholders The code requires a disclosure of this Principle in the Annual Report, which is included in Strategic Report on pages 5 to 20. The Group operates in markets dominated by large multinational corporates, with a wide supplier base populated by small and medium sized enterprises, both privately owned and quoted. The Group has grown organically and by acquisition and has always recognised thatitwilleitherbeaconsolidatorofsimilarSME’sby acquisition or consolidated by a larger multinational enterprisethroughbeingacquired. TheGrouphas relooked at its strategy and has a plan to grow the businessrecognisingthedifficulttradingconditions broughtonbytheeffectsofthepandemic.TheBoard itself has been rejuvenated to support the business and the management team in order to deliver the strategy and be responsive to constantly changing market conditions. The Executive Directors are responsible for the leadership and day-to-day management of the Group. This includes formulating and recommending the Group’sstrategyforBoardapprovalonceapproved, executing the strategy. Principle 2 Seek to understand and meet shareholder needs and expectations TheGroup’sshareholderbasehasbeendominated by founding family shareholders, former members of the board, a limited number of Institutions and approximatelyfivehundredprivateorrelativelysmall holdings. The market in the shares is relatively illiquid and there can be a wide spread between the bid and offerprice,makingdealingintheshareschallenging. Having rejuvenated the Board, the Group is committed to improving liquidity and the nature of the shareholder base to better equip the business with sources of equity funding, supporting its growth plans. In recent years the Group has relied upon debt funding to support its capital investments into capacity and capabilities and fund working capital requirements. Thefoundingfamiliesandsignificantshareholder Directors are no longer represented on the board. Investor liaison is the responsibility of the Chairman, supportedbytheGroup’sExecutive. The Group gives regular updates on progress through theyearandpublishessignificanteventsviathe Regulated News Service of the Stock Exchange. The 27 ANNUAL REPORT & ACCOUNTS 2021 BOARD REPORTS | CORPORATE GOVERNANCE REPORT Preliminary Announcement is made in late January and the Annual Report is published shortly thereafter. The Chairman normally gives an update at the Annual General Meeting in March. The Interim Announcement forthefirsthalfto31Marchismade,andtheInterim Report published, in late June. It has become recent practicetogiveanupdateontradingearlyinthefirst quarter,followingthecloseofthefinancialyearat30 September. Copies of all announcements are published on the website, www.lpa-group.com. TheGroup’sBrokersprepareanalysesoftheGroup’s performance and make these available to their clients, normally together with their trading expectations. TheGroup aimstomeetShareholders,prospective shareholders and other interested parties, immediately after the Interim and Final Announcements as recommended and organised by its Nominated Broker. The Chairman is available to shareholders throughout theyearand,subjecttoanyrulesregardingconfidential information, is able to discuss the strategic direction of the Group. The Board is acutely aware of its responsibility to ensure thatthereisnofalsemarketintheGroup’ssharesand to ensure the market is properly informed of changes in expectationsandsignificanteventsinatimelyway.The last 2 years have witnessed severe challenges for most businesses and especially in the sectors the Group operatesin.Thesesignificantchallengesaremanifested in the ability to forecast and manage expectations in the short term as our customers struggle to keep their projects on track and their commitments and orders to us to the agreed upon schedules. Some of these unforeseeable activities remain beyond the control of the Group. Principle 3 Take into account wider stakeholder and social responsibilities and their implications for long- term success The Board recognises that our people are our most valuableasset.StaffturnoveracrosstheGroupremains low, however Covid-19 has forced an increase as the Group has managed its resources and costs accordingly. StaffsurveysateachoftheGroup’sSitesareundertaken tomonitorandengagewithourstaffandensuretheir needs are being met. Apprenticeships, degree and other courses, support, training, and personal development areoffered.AttheoutsetofCovid-19theBoardandthe Executive together prepared a Covid-19 Pandemic Policy, which was described in the interim report in June 2020. This has served the Group well thus far and remains in place with the ongoing challenges Covid-19 presents. 28 TheGroup’scustomerbaseismainlycomprised of large multinationals who demand quality, reliability, value for money and on-time delivery. We endeavour to engage with our customers on many levels to ensure that we understand what is expected of us. We seek customer feedback, and we use metrics to monitor our own performance. We have developed our supplier base over many years andmeasuretheirperformanceusingKPI’s.Indifficult market conditions close relationships are essential to maintaintimely,costeffectiveandqualitysupplies. We rely on partners in our export markets to represent us between our own visits to customers. Many of these partnerships are long term and our export success reflectsourcollectiveresponsetochanginglocal market conditions. We are responsive to our local communities, engaging with schools and universities and supporting local youth sports and other charitable organisations. TheGroup’smantrais‘Long Life Reliability does not cost the Earth’, which means that we commit to the concept of whole life cost not only in terms of currency but also in the use of scarce resources including materials, energy and labour, designing in long life rather than obsolescence. Principle 4 Embed effective risk management, considering both opportunities and threats, throughout the Group ThePrincipalRisksandUncertaintiesareidentified in the Strategic Report, which is included on pages 18 & 19. Each trading entity includes a Successes, Opportunities, Failures and Threats (SOFT) Report within its monthly progress report, which is incorporated into the Group Performance Review, which is circulated to the board each month. Risk registers for entities identify key risks. Risk is considered at the monthly Executive Meetings comprising the Managing Directors or General Managers of the entities, the CEO and the CFO. The CEOandtheCFOincludecommentaryonidentified changes in risk in their reports to Board Meetings. Internal Controls are detailed below. Internal Control TheBoardhasoverallresponsibilityfortheGroup’s system of internal control, which is designed to provide reasonable but not absolute assurance against material misstatement or loss. The Board has assigned day-to-day responsibility for the continuous review of risk management to ANNUAL REPORT & ACCOUNTS 2021 BOARD REPORTS | CORPORATE GOVERNANCE REPORT the executive directors. The Board receives regular updatesonriskissuesandreviewstheeffectivenessof theGroup’ssystemsofinternalcontrolsinrelationto financial,operationalandcompliancecontrolsandrisk management. Risk management is discussed formally at each Board meeting. which also describes the Board Composition, Responsibility, Independence and the number of Board Meetings during the year, the nature and composition of the two board committees and details the time commitment and attendance record of directors at board and committee meetings. In addition, the Board reviewed the requirement for an internal audit function and having regard to the size of the Group, the costs of such a function versus the likely benefit,sufficientassuranceastothefunctioningofthe system of internal control, and that the circumstances confronting the Group remain unchanged, considered there was no such requirement at this time. Afteralongperiodofstability,theboard’srecent transition is close to conclusion following the retirement of the long serving Chief Executive and latterly Chairman, Peter Pollock, after 24 years of service. Robert B Horvath, appointed 1 February 2021 as Director and Chair elect, was appointed Independent Chairman from 9 August 2021. In relation to business risk a continuous process of risk assessment and reporting has been adopted. Executive Directors report regularly to the Board on major business risks faced by individual operating units and by the Group and how it is proposed that those risks be managed. Through this, business risks are assessed according to their nature and urgency and the Board considers what would be an appropriate response. TheBoardhasdefinedaformalscheduleofmatters specificallyreservedfordecisionbyitandthe delegated authorities of its committees and the Executive Directors. The Group has a clear organisation structure and reporting framework. Whilst the management of operating units exercise autonomy in the day-to-day running of their activities, given the size of the Group, the Executive Directors remain close to the decisions made at each operating unit. The Group has a system of budgeting, forecasting and reporting which enables the Board to set objectives and monitor performance. A budget is prepared annually, which includes detailed projections for the next two years, for review by the Board. Forecasts are reviewed and re-forecast at least twice annually, rolling forecasts are updated monthly, with interim monthly Flash reporting.TheGroup’sperformanceagainstbudget and forecast is continuously monitored by the executive directors, and by the Board at least quarterly. The Group operates an investment approval process. Board approval is required for all acquisitions and divestments. Principle 5 Maintain the Board as a well-functioning, balanced team led by the Chair AbiographyofeachoftheDirectorswhichidentifies whether they are executive or non-executive, together withadirectors’responsibilitiesstatementisincluded ontheGroup’swebsiteandwithintheAnnualReport, Andrew Jenner commenced 1 September 2021 as SeniorIndependentDirector(“SID”),LenPorterretired on 31 December 2021 at the conclusion of his term as Independent Director, Gordon Wakeford served throughout the year also as Independent Director. Paul Curtis and Chris Buckenham, as Executive Directors, also served throughout the year. Board Composition and Responsibility As of 1 January 2022, the Board comprises three independent Directors and two Executive Directors. There is a clear division of responsibility between the independent directors, including the Chairman and the executive. Robert B Horvath, Andrew Jenner and Gordon Wakeford are regarded as independent directors. They are from varied backgrounds and bring with them a range of skills and experience in commerce and industry. The Directors are judged to have made the necessary time commitmenttofulfiltheirroleswhichisevaluated through achievement of deadlines, commitments, availability, and attendance at meetings. The Board meets at least six times during the year, with additional meetings being convened as necessary. The Board has two standing committees, the Audit Committee and the Remuneration Committee, both having written terms of reference which are published ontheGroup’swebsite.ThesecomprisetheBoard’s independent directors who served through the year. From 1 September 2021 Andrew Jenner was appointed Chair of the Audit Committee and Senior Independent Director, Gordon Wakeford appointed Chair of the Remuneration Committee, having served as Audit Committee Chair from 1 April 2021 to 31 August 2021. Len Porter remained a member of both Committees through to 31 December 2021, stepping down as Audit and Remuneration Committee Chair and Senior Independent Director through 2021, facilitating an orderly hand over ahead of the end of his 7 year term. 29 ANNUAL REPORT & ACCOUNTS 2021 BOARD REPORTS | CORPORATE GOVERNANCE REPORT The Audit Committee meets at least twice a year. It is responsibleforreviewingarangeoffinancialmatters includingtheinterimandfinalaccounts,monitoring thecontrolswhichensuretheintegrityofthefinancial information reported to the shareholders, making recommendations to the Board in relation to the appointment of the external auditor, and approving the remuneration and terms of reference for the external auditor. It also meets with the external auditor who attends its meetings when required. The Remuneration Committee meets at least twice a year and its principal function is to determine executive remuneration policy and that of the Independent Chairman on behalf of the Board. In addition, the committee is responsible for supervising the various share option schemes and for the granting of options under them. A schedule of the Board meetings, its committees and the Director attendance compared to the meetings held is set out below: Year ending 30 September 2021 Board meetings Audit committee Remuneration committee No of meetings Executive Directors P V Curtis C J Buckenham P G Pollock (resigned 08/08/21) Independent Directors R B Horvath (appointed 01/02/21) A Jenner (appointed 01/09/21) G Wakeford L Porter (resigned 31/12/21) 9 9/9 9/9 7/8 6/6 1/1 9/9 9/9 5 n/a n/a n/a 2/2 1/1 5/5 5/5 4 n/a n/a n/a 1/1 0/0 4/4 4/4 Attendance at meetings by invitation is not shown – (n/a). AGM 2021 1 1/1 1/1 1/1 1/1 0/0 1/1 1/1 The principal responsibilities of the Board are to agree overall strategy and investment policy, to approve the annual budget, to monitor the performance of the senior management, and to ensure that there are proper internalfinancialcontrolsinplace.Thereisaformal schedule of matters reserved for Board approval. The nature and size of the Group ensures that the Board considers all major decisions. Directors are subject to election by shareholders at the firstopportunityaftertheirappointment,andtore-election thereafter at intervals of no more than three years. All directors have access to the advice and services of the company secretary, who is also responsible for ensuring that Board procedures are followed. There is also a procedure in place for any director to take independent professional advice, if necessary, at the Company’sexpense. Principle 6 Ensure that between them the directors have the necessary up-to-date experience, skills and capabilities The Board has a broad balance of skills and experience as well as personal qualities. Recent Board appointments have reinforced this balance, including the appointment of a new Independent Chairman from 9August,rotationofCommitteeChair’sandSenior Independent Director roles through 2021. The Board recognises that its small size limits the opportunity for gender balance and diversity, however, ensures that its recruitment processes are fair, and all candidates are considered and treated equally. The Board is not dominated by any one person or group of people with recent Board changes re-enforcing independence. 30 ANNUAL REPORT & ACCOUNTS 2021 BOARD REPORTS | CORPORATE GOVERNANCE REPORT The Chair will continue to evaluate the strengths and weaknesses of the Board and seek to address these together with other needs as the company evolves in any future appointments and in succession planning. adequateandalignedwiththeGroup’srequirements. The Group considers this approach compliant to the Code, Robert B Horvath as Chairman will continue to develop this area as part of the Road Map. This Annual Report, which is included on the website, identifieseachDirectorwiththeirbiography,which outlinetherelevantskills,qualificationsandprevious roles that each have held. Annual Reports will demonstrate the adequacy of the Board and identify any additional experience, skills, personal qualities, gender balance and capabilities necessary to deliver the strategyforthebenefitofshareholdersandshowhow directors are maintaining their skill sets. TheDirector’sachievethisrequirementsthrough participation and reporting on activities outside of the Company to develop and maintain their skills. Participation in Continuing Professional Development coursestomaintainprofessionalqualificationsand development of knowledge; industry and market forums; holding additional NED appointments to broaden knowledge, and engagement with bodies including the QCA and The Deloitte Academy are both monitored and actively encouraged. The Group considers this approach compliant in this area to the Code. AnnualReportswilldetailsignificantmattersrequiring externaladviceanddescribeanysignificantadvice provided internally to the Board by the Company Secretary or Senior Independent Director. Employer advice related to the transfer of the LPA Industries definedbenefitpensionSchemeintoaSectionofthe Deloitte Master Trust, together with advice associated with the successful defence of a wrongful dismissal claim following breach of Covid-19 guidelines and health and safety precautions in place, represented the key areas of advicefortheCompanyduringthe2021financialyear. Principle 7 Evaluate board performance based on clear and relevant objectives, seeking continuous improvement The objective has been to create a board with the necessaryskillsandexperiencetodelivertheGroup’s strategy over the medium term, following a period of board stagnation. The maintenance and development of the board skills matrix assisted the former Chairman in this process having been developed to form the basis of the Board rejuvenation process and recruitment. The skills and qualities of the Board have been assessed to ensure the recruitment process targeted those which would be lost through retirements and those the Company required for the future. A full assessment of the current and future Board skill sets was undertaken by the former Chairman who concluded these to be The Directors are adjudged to have performed at least as expected and individual performances reviewed accordingly. Principle 8 Promote a corporate culture that is based on ethical values and behaviours The Board, led by the Chair, promotes a sound ethical culture through its own behaviour and this is visible through the actions of the non-executive and executive teams. Corporate values guide the objectives and strategy of the business and the conduct of all aspects of business, including disclosures in this Annual Report. TheChair’sCorporateGovernancestatementinthe Annual Reports comments upon how the culture is consistentwiththeGroup’sobjectives,strategyand business model contained in the strategic report, the principal risks and uncertainties, how these are monitored and how a healthy corporate culture is promoted and assessed. The Group has a Code of Ethics and a Code of Conduct, whichDirectorsandotherofficersoftheGroupare expected to comply with and to record such instances asrequired,aspartoftheGroup’santi-bribery procedures. These are published on the website. Principle 9 Maintain governance structures and processes that are fit for purpose and support good decision-making by the Board The Group maintains governance structures and processes in line with its corporate culture and appropriate to its size and complexity, and capacity, appetite and tolerance, for risk. Its processes develop over time as the needs of the business and its development require. It is expected that given the small size of the Group therewillbelittledifferencebetween,theChair’s high-level explanation of the application of the Code in the Corporate Governance Statement in the Annual Report, and any other description of the roles and responsibilitiesoftheChair,ChiefExecutiveOfficer, ChiefFinancialOfficeroranyotherdirectorwith particular responsibilities. 31 ANNUAL REPORT & ACCOUNTS 2021 BOARD REPORTS | CORPORATE GOVERNANCE REPORT Principle 10 Communicate how the Group is governed and is performing by maintaining a dialogue with shareholders and other relevant stakeholders The Board believes that a healthy dialogue does exist between the Group and its stakeholders and shareholders, which should allow interested parties to come to informed decisions about the Group. The Board believes that through appropriate use oftheStockExchangeRegulatedNewsService(“RNS”) for announcements and the timely posting of all such announcements on the Group Website appropriate communication and reporting structures exist between the Group and all constituent parts of the shareholder base. The Preliminary Announcement, the Annual Report, theChairman’sremarksattheAnnualGeneralMeeting, the Interim Announcement, the Interim Statement, any ClosingUpdateinOctoberafterthefinancialyearend, togetherwithannouncementsofanysignificantevents, are all timely published via the RNS and posted on the website, and routinely inform all shareholders of the Group’sprogress. All shareholders are invited to the Annual General Meeting where there is both a formal and informal opportunity to ask questions either on the business ofthemeetingorspecificmattersofinterest. This Annual Report, which is posted on the website, describes the work of the Board committees undertaken during the year. It includes a remuneration report. Should the Group be unable to comply with any disclosure requirements of Principles 1-9 and omit them from the Annual Report or the Website, they will be disclosed, and their omission explained. AllvotesattheGroup’sGeneralMeetingsare announced on the RNS immediately after the close of the meeting and posted on the website. Shouldtherebeasignificantproportionofvotescast against a resolution at a General Meeting the Group would announce in a timely way by way of the RNS and on the website, the result, what action it intends to take to understand the reasons for the negative vote and what action, if any, it intends to take in the light of that vote. Voting at recent Annual General Meetings has been overwhelmingly in favour of all resolutions. Annual Reports, including the Notice of any General Meetingspublishedduringthelastfiveyearsare included on the website: www.lpa-group.com. Robert B Horvath Chairman 27 January 2022 32 ANNUAL REPORT & ACCOUNTS 2021 Directors’ Report The directors present their annual report together with theauditedfinancialstatementsfortheyearended30 September 2021. Results and Dividends The loss for the year amounted to £34,000 (2020: profit£595,000).Thedirectorsdonotrecommendthe paymentofafinalordinarydividendfor2021(2020:nil), which together with the interim dividend of nil (2020: nil) makes a total for the year of nil p per share (2020: nil p). ThefactorswhichhaveaffectedtheGroup’sbusiness activities in the current year, and which are likely toaffectitsfutureperformancearedetailedinthe Chairman’sStatement,ChiefExecutiveOfficers’Review and the Financial Review. The principal risks and uncertainties confronting the Group are set out on pages 18 and 19 and the key performance indicators used in assessing the progression of the business are set out on page 20. Principal Activities The principal activity of the Group continues to be designer, manufacturer and supplier of high reliability, LED based lighting and electronic systems, electro- mechanical systems and a distributor of engineered components.DescriptionsoftheGroup’sdevelopment and performance during the year, position at the year end and likely future prospects are reviewed in the Strategic Report on pages 5 to 20. BOARD REPORTS Substantial Shareholdings As far as the directors are aware the only shareholders with abeneficialinterestasat30September2021representing three per cent or more of the issued share capital were: No of Shares Percentage Peter Pollock Michael Rusch 1,000,000 960,022 Peter Gyllenhammar AB 832,843 Rights & Issues Investment Trust Plc Susan Thynne Marilyn Porter Stephen Brett 650,000 578,696 535,751 453,000 7.44% 7.14% 6.19% 4.83% 4.30% 3.98% 3.37% Research and Development The Group is committed to research and development activities to ensure its position as a market leader in the manufacture of electronic and electrical components, and systems in its market sectors. Directors and their Interests The current directors of the Company and brief biographical details are given on pages 34 & 35. During the year two Directors were appointed, on 1 February 2021 (Robert B Horvath) and 1 September 2021 (Andrew Jenner) respectively. One Director resigned (Peter Pollock), on 8 August 2021 (2020: one appointment and one resignation). A statement of their remuneration and interests in the ordinary shares of the Company and share options are set out in the Remuneration Report. The Company has made qualifying third-party indemnityprovisionsforthebenefitofitsdirectors.The Group maintained insurance cover during the year for its DirectorsandOfficersandthoseofsubsidiarycompanies underaDirectorsandOfficersliabilityinsurancepolicy against liabilities which may be incurred by them while carrying out their duties. No director had any material interest in any contract with the Group. In accordance with the articles of association Chris Buckenham and Paul Curtis retire by rotation at the forthcoming annual generalmeeting,andbeingeligible,offerthemselvesfor re-election, Andrew Jenner stands for re-appointment. 33 ANNUAL REPORT & ACCOUNTS 2021 BOARD REPORTS | DIRECTORS’ REPORT Directors’ Responsibilities Statement The directors are responsible for preparing the Strategic Report,theDirectors’Report,theseparateCorporate GovernanceStatement,andthefinancialstatementsin accordance with applicable law and regulations. Company law requires the directors to prepare group andcompanyfinancialstatementsforeachfinancial year. The directors have elected under company law and are required by the AIM Rules of the London Stock ExchangetopreparetheGroup’sfinancialstatements in accordance with International Accounting Standards in conformity with the requirements of the Companies Act 2006 (IFRS) and have elected under company lawtopreparetheCompanyfinancialstatementsin accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). Thegroupfinancialstatementsarerequiredbylawand international accounting standards in conformity with the requirements of the Companies Act 2006 to present fairly thefinancialpositionandperformanceofthegroup.The CompaniesAct2006providesinrelationtosuchfinancial statements that references in the relevant part of that Acttofinancialstatementsgivingatrueandfairvieware references to their achieving a fair presentation. Under company law the directors must not approve thefinancialstatementsunlesstheyaresatisfiedthat theygiveatrueandfairviewofthestateofaffairsof theGroupandtheCompanyandoftheprofitorlossof theGroupforthatperiod.Inpreparingthesefinancial statements, the directors are required to: • select suitable accounting policies and then apply them consistently; • make judgements and accounting estimates that are reasonable and prudent; • • forthegroupfinancialstatements,statewhetherthey have been prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006; fortheCompanyfinancialstatementsstate whether applicable UK accounting standards have been followed, subject to any material departures disclosedandexplainedinthecompanyfinancial statements; and • preparethefinancialstatementsonthegoingconcern basis unless it is inappropriate to presume that the Group and Company will continue in business. The directors are responsible for keeping adequate accountingrecordsthataresufficienttoshowand explaintheGroupandCompany’stransactionsand 34 disclose with reasonable accuracy at any time the financialpositionoftheGroupandCompanyandenable themtoensurethatthefinancialstatementscomplywith the Companies Act 2006. They are also responsible for safeguarding the assets of the Group and Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. Thedirectorsconfirmthat: • so far as each director is aware, there is no relevant auditinformationofwhichtheCompany’sauditoris unaware; and • the directors have taken all steps that they ought to have taken as Directors in order to make themselves aware of any relevant audit information and to establishthattheCompany’sauditorisaware of that information. The directors are responsible for the maintenance and integrityofthecorporateandfinancialinformation includedontheCompany’swebsite.Legislationin the United Kingdom governing the preparation and disseminationoffinancialstatementsmaydifferfrom legislation in other jurisdictions. Directors Biographies Robert B Horvath – Independent Chairman, born 1956, has a BSc degree in Economics from the University of Wales and is a Fellow of the Institute of Chartered Accountants in England and Wales, and a Fellow of Gray’sInn.HeservedArticleswithPriceWaterhouse andspenttwelveyearswiththefirmincludingtwo yearsintheUS.Hehasoverthirtyyears’experience inseniorfinancialandgeneralmanagementposts in Manufacturing Industry. He joined LPA Group on 1 February 2021 as Chair elect and was appointed Chairman on 9 August 2021. Previous appointments include Chairman of Sigmat Group, Chief Executive of Tenfore Holdings, Group Managing Director of Interior Services Group Plc and Group Financial Director of Higgins Group Plc and A&P Appledore Ship Builders Ltd. Other public appointments include Advisor to and Chairman of Worth Abbey, NED at Defence Infrastructure Organisation and advisor to HM Treasury on PFI contracts. Paul Curtis – Chief Executive Officer (CEO), born 1972,joinedChannelElectricEquipmentLtd(“LPA ChannelElectric”),LPA’shighlysuccessfuldistribution and manufacturing business, as an apprentice in September1988andachievedanMBA.Paulhasfulfilled engineering and sales management roles during his career. He served as Sales and Marketing Director of LPA Connection Systems from 2007 to 2010, before returning to LPA Channel Electric as Managing Director, when he became a member of the Group Executive, ANNUAL REPORT & ACCOUNTS 2021 BOARD REPORTS | DIRECTORS’ REPORT reporting to the Group Chief Executive. Following his appointmenttoChiefOperatingOfficeron1October 2018 and a period as acting Managing Director of LPA Connection Systems, he was appointed Chief Executive Officeron1April2020. Chris Buckenham – Chief Financial Officer (CFO) and CompanySecretary,born1971,trainedandqualified asacharteredcertifiedaccountantin1996and registered auditor in 1998, working in accountancy practice where he became Partner. He specialised asaLeadAdvisorwithGrantThornton’scorporate financeteamin2000,focusedonSME’sandtraditional industries, providing advice, working with management teamsalongsidefinancialinstitutionsandprofessional advisors, before leaving the profession in 2005. Prior to joining LPA Group in October 2018, he held Finance Director positions in privately owned manufacturing andengineeringbusinessesandworkedfortheSmurfit Kappa Group, following their acquisition of CRP Print & Packaging Ltd in 2013. He joined the Board in March 2018 having joined the Group in October 2017. Andrew Jenner – Senior Independent Director (SID), born 1969, holds a BSc in Accounting with First Class Honors from the University of Hull and is a Member of the Institute of Chartered Accountants England and Wales. Andrew is an experienced Chief Financial OfficerandNon-ExecutiveDirectorhavingheldsenior positions in a number of FTSE100, 250 and privately heldcompaniesandhasworkedindifferentsectors including manufacturing, services, engineering, rail and construction. Since February 2018 he has been CFO of Petainer, a manufacturer of sustainable plasticpackagingforthedrinksindustryworldwide. Petainer is owned by KKR, a leading global investment firm.PreviousappointmentsincludeNEDandAudit Committee Chair of Galliford Try Plc, NED at E.W. Beard, CFOatSercoGroupPlcandCFOatGlobalOfficeGroup. Andrew was appointed to LPA Group on 1 September 2021, is the Audit Committee Chair and a member of the Remuneration Committee. Gordon Wakeford – Independent Director born 1962, formerlyChiefExecutiveOfficerofSiemensMobility Limited UK, joined the board as a Non-Executive Directorwitheffectfrom1April2020.HeholdsaFirst Class Honors Degree in Mechanical Engineering, is a Chartered Engineer and Fellow of the Chartered Institute of Highways and Transportation. He is highly experienced, having worked at very senior levels within industry and with Government. He is a former Chairman of the Railway Industry Association and Chair of the Rail Supply Group. He was a member of the National College for High Speed Rail Industrial Advisory Board and the CBI Manufacturing Council. He is a member of the Board’sAuditandRemunerationCommittees,wasChair of the Audit Committee from 1 April 2021 to 31 August 2021 and was appointed Chair of the Remuneration Committee from 1 September 2021. 35 ANNUAL REPORT & ACCOUNTS 2021 BOARD REPORTS | DIRECTORS’ REPORT Annual General Meeting The annual general meeting is to be held at 10:30 onThursday24March2022attheofficesoffinnCap, 1 Bartholomew Close, London, EC1A 7BL. The Notice of Meeting is set out on pages 102 to 105. Special business includes four resolutions which relate to share capital: 1. an ordinary resolution to renew the authority of the directors to allot shares generally. 2. is a special resolution to give power to the directors information required by the Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008 Sch. 7 to be contained in the Directors’Report. Financial risk management disclosures are detailed in note 17. Post Balance sheet events The Directors consider there to be no post balance sheet events. toallotequitysecuritiesforcashwithoutfirstoffering them to existing shareholders. Auditors RSMUKAuditLLParewillingtocontinueinoffice.In accordance with section 485 of the Companies Act 2006, a resolution proposing that they be re-appointed will be put to the Annual General Meeting. By order of the Board Chris Buckenham Company Secretary 27 January 2022 LPA Group Plc is registered in England No 00686429 3. is a special resolution to permit the Company to make market purchases of its own shares. 4. isanordinaryresolutiontoincreasetheCompany’s authorised share capital to £2,500,000 divided into 25,000,000 ordinary shares of 10 pence each. Ofthefourresolutions,thefirstthreearethesameas thosesoughtandapprovedatlastyear’sannualgeneral meeting, are part of the portfolio of powers commonly grantedtodirectorstoensureflexibility,should appropriate circumstances arise, to either allot shares, ormakepurchasesoftheCompany’sownsharesinthe best interests of shareholders. Each authority will run through until the next annual general meeting. Information in other reports The Company has chosen, in accordance with the Companies Act 2006 s414C(11), to set out in the Chairman’sStatement,FinancialReview,Strategic Report and Corporate Governance Statement, certain 36 ANNUAL REPORT & ACCOUNTS 2021 COMPANY INFORMATION 37 ANNUAL REPORT & ACCOUNTS 2021COMPANY INFORMATION | CHAIRMAN’S STATEMENT COMPANY INFORMATION Company Information Company contacts Directors Robert B Horvath Independent Chairman PaulCurtisChiefExecutiveOfficer ChrisBuckenhamChiefFinancialOfficer Andrew Jenner Senior Independent Director Gordon Wakeford Independent Director Secretary Chris Buckenham Registered Office Light&PowerHouse,ShireHill,SaffronWalden,CB113AQ,UK Registered Number 00686429 Website www.lpa-group.com Nominated Adviser Cairn Financial Advisers LLP Broker finnCap 107 Cheapside London EC2V 6DN 1 Bartholomew Close London EC1A 7BL Auditors RSM UK Audit LLP Bankers Barclays Bank Plc 2nd Floor, North Wing East Abacus House City House, Hills Road Castle Park, Castle Hill Registrars Cambridge CB2 1RE Link Group 10th Floor Central Square 29 Wellington Street Leeds, LS1 4DL Trading subsidiaries LPA Group Plc headquarters is situated at, and all LPA Group entities have their registered address at: Light & PowerHouse,ShireHill,SaffronWalden,CB113AQ,UK. Trading addresses: LPA Group entities operate as distinct businesses through appointed Executive Teams. Cambridge CB3 0AN Solicitors Eversheds Sutherland (International) LLP 115 Colmore Row Birmingham B3 3AL Light & Power House, Shire Hill, Saffron Walden, CB11 3AQ, UK LPA Industries Ltd / Haswell Engineers Ltd – trading as LPA Connection Systems LPA House, Ripley Drive, Normanton, West Yorkshire, WF6 1QT, UK Excil Electronics Ltd – trading as LPA Lighting Systems Bath Road, Thatcham, Berkshire, RG18 3ST, UK Channel Electric Equipment Ltd – trading as LPA Channel Electric 38 ANNUAL REPORT & ACCOUNTS 2021 COMPANY INFORMATION 39 ANNUAL REPORT & ACCOUNTS 2021 40 ANNUAL REPORT & ACCOUNTS 2021COMPANY INFORMATION | CHAIRMAN’S STATEMENT GROUP FINANCIAL STATEMENTS IndependentAuditor’sReport Consolidated Income Statement 42 49 Consolidated Statement of Comprehensive Income 50 Consolidated Balance Sheet Consolidated Statement of Changes in Equity Consolidated Cash Flow Statement Notes to the Financial Statements 51 52 53 56 41 ANNUAL REPORT & ACCOUNTS 2021GROUP FINANCIAL STATEMENTS | CHAIRMAN’S STATEMENT GROUP FINANCIAL STATEMENTS Independent Auditor’s Report Opinion WehaveauditedthefinancialstatementsofLPAGroupPLC(the‘parentcompany’)anditssubsidiaries(the‘group’) for the year ended 30 September 2021 which comprise Consolidated Income Statement, Consolidated Statement of Comprehensive Income, Consolidated and Company Balance Sheets, Consolidated and Company Statements of Changes inEquity,ConsolidatedCashflowStatementandnotestothefinancialstatements,includingsignificantaccountingpolicies. Thefinancialreportingframeworkthathasbeenappliedinthepreparationofthegroupfinancialstatementsisapplicable lawandInternationalAccountingStandardsinconformitywiththerequirementsoftheCompaniesAct2006.Thefinancial reportingframeworkthathasbeenappliedinthepreparationoftheparentcompanyfinancialstatementsisapplicablelaw andUnitedKingdomAccountingStandards,includingFinancialReportingStandard102“TheFinancialReportingStandard applicableintheUKandRepublicofIreland”(UnitedKingdomGenerallyAcceptedAccountingPractice). In our opinion: • thefinancialstatementsgiveatrueandfairviewofthestateofthegroup’sandoftheparentcompany’saffairsasat 30September2021andofthegroup’slossfortheyearthenended; • thegroupfinancialstatementshavebeenproperlypreparedinaccordancewithInternationalAccountingStandards in conformity with the requirements of the Companies Act 2006; • theparentcompanyfinancialstatementshavebeenproperlypreparedinaccordancewithUnitedKingdom Generally Accepted Accounting Practice; and • thefinancialstatementshavebeenpreparedinaccordancewiththerequirementsoftheCompaniesAct2006. Basis for opinion We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. OurresponsibilitiesunderthosestandardsarefurtherdescribedintheAuditor’sresponsibilitiesfortheauditofthe financialstatementssectionofourreport.Weareindependentofthegroupandtheparentcompanyinaccordance withtheethicalrequirementsthatarerelevanttoourauditofthefinancialstatementsintheUK,includingtheFRC’s EthicalStandardasappliedtolistedentitiesandwehavefulfilledourotherethicalresponsibilitiesinaccordancewith theserequirements.Webelievethattheauditevidencewehaveobtainedissufficientandappropriatetoprovide a basis for our opinion. Conclusions relating to going concern Inauditingthefinancialstatements,wehaveconcludedthatthedirectors’useofthegoingconcernbasisofaccounting inthepreparationofthefinancialstatementsisappropriate.Ourevaluationofthedirectors’assessmentofthegroup’s andparentcompany’sabilitytocontinuetoadoptthegoingconcernbasisofaccountingincluded: • understandinghowthecashflowforecastsforthegoingconcernperiodhadbeenpreparedandthe assumptions adopted; • testing of the integrity of the forecast model to ensure it was operating as expected; • challenging the key assumptions within the forecast with agreement to supporting data where possible; • reviewing the calculation and level of headroom for debt covenants including understanding and evaluating available management actions to cover any shortfall; • review and consideration of the appropriateness of the sensitivity analysis performed by management and available actions should performance be behind expectations. 42 ANNUAL REPORT & ACCOUNTS 2021 GROUP FINANCIAL STATEMENTS | INDEPENDENT AUDITOR’S REPORT Management forecasts adopted by the Board show the ability to operate within existing banking facilities even if sales are significantlybelowcurrentexpectations.Wedohowevernotethatshouldtherebeadditionalsignificantdelaysinproject- based work then there is an increased risk of a covenant breach. The Directors expect to be able to mitigate any shortfall by available actions and if required expect to receive continued support from the bank who withdrew the requirement for the covenants to be measured at 30 September 2021. Basedontheworkwehaveperformed,wehavenotidentifiedanymaterialuncertaintiesrelatingtoeventsorconditions that,individuallyorcollectively,maycastsignificantdoubtonthegroup’sortheparentcompany’sabilitytocontinueasa goingconcernforaperiodofatleasttwelvemonthsfromwhenthefinancialstatementsareauthorisedforissue. Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report. Summary of our audit approach Key audit matters Group • Revenue recognition • Valuation of inventory Parent Company • Nokeyauditmatterswereidentified Materiality Group • Overall materiality: £183,000 (2020: £208,000) • Performance materiality: £137,000 (2020: £156,000) Parent Company • Overall materiality: £151,000 (2020: £60,000) • Performance materiality: £113,000 (2020: £45,000) Scope Our audit procedures covered 100% of revenue, 98% of total assets and 98% of loss before tax. Key audit matters Keyauditmattersarethosemattersthat,inourprofessionaljudgment,wereofmostsignificanceinourauditofthegroup financialstatementsofthecurrentperiodandincludethemostsignificantassessedrisksofmaterialmisstatement (whetherornotduetofraud)weidentified,includingthosewhichhadthegreatesteffectontheoverallauditstrategy,the allocationofresourcesintheauditanddirectingtheeffortsoftheengagementteam.Thesematterswereaddressedin thecontextofourauditofthegroupfinancialstatementsasawhole,andinformingouropinionthereon,andwedonot provide a separate opinion on these matters. 43 ANNUAL REPORT & ACCOUNTS 2021 GROUP FINANCIAL STATEMENTS | INDEPENDENT AUDITOR’S REPORT Revenue recognition Key audit matter description Thegroup’srevenuecontractsinvolvethedesign,manufactureandsupplyofvarious products. There is management judgement required to determine the performance obligations in the contracts, the allocation of revenue to each of these obligations and ensuring that income is appropriately recognised in line with the requirements of IFRS 15. The main judgement is whether the design/engineering stage should be a separate performance obligation or whether there is only one performance obligation for a contract in relation to the supply of products. How the matter was addressed in the audit • Wereviewedandchallengedmanagement’sassessmentoftheperformance obligationsidentifiedandensuredthatincomewasappropriatelyallocatedtoeach of the performance obligations. • Weperformedcut-offtestingandsubstantivetestingprocedurestovalidate that the revenue recognised in the year was in line with the contractual terms and IFRS 15 requirements. • Wealsoconsideredtheadequacyofthegroup’srevenuerecognitionaccounting policy as disclosed in note 1M and the key judgement disclosure in relation to revenue recognition in note 1R. Valuation of inventory Key audit matter description Inventory is recognised in the balance sheet at the cost of bringing it to its present location and condition. The cost of inventory includes direct materials, direct labour and a proportion of production overheads based on normal levels of activity. There is management judgement involved in the calculation of the overhead rates to be absorbed and the provision of slow moving or obsolete inventory. How the matter was addressed in the audit • We performed substantive testing over a sample of inventory items, verifying costs to supporting documentation and ensuring a suitable allocation of labour and overheads. • We reviewed and tested the year-end inventory provisioning calculations prepared by management, including their arithmetic integrity. We have challenged management on the assumptions adopted within the provisioning calculations. We performed testing to ensure that the valuation of inventory is stated at the lower of cost and net realisable value by comparing the sales value of the products to their actual cost. • Wealsoconsideredtheadequacyofthegroup’sinventoryaccountingpolicy as disclosed in note 1J and the disclosures in relation to inventory provisions in note 1R and note 12. 44 ANNUAL REPORT & ACCOUNTS 2021 GROUP FINANCIAL STATEMENTS | INDEPENDENT AUDITOR’S REPORT Our application of materiality When establishing our overall audit strategy, we set certain thresholds which help us to determine the nature, timing andextentofourauditprocedures.Whenevaluatingwhethertheeffectsofmisstatements,bothindividuallyand onthefinancialstatementsasawhole,couldreasonablyinfluencetheeconomicdecisionsoftheuserswetake into account the qualitative nature and the size of the misstatements. Based on our professional judgement, we determined materiality as follows: Group Parent company Overall materiality £183,000 (2020: £208,000) £151,000 (2020: £60,000) Basis for determining overall materiality 1% of revenue (2020: 1% of revenue) 1.8% of total assets (2020: 1.8% of net assets) Rationale for benchmark applied Revenue was chosen as the group monitors revenue-based metrics in its key performance indicators. Total assets was chosen as the entity is a non-trading holding company. Performance materiality £137,000 (2020: £156,000) £113,000 (2020: 45,000) Basis for determining performance materiality Reporting of misstatements to the Audit Committee 75% of overall materiality 75% of overall materiality Misstatements in excess of £9,000 and misstatements below that threshold that, in our view, warranted reporting on qualitative grounds. Misstatements in excess of £7,560 and misstatements below that threshold that, in our view, warranted reporting on qualitative grounds. An overview of the scope of our audit The group consists of 5 components, all of which are based in the UK. The coverage achieved by our audit procedures was: Number of components Revenue Total assets Loss before tax Full scope audit Total 4 4 100% 100% 98% 98% 98% 98% Analytical procedures at group level were performed for the remaining component. All component audits were undertaken by RSM UK Audit LLP. 45 ANNUAL REPORT & ACCOUNTS 2021 GROUP FINANCIAL STATEMENTS | INDEPENDENT AUDITOR’S REPORT Other information Theotherinformationcomprisestheinformationincludedintheannualreport,otherthanthefinancialstatements andourauditor’sreportthereon.Thedirectorsareresponsiblefortheotherinformationcontainedwithintheannual report.Ouropiniononthefinancialstatementsdoesnotcovertheotherinformationand,excepttotheextent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistentwiththefinancialstatementsorourknowledgeobtainedinthecourseoftheauditorotherwiseappears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are requiredtodeterminewhetherthisgivesrisetoamaterialmisstatementinthefinancialstatementsthemselves. 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’Reportforthefinancialyearforwhich thefinancialstatementsarepreparedisconsistentwiththefinancialstatements;and • theStrategicReportandtheDirectors’Reporthavebeenpreparedinaccordancewithapplicable legal requirements. 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 thecourseoftheaudit,wehavenotidentifiedmaterialmisstatementsintheStrategicReportortheDirectors’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 • theparentcompanyfinancialstatementsarenotinagreementwiththeaccountingrecordsandreturns;or • certaindisclosuresofdirectors’remunerationspecifiedbylawarenotmade;or • we have not received all the information and explanations we require for our audit. Responsibilities of directors Asexplainedmorefullyinthedirectors’responsibilitiesstatementsetoutonpage34,thedirectorsareresponsible forthepreparationofthefinancialstatementsandforbeingsatisfiedthattheygiveatrueandfairview,andforsuch internalcontrolasthedirectorsdetermineisnecessarytoenablethepreparationoffinancialstatementsthatarefree from material misstatement, whether due to fraud or error. Inpreparingthefinancialstatements,thedirectorsareresponsibleforassessingthegroup’sandtheparent company’sabilitytocontinueasagoingconcern,disclosing,asapplicable,mattersrelatedtogoingconcernandusing 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 Ourobjectivesaretoobtainreasonableassuranceaboutwhetherthefinancialstatementsasawholearefreefrom materialmisstatement,whetherduetofraudorerror,andtoissueanauditor’sreportthatincludesouropinion. 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 consideredmaterialif,individuallyorintheaggregate,theycouldreasonablybeexpectedtoinfluencetheeconomic decisionsofuserstakenonthebasisofthesefinancialstatements. 46 ANNUAL REPORT & ACCOUNTS 2021 GROUP FINANCIAL STATEMENTS | INDEPENDENT AUDITOR’S REPORT The extent to which the audit was considered capable of detecting irregularities, including fraud Irregularities are instances of non-compliance with laws and regulations. The objectives of our audit are to obtain sufficientappropriateauditevidenceregardingcompliancewithlawsandregulationsthathaveadirecteffectonthe determinationofmaterialamountsanddisclosuresinthefinancialstatements,toperformauditprocedurestohelp identifyinstancesofnon-compliancewithotherlawsandregulationsthatmayhaveamaterialeffectonthefinancial statements,andtorespondappropriatelytoidentifiedorsuspectednon-compliancewithlawsandregulations identifiedduringtheaudit. In relation to fraud, the objectives of our audit are to identify and assess the risk of material misstatement ofthefinancialstatementsduetofraud,toobtainsufficientappropriateauditevidenceregardingtheassessedrisks of material misstatement due to fraud through designing and implementing appropriate responses and to respond appropriatelytofraudorsuspectedfraudidentifiedduringtheaudit. However, it is the primary responsibility of management, with the oversight of those charged with governance, to ensurethattheentity’soperationsareconductedinaccordancewiththeprovisionsoflawsandregulationsandforthe prevention and detection of fraud. In identifying and assessing risks of material misstatement in respect of irregularities, including fraud, the group audit engagement team and component auditors: • obtained an understanding of the nature of the industry and sector, including the legal and regulatory frameworks that the group and parent company operate in and how the group and parent company are complying with the legal and regulatory frameworks; • inquiredofmanagement,andthosechargedwithgovernance,abouttheirownidentificationandassessmentofthe risks of irregularities, including any known actual, suspected or alleged instances of fraud; • discussed matters about non-compliance with laws and regulations and how fraud might occur including assessmentofhowandwherethefinancialstatementsmaybesusceptibletofraud. AllrelevantlawsandregulationsidentifiedataGrouplevelandareassusceptibletofraudthatcouldhaveamaterial effectonthefinancialstatementswerecommunicatedtocomponentauditors.Anyinstancesofnon-compliancewith lawsandregulationsidentifiedandcommunicatedbyacomponentauditorwereconsideredinourauditapproach. Themostsignificantlawsandregulationsweredeterminedasfollows: Legislation / Regulation Additional audit procedures performed by the Group audit engagement team and component auditors included: UK-adopted IAS, FRS102 and Companies Act 2006 Reviewofthefinancialstatementdisclosuresandtestingtosupporting documentation; Completion of disclosure checklists to identify areas of non-compliance. Tax compliance regulations Inspection of advice received from external tax advisors; Inspection of correspondence with local tax authorities Health and safety ISAs limit the required audit procedures to identify non-compliance with these laws and regulations to inquiry of management and where appropriate, those charged with governance. 47 ANNUAL REPORT & ACCOUNTS 2021 GROUP FINANCIAL STATEMENTS | INDEPENDENT AUDITOR’S REPORT Theareasthatweidentifiedasbeingsusceptibletomaterialmisstatementduetofraudwere: Risk Audit procedures performed by the audit engagement team: Revenue recognition See key audit matters above. In addition, we reviewed revenue journals for appropriateness. Management override of controls Testing the appropriateness of journal entries and other adjustments; Assessing whether the judgements made in making accounting estimates are indicative of a potential bias; and Evaluatingthebusinessrationaleofanysignificanttransactionsthatareunusualoroutside the normal course of business. AfurtherdescriptionofourresponsibilitiesfortheauditofthefinancialstatementsislocatedontheFinancial ReportingCouncil’swebsiteat:www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’sreport. Use of our report Thisreportismadesolelytothecompany’smembers,asabody,inaccordancewithChapter3ofPart16ofthe CompaniesAct2006.Ourauditworkhasbeenundertakensothatwemightstatetothecompany’smembersthose matterswearerequiredtostatetotheminanauditor’sreportandfornootherpurpose.Tothefullestextentpermitted bylaw,wedonotacceptorassumeresponsibilitytoanyoneotherthanthecompanyandthecompany’smembersas a body, for our audit work, for this report, or for the opinions we have formed. Neil Stephenson (Senior Statutory Auditor) For and on behalf of RSM UK Audit LLP, Statutory Auditor Chartered Accountants 2nd Floor, North Wing East City House, Hills Road Cambridge CB2 1RE 27 January 2022 48 ANNUAL REPORT & ACCOUNTS 2021 GROUP FINANCIAL STATEMENTS Consolidated Income Statement For the year ended 30 September 2021 Continuing operations Revenue Cost of Sales Gross Profit Distribution Costs Administrative Expenses Other Operating Income Underlying Operating (Loss)/Profit Share Based Payments Exceptional Costs Operating (Loss)/Profit Finance Income Finance Costs (Loss)/Profit Before Tax Taxation (Loss)/Profit for the Year Attributable to: - Equity Holders of the Parent (Loss)/Earnings per Share Basic Diluted Thenotesonpages56to88formanintegralpartofthesefinancialstatements. Note 2021 £000 2020 £000 2 18,265 20,711 (14,558) (16,017) 3,707 (1,562) (2,710) 217 (274) (28) (46) (348) 47 (86) (387) 353 (34) (34) (0.27)p (0.27)p 6 20 6 6 4 5 7 8 4,694 (1,514) (2,897) 333 783 (36) (131) 616 41 (106) 551 44 595 595 4.82p 4.65p 49 ANNUAL REPORT & ACCOUNTS 2021 GROUP FINANCIAL STATEMENTS Consolidated Statement of Comprehensive Income For the year ended 30 September 2021 (Loss)/Profit for the Year (34) 595 Note 2021 £000 2020 £000 Other Comprehensive Income/(Expense) Items that will not be reclassified to profit or loss: Actuarial gain/(loss) on pension scheme Deferredtaxondefinedbenefitscheme Other Comprehensive Income Net of Tax 21 18 1,849 (601) 1,248 (427) 28 (399) Total Comprehensive Income for the Year 1,214 196 Attributable to: - Equity Holders of the Parent 1,214 196 Thenotesonpages56to88formanintegralpartofthesefinancialstatements. 50 ANNUAL REPORT & ACCOUNTS 2021 Consolidated Balance Sheet At 30 September 2021 Co No: 00686429 Non-Current Assets Intangible Assets Tangible Assets Right of Use Assets RetirementBenefits Current Assets Inventories Trade and Other Receivables Current Tax Receivable Cash and Cash Equivalents Total Assets Current Liabilities Bank Loan Lease Liabilities Trade and Other Payables Non-Current Liabilities Bank Loan Lease Liabilities Deferred Tax Liabilities Total Liabilities Net Assets Equity Share Capital Investment in Own Shares Share Premium Account Share Based Payment Reserve Merger Reserve Retained Earnings Equity Attributable to Shareholders of The Parent Note 9 10 11 21 12 13 15 16 14 15 16 18 19 19 19 19 19 19 Thenotesonpages56to88formanintegralpartofthesefinancialstatements. ThefinancialstatementswereapprovedbytheBoardon27January2022andsignedonitsbehalfby: P V Curtis Director C J Buckenham Director GROUP FINANCIAL STATEMENTS 2021 £000 1,405 5,188 1,245 3,943 2020 £000 1,386 5,546 1,438 1,964 11,781 10,334 4,702 4,111 55 1,358 10,226 3,968 5,447 30 845 10,290 22,007 20,624 (191) (323) (4,180) (4,694) (2,123) (354) (723) (3,200) (7,894) 14,113 1,345 (324) 929 60 230 11,873 14,113 (188) (406) (4,193) (4,787) (2,313) (584) (389) (3,286) (8,073) 12,551 1,266 (324) 708 118 230 10,553 12,551 51 ANNUAL REPORT & ACCOUNTS 2021 GROUP FINANCIAL STATEMENTS Consolidated Statement of Changes in Equity For the year ended 30 September 2021 Investment in Own Shares Share Premium Account Share Based Payment Reserve Merger Reserve Retained Earnings £000 £000 £000 £000 £000 Share Capital £000 Total £000 2021 At 1 October 2020 1,266 (324) 708 118 230 10,553 12,551 (Loss) for the Year Actuarial gain on pension scheme (net of tax) Total Comprehensive Income - - - Proceeds from issue of shares 79 Share based payments Tax on share-based payments Transfer on exercise of share options Transactions with Owners - - - 79 - - - - - - - - At 30 September 2021 1,345 (324) - - - 221 - - - 221 929 - - - - 28 - (86) (58) - - - - - - - - (34) (34) 1,248 1,248 1,214 1,214 - - 20 86 106 300 28 20 - 348 60 230 11,873 14,113 Investment in Own Shares Share Premium Account Share Based Payment Reserve Merger Reserve Retained Earnings £000 £000 £000 £000 £000 Share Capital £000 Total £000 2020 At 1 October 2019 1,266 (324) 708 82 230 10,362 12,324 ProfitfortheYear Actuarial (loss) on pension scheme (net of tax) Total Comprehensive Income Share based payments Tax on share-based payments Transactions with owners At 30 September 2020 - - - - - - - - - - - - - - - - - - - - - 36 - 36 - - - - - - 595 595 (399) 196 (399) 196 - (5) (5) 36 (5) 31 1,266 (324) 708 118 230 10,553 12,551 Thenotesonpages56to88formanintegralpartofthesefinancialstatements. 52 ANNUAL REPORT & ACCOUNTS 2021 GROUP FINANCIAL STATEMENTS Consolidated Cash Flow Statement For the year ended 30 September 2021 (Loss)/ProfitBeforeTax Finance Costs Finance Income Operating(Loss)/Profit Adjustments for: Amortisation of Intangible Assets Depreciation of Tangible Assets Depreciation of Right of Use Assets Loss on sale of Plant and Equipment Loss on disposal of Intangible Assets Equity Settled Share Based Payments Operating cash flow before movements in working capital Movements in Working Capital: (Increase) in Inventories Decrease/(Increase) in Trade and Other Receivables (Decrease)/Increase in Trade and Other Payables Cash generated from operations Income Taxes Received DefinedBenefitPensionContributionslesssettlements Net cash inflow from operating activities Purchase of Software Purchase of Property, Plant & Equipment Proceeds from Sale of Property, Plant and Equipment Expenditure on Capitalised Development Costs Net cash outflow from investing activities Repayment of Bank Loan Principal elements of Lease Liabilities Interest Paid Proceeds from Issue of Share Capital Net cash outflow from financing activities Net increase/(decrease) in Cash and Cash Equivalents Cash and Cash Equivalents at start of the year Cash and Cash Equivalents at end of the year Reconciliation of cash and cash equivalents Cash and Cash Equivalents in Current Assets 2021 £000 (387) 86 (47) (348) 111 484 273 - 53 28 601 (734) 1,336 (8) 1,195 77 (83) 1,189 (16) (100) - (167) (283) (187) (420) (86) 300 (393) 513 845 1,358 2020 £000 551 106 (41) 616 95 494 241 61 - 36 1,543 (144) (902) 245 742 131 (100) 773 (22) (150) 6 (100) (266) (84) (367) (100) - (551) (44) 889 845 1,358 845 53 ANNUAL REPORT & ACCOUNTS 2021 GROUP FINANCIAL STATEMENTS | CONSOLIDATED CASH FLOW STATEMENT Net Debt An analysis of the change in net debt is shown below: Bank Loan Lease Liabilities Cash and Cash Equivalents At 1 October 2020 NewLeaseObligationsandmodifications Interest Costs Repayment of Borrowings/Lease Liabilities Other Cash (Generated) £000 2,501 - 57 (244) - £000 990 107 30 (450) - Net Debt £000 2,646 107 86 - £000 (845) - (1) 694 (1,206) (1,206) At 30 September 2021 2,313 677 (1,358) 1,633 At 1 October 2019 Adoption of IFRS 16 New Lease Obligations Interest Costs Repayment of Borrowings/Lease Liabilities Other Cash (Generated) Bank Loan Lease Liabilities Cash and Cash Equivalents Net Debt £000 2,585 - - 68 (152) - £000 724 157 470 38 (399) - £000 (889) - - - 551 (507) £000 2,420 157 470 106 - (507) At 30 September 2020 2,501 990 (845) 2,646 Thenotesonpages56to88formanintegralpartofthesefinancialstatements 54 ANNUAL REPORT & ACCOUNTS 2021 55 ANNUAL REPORT & ACCOUNTS 2021GROUP FINANCIAL STATEMENTS | CHAIRMAN’S STATEMENT GROUP FINANCIAL STATEMENTS Notes to the Financial Statements For the Year ended 30 September 2021 1. Accounting Policies A. General Information LPAGroupPlc(the“Company”)isapubliccompany incorporated, domiciled and registered in England andWales.TheCompany’sregisterednumber is00686433anditsregisteredofficeaddressis Light&PowerHouse,ShireHill,SaffronWalden, CB11 3AQ, UK. The Company operates through its subsidiary trading entities from three locations in the UK as detailed on page 7. B. Basis of Preparation Theconsolidatedfinancialstatementshave been prepared in accordance with International Accounting Standards in conformity with the requirements of the Companies Act 2006 (IFRS). Thefinancialstatementshavebeenpreparedunder the historical cost convention with the exception of certain items which are measured at fair value, as disclosed in the accounting policies below. The measurement bases and principal accounting policies of the Group are set out below. Thefinancialstatementsarepresentedin poundssterling(theCompany’sfunctionaland presentational currency), rounded to the nearest thousand (£000). C. Going Concern TheGroup’sbusinessactivitiesandthefactors likelytoaffectitsfutureperformancearesetoutin the Strategic Report (which comprises information aboutLPA’sBusinessmodelandstrategy,the Chairman’sStatement,theChiefExecutiveOfficer’s Review, the Financial Review, Key Performance Indicators and Principal Risks and Uncertainties) on pages5to20.ThefinancialpositionoftheGroup, itscashflows,liquiditypositionandborrowing facilities are included in the Financial Review. In addition,theGroup’streasurypolicy,itsapproachto themanagementoffinancialrisk,anditsexposure to liquidity and credit risks are outlined in note 17. have and continue to make forecasting extremely challenging, with these multiple factors causing delivery schedule delays. InassessingtheGroup’sgoingconcernthe directors also note that (i) despite reporting an operating loss in the current year and anticipating a challenging start to the 2022 year, the Group is expectedtoreturntoprofitabilityinthenearterm; (ii) has in place adequate working capital facilities for its forecast needs and was cash generative through the2021financialyear,withapositiveEBITDAand strongcashmanagement,benefitingfromapolicy of cash retention at this time; (iii) has a strong and recordlevelorderbookwithsignificantfurther opportunities in its market place; and (iv) has proven adaptable in past periods of adversity, as again proven through the 2021 challenges. Therefore, the directors believe that it is well placed to manage its business risks successfully. TheGroupbenefitedfromCJRSgrantsthrough 2021, utilising this support to retain jobs and skills which contributes to higher wage costs reported. Supply chain delays now widely seen, aligned with price pressures in the supply chain, covering commodities,utilitiesandwageinflationallposerisks toUKmanufacturingbusinesses.Offsettingthese, on-shoring opportunities and the supply chain delays andshortagesthemselvesoffernewopportunitiesto theGrouptoassistoffsetsomeoftheprojectdelays. The directors recognise that the ongoing support ofitsbankisakeyfeaturetotheGroup’ssuccess which provides for the funding and working capital facilities as outlined in note 17. Should there be additionalsignificantdelaysinourproject-based work then there is an increased risk of covenant breach. Whilst actions are available to management to mitigate any shortfall, we expect that if required the bank would remain supportive and a suitable agreement would be reached to provide the group withsufficientfinancing. In assessing going concern, including impacts of Covid-19, Brexit, supply chain shortages and inflationarypressuresseenlatterly,thedirectors note that current economic conditions are continuing to create uncertainty. Such uncertainties After making enquiries including but not limited to compiling updated forecasts; sensitivities; and expectations, reviewing liabilities and risks and followingconfirmationofongoingsupportfrom theGroup’sbank,thedirectorshaveareasonable 56 ANNUAL REPORT & ACCOUNTS 2021 expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the annual report and accounts. D. Changes in accounting policy For the purpose of the preparation of these consolidatedfinancialstatements,theGrouphas applied all standards and interpretations that are effectiveforaccountingperiodsbeginningonor after1October2020withnosignificantimpact. No new standards are applicable. New accounting standards and interpretations not yet adopted No new standards, amendments or interpretations to existing standards that have been published andthataremandatoryfortheGroup’saccounting periods beginning on or after 1 October 2021, or later periods, have been adopted early. The new standards and interpretations are not expectedtohaveanysignificantimpactonthe financialstatementswhenapplied. E. Basis of Consolidation Theconsolidatedfinancialstatementsincludethe financialstatementsoftheCompanyandbothits subsidiariesandtheEmployeeBenefitTrust(“EBT”), (togetherthe“Group”).Subsidiariesarethoseentities over which the Company has the power to control thefinancialandoperatingpoliciessoastoobtain benefitsfromitsactivities.TheCompanyobtainsand exercisescontrolthroughvotingrights.Thefinancial statements of subsidiaries are included in the consolidatedfinancialstatementsfromthedatethat control commences to the date that control ceases. The EBT is established through a third-party Trustee and is not controlled by the Group. However,theTrust’sobjectiveistobenefitthe Group’semployees,activitiesincludingacquiring shares in the Company to satisfy the exercise of share options. The Company is required to fund the activities and costs of the EBT and as such is required to consolidate the accounts of the EBT, which are prepared by the Trustee. Intragroup balances and transactions, and any unrealised gains arising from intragroup transactions, are eliminated in preparing the consolidatedfinancialstatements. Acquisitions of subsidiaries are dealt with by the acquisition method. The acquisition GROUP FINANCIAL STATEMENTS | NOTES TO THE FINANCIAL STATEMENTS method involves the recognition at fair value of allidentifiableassetsandliabilities,including contingent liabilities of the subsidiary, at the acquisition date, regardless of whether or not they wererecordedinthefinancialstatementsofthe subsidiary prior to acquisition. On initial recognition, the assets and liabilities of the subsidiary are included in the consolidated balance sheet at their fair values, which are also used as the bases for subsequent measurement in accordance with the Group accounting policies. Goodwillisstatedafterseparatingoutidentifiable intangible assets. Goodwill represents the excess of the fair value of the consideration transferred overthefairvalueoftheGroup’sshareofthe identifiablenetassetsoftheacquiredsubsidiaryat the date of acquisition. Acquisition costs are written offasincurred. F. Intangible Assets Goodwill Goodwill representing the excess of the fair value of the consideration transferred over the fair value oftheGroup’sshareoftheidentifiablenetassets acquired is capitalised and reviewed annually for impairment. Goodwill is carried at cost less accumulated impairment losses. Goodwill on acquisitions prior to 1 January 1998 was deducted from reserves in the year of acquisition. Such goodwill continues as a deduction from reserves and is not recognised in the income statement in the event of disposal. Research and development Research expenditure is expensed in the income statement as incurred. Development expenditure on a project is written offasincurredunlessitcanbedemonstrated that the following conditions for capitalisation, in accordance with IAS38 Intangible Assets, are met: • the intention is to complete the development of the intangible asset and use or sell it; • thedevelopmentcostsareseparatelyidentifiable and can be measured reliably; • managementaresatisfiedastotheultimate technical and commercial viability of the project; so that it will be feasible to complete and be available for use or sale; • managementaresatisfiedwiththeavailability oftechnical,financialandotherresourcesto complete the development and use or sell the intangible asset; and 57 ANNUAL REPORT & ACCOUNTS 2021 GROUP FINANCIAL STATEMENTS | NOTES TO THE FINANCIAL STATEMENTS • it is probable that the asset will generate future economicbenefit. Any subsequent development costs are capitalised and are amortised, within cost of sales, from the date the product or process is available for use, on a straight-line basis over its estimated useful life. The useful life for the development costs capitalised at the current year-end is up to 3 years. Software Allfinite-livedintangibleassets,includingseparately identifiablepurchasedsoftware,areaccountedfor using the cost model whereby capitalised costs are amortised on a straight-line basis over their estimated useful lives. Residual values and useful lives are reviewed at each reporting date. The following useful lives are applied: Software 25% – 33% Amortisation has been expensed both within cost of sales and administrative expenses. Subsequent expenditure on the maintenance of computer software is expensed as incurred. When an intangible asset is disposed of, the gain or loss on disposalisdeterminedasthedifferencebetween the proceeds and the carrying amount of the asset and is recognised in the Consolidated Income Statementwithinotherprofitorloss. G. Impairment of Assets Goodwill Goodwill is allocated to cash-generating units for the purpose of impairment testing. The recoverable amount of the cash-generating unit to which goodwill relates is tested annually for impairment or when events or changes in circumstances indicate that it might be impaired. The carrying values of property, plant and equipment and intangible assets other than goodwill are reviewed for impairment only when events indicate the carrying value may be impaired. In an impairment test, the recoverable amount of the cash generating unit or asset is estimated to determine the extent of any impairment loss. The recoverable amount is the higher of fair value less costs to sell and the value in use to the Group. An impairment loss is recognised in the income statement to the extent that the carrying value exceeds the recoverable amount. Indeterminingacash-generatingunit’sorasset’s valueinuse,estimatedfuturecashflowsare discounted to their present value using a pre- taxdiscountratethatreflectscurrentmarket assessments of the time value of money and risks 58 specifictothecash-generatingunitorassetthat have not already been included in the estimate of futurecashflows. A previously recognised impairment loss, other than goodwill, is reversed only if there has been a change in the previous indicator used to determine theassets’recoverableamountsincethelast impairment loss was recognised. The reinstated carrying amount cannot exceed the carrying amount that would have been determined, net of amortisation, had no impairment loss been recognised for the asset in prior years. Other non-financial assets The Group reviews the carrying amounts of its tangible and intangible assets other than goodwill to determine if there has been a triggering event which indicates whether there is any indication that those assetshavesufferedanimpairmentloss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount provided that this does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset in prior years. A reversal of an impairment loss is recognised immediatelyinprofitorloss. H. Property, Plant and Equipment Property, plant and equipment is stated at cost or deemed cost, net of depreciation and any provision for impairment. Depreciation is calculated to write down the cost or valuation, less estimated residual value, of all property, plant and equipment, other than freehold land, by equal annual instalments over their estimated useful economic lives, on a straight line basis. The rates generally applicable are: Freehold Buildings 2% Plant, Machinery and Equipment 7% – 15% Motor Vehicles 20% Furniture,FittingsandOfficeEquipment 10%–20% Computers 20% – 33% Residual values are reviewed annually. Aprofitorlossondisposalisrecognisedinthe consolidated income statement at the surplus ordeficitofdisposalproceedsovernetcarrying amount of the asset at the time of disposal. ANNUAL REPORT & ACCOUNTS 2021 GROUP FINANCIAL STATEMENTS | NOTES TO THE FINANCIAL STATEMENTS I. Right of Use Assets and Lease Liabilities K. Financial Instruments The Group adopted IFRS 16 (Accounting for leases) effective1October2019. Right of Use assets and their associated lease liability are recognised at the lease commencement date. The Right of Use asset is initially measured at cost, comprising the initial amount of the lease liability plus any initial direct costs incurred and any lease payments made at or before the lease commencement date, less any lease incentives received. The Right of Use asset is subsequently depreciated using the straight-line method from the commencement date to the earlier of the end of the useful life of the asset or the end of the lease term. At the commencement date of the lease, the Group recognises lease liabilities measured at the present value of the lease payments to be made over the lease term. Lease liabilities are measured at the present value of the contractual payments due to the lessor over the lease term, with the discount rate determined by reference to the rate inherent in the lease unless (as is typically the case) this is notreadilydeterminable,inwhichcasethegroup’s andcompany’sincrementalborrowingrateon commencement of the lease is used. Where a modification,includingchangeofleasetermor lease payments occurs, an adjustment to the lease liability and the right of use asset is recognised. WhereafinanceleaseissettledandaRightof Use asset is then acquired, a transfer to Tangible Intangible or Tangible Assets occurs, including the associated depreciation charge. Payments associated with short-term leases and leases of low-value assets are recognised on a straight-linebasisasanexpenseinprofitorloss. Short-term leases are leases with a lease term of 12 months or less or a value, excluding services charged, of $5,000. J. Inventories Inventories are stated at the lower of cost and net realisable value. The costs of ordinarily interchangeableitemsarebasedonafirst-in,first- out basis. Cost includes direct materials, direct labour and an appropriate proportion of production overheads based on normal levels of activity. Net realisable value is based on estimated selling price less further costs expected to be incurred through to disposal. Provision is made for obsolete, slow- moving and defective items. Classification and measurement of financial assets Allfinancialassetsareclassifiedaseitherthose whicharemeasuredatfairvaluethroughprofitor loss or Other Comprehensive Income, and those measured at amortised cost. Financial assets are initially recognised at fair value. For those which are not subsequently measured at fairvaluethroughprofitorloss,thisincludesdirectly attributable transaction costs. Trade and other receivables and cash and cash equivalents are subsequently measured at amortised cost. Recognition and derecognition of financial assets FinancialassetsarerecognisedintheGroup’s Balance Sheet when the Group becomes a party to the contractual provisions of the instrument. The Groupderecognisesafinancialassetonlywhenthe contractualrightstothecashflowsfromtheasset expire,orwhenittransfersthefinancialassetand substantially all the risks and rewards of ownership of the asset to another entity. Impairment of financial assets Fortradeandotherreceivables,thesimplified approach permitted under IFRS 9 (Financial Instruments)isapplied.Thesimplifiedapproach requires that at the point of initial recognition the expected credit loss across the life of the receivable must be recognised. As these balances donotcontainasignificantfinancingelement,the simplifiedapproachrelatingtoexpectedlifetime losses is applicable. Trade and other receivables Trade receivables and other receivables are initially measured at fair value and are subsequently measured and carried at amortised cost using the effectiveinterestmethod,lessanyimpairment.The carrying amount of other receivables is reduced by the impairment loss directly and a charge is recorded in the Income Statement. For trade receivables, the carrying amount is reduced by the expected lifetime losses. Subsequent recoveries of amountspreviouslywrittenoffarecreditedagainst the allowance account and changes in the carrying amount of the allowance account are recognised in the Income Statement. 59 ANNUAL REPORT & ACCOUNTS 2021 GROUP FINANCIAL STATEMENTS | NOTES TO THE FINANCIAL STATEMENTS Cash and Cash Equivalents M. Revenue Cash and cash equivalents comprise cash balances and short-term deposits that are readily convertible into known amounts of cash and which are subject to aninsignificantriskofchangeinvalue.Bankoverdrafts that are repayable on demand and form an integral partoftheGroup’scashmanagementareincluded as a component of cash and cash equivalents for the purposeofthecashflowstatement. Equity Instruments An equity instrument is any contract which evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs. Financial Liabilities Financial liabilities are obligations to pay cash or otherfinancialassetsandarerecognisedwhen the Group becomes a party to the contractual provisionsoftheinstrument.TheGroup’sfinancial liabilities comprise trade payables, borrowings, and lease liabilities. Financial liabilities are recorded initially at fair value and subsequently at amortised cost using theeffectiveinterestmethod,withinterestrelated chargesrecognisedasanexpenseinfinancecost within the consolidated income and expenditure statement. Afinancialliabilityisderecognisedonlywhenthe obligation is discharged, cancelled or expires. L. Foreign Currencies Transactions denominated in foreign currencies are translated into sterling at the exchange rate ruling at the date of the transaction. Foreign currency monetary assets and liabilities are translated into sterling at the rates of exchange ruling at the balance sheet date. Exchange gains and losses arising are credited or charged to the income statement within net operating costs in the period in which they arise. IFRS 15 (Revenue from Contracts with Customers) requires that in the normal course, revenues arise from the sale, refurbishment, repair or installation of products, excluding value added tax, trade or volume discounts, or values related to future performance obligations. Product revenues include, designandengineering,certification,testand specifictoolingrelatedtothesupply.Dependingon the nature of a contract these can have one or more performance obligations which are recognised either at a point in time or over time depending on the nature of the performance obligation. On occasion, particularly in respect of complex or large contracts, design and engineering costs may be a separate performance obligation. The nature of large procurement contracts is evolving. Some are increasing in scope to include a broader responsibility, for product interfaces and compliance. To determine whether to recognise revenue, the Group follows the 5-step process, recommended by the Standard: 1. 2. Identifying the contract with a customer Identifying the performance obligations 3. Determining the transaction price 4. 5. Allocating the transaction price to the performance obligations Recognising revenue when/as performance obligation(s) Revenue is recognised either at a point in time orovertime,when(oras)theGroupsatisfies performance obligations by transferring the promised goods or providing services to its customers. At the point of recognising revenue, the Group also recognises contract liabilities in respectofunsatisfiedperformanceobligationsthat have been invoiced and reports these amounts as deferredincome.Similarly,iftheGroupsatisfies a performance obligation before it invoiced the customer, the Group recognises the asset within accrued income. Revenue is not recognised where recovery of the consideration is not probable ortherearesignificantuncertaintiesregarding associated costs or the possible return of goods. See also note 1R. 60 ANNUAL REPORT & ACCOUNTS 2021 GROUP FINANCIAL STATEMENTS | NOTES TO THE FINANCIAL STATEMENTS N. Taxation O. Employee Benefits Current tax represents the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the balance sheet date, and taking into account any adjustments in respect of prior years. Deferred tax is calculated using the balance sheet liabilitymethodontemporarydifferencesand providedonthedifferencebetweenthecarrying amounts of assets and liabilities and their tax bases. However, deferred tax is not provided on the initial recognition of goodwill, nor the initial recognition of an asset or liability, unless the related transaction is abusinesscombinationoraffectstaxoraccounting profit.Deferredtaxontemporarydifferences associated with shares in subsidiaries is not providedifreversalofthesetemporarydifferences can be controlled by the Group and it is probable that reversal will not occur in the foreseeable future. Deferred tax is measured at the tax rates that are expectedtoapplywhenthetemporarydifferences reverse, based on the tax laws that have been enacted or substantively enacted by the balance sheet date. Deferred tax liabilities are provided in full, with no discounting. Deferred tax assets are recognised to the extent that it is probable that future taxable income will be available against which thetemporarydifferencecanbeutilisedoroffset against deferred tax liabilities. Changes in deferred tax assets or liabilities are recognised as a component of tax expense in the income statement, except where they relate to items that are recognised in other comprehensive income or charged or credited directly to equity in which case the related deferred tax is also recognised in other comprehensive income or charged or credited directly to equity respectively. Equity-Settled Share-Based Payments The cost of share-based employee compensation arrangements, whereby employees receive remuneration in the form of share options, is recognisedasanemployeebenefitexpenseinthe income statement, with a corresponding credit to the share-based payment reserve. The total expense to be apportioned over the vesting periodofthebenefitisdeterminedbyreferenceto the fair value of the share options awarded (at the date of grant) and the number of options that are expected to vest. The Group has adopted the Black- Scholes model for the purposes of computing the fair value of options. At each balance sheet date, the Group revises its estimates of the number of options that are expected to vest. The impact of the revision oftheoriginalestimates,ifany,isrecognisedinprofit orlosssuchthatthecumulativeexpensereflectsthe revised estimate, with a corresponding adjustment to the share based payment reserve. The proceeds received net of any directly attributable transaction costs are credited to share capital (nominal value) and the share premium account when the options are exercised. Short-Term Compensated Absences A liability for short-term compensated absences, such as holiday, is recognised at the amount the Group may be required to pay as a result of the unused entitlement that has accumulated at the balance sheet date. Defined Contribution Pension Plans Thecostofdefinedcontributionpensionplans is charged to the income statement as they become payable. Defined Benefit Pension Scheme TheGroup’sdefinedbenefitpensionschemeis closed to future accrual. The ongoing net liability or asset is calculated by estimating the amount offuturebenefitthatemployeesearnedinreturn fortheirserviceinpriorperiods;thatbenefitis discounted to determine its present value and then deducted from the fair value of plan assets. The discount rate is the yield on high quality corporate bonds that have maturity dates approximating the termsoftheGroup’sobligations.Afullactuarial valuation is carried out every three years and updated at each balance sheet date using the projected unit method. 61 ANNUAL REPORT & ACCOUNTS 2021 GROUP FINANCIAL STATEMENTS | NOTES TO THE FINANCIAL STATEMENTS Aretirementbenefitliabilityisshownwithinnon- current liabilities on the balance sheet. A retirement benefitassetisonlyrecognisedtotheextentthat theGroupcanbenefitfromareductioninfuture contributions or refunds and is shown within non- current assets and the related deferred tax liability within non-current liabilities. Thedeferredtaxinrespectofretirementbenefitsis netted against other deferred tax assets and liabilities and included in the deferred taxation asset or liability shown under non-current assets or liabilities. Thenetinterestcostorincome(thedifference between the interest cost resulting from the increase inthepresentvalueofthedefinedbenefitobligation over time, and the interest income on plan assets) is recognisedinfinancecostorincome. Past service cost is recognised immediately to theextentthatbenefitshavealreadyvestedoris otherwise expensed on a straight-line basis over theaverageperioduntilthebenefitsvest. Actuarial gains and losses arising from experience adjustments or changes in actuarial assumptions are charged or credited in other comprehensive income in the period in which they arise. P. Exceptional Costs and Non-Underlying Items Management use a range of measures to assess theGroup’sfinancialperformance.Theseinclude statutory measures calculated in accordance with IFRStogetherwith“underlyingoperatingprofit” asanadjustedmeasureofprofitability.Wereport this measure as we believe that it provides useful additionalinformationabouttheGroup’sperformance. UnderlyingOperatingProfitrepresentsthe equivalent IFRS measure but adjusted to exclude items that we consider would prevent comparison oftheGroup’sperformancebothfromonereporting period to another and with other similar businesses. ExceptionalandNon-UnderlyingItemsarenotdefined underIFRS.ExceptionalCostsareclassifiedasthose whichareseparatelyidentifiablebyvirtueoftheirsize, nature or expected frequency and therefore warrant separate presentation. Non-underlying items are other items that we consider should be presented separately to allow a better understanding of the underlying performance of the business. Presentation of these measures is not intended to be a substitute for or to promote them above statutory measures. Exceptional Costs and Non-Underlying Items are detailedinnote6tothefinancialstatements. 62 Q. Grant receipts Grants received, including the UK Governments Covid Job Retention Scheme grants (CJRS), are credited to the income statement within Other Operating Income when received or the receipt becomes unconditional. R. Use of Judgements, Estimates and Assumptions Thepreparationofthefinancialstatementsrequires management to make judgements on the application oftheGroup’saccountingpoliciesandmake estimatesaboutthefuture.Actualresultsmaydiffer from these assumptions. The critical judgements made in arriving at the amounts included in the financialstatementsaredetailedbelow.Keysources ofestimationuncertaintythathaveasignificantrisk of causing a material adjustment to the carrying amountsofassetsandliabilitiesinthenextfinancial year are discussed below. Impairment of Goodwill The determination of whether goodwill has been impaired requires an estimate of the value in use of the cash-generating units to which the goodwill has been allocated. The value in use calculation requires management to make an estimate of the expectedfuturecashflowsofthecash-generating units and to choose an appropriate discount rate in order to calculate the present value of those cash flows.Thecarryingamountofgoodwillandthekey assumptions used in the value in use calculations are disclosed in note 9. R&D Expenditure and Tax Credits Management judgement is required in assessing the fair value of development costs capitalised includingthefutureeconomicbenefitexpectedto be generated by those assets and in calculating the attributable costs. Management judgement is also required in assessing the useful economic lives of these assets for the purposes of amortisation. Further information is provided in note 9. Thetaxcredit/chargefortheyearreflects management’sjudgementsinrespectofthe application of tax regulations, in particular R&D tax creditsavailable.TheGroup’sestimatesmaybe differenttothefinalvaluesadoptedoncetheannual taxcomputationshavebeenfinalisedwiththe Group’sappointedadvisors,resultinginadifferent tax payable or recoverable from that provided. Thetaxnote(note7)identifiesprioryeartax adjustmentswhereR&Dspendhasdifferedtothe values provided in past years. ANNUAL REPORT & ACCOUNTS 2021 Defined Benefit Pension Scheme Theretirementbenefitpositionshowninthebalance sheet is sensitive to changes in the assumptions used inthecalculationofthedefinedbenefitobligation in particular assumptions about the discount rate, inflation,mortalityandfuturepensionincreases.The carrying amount of assets and liabilities relating to the definedbenefitpensionplanandthekeyassumptions usedinthecalculationofthedefinedbenefit obligation are disclosed in note 21. IFRIC 14 requires the Directors to consider whether the Company is entitled to any surplus reported within the Scheme, such that on wind up, the Company would be entitled to unconditionally receive remaining funds. In the Directors opinion, on a wind up to determine the Scheme, which the Company is unilaterally able to commence as the sponsoring employer, following full settlement ofallmemberbenefitsandallschemeliabilities, including HMRC, any remaining surplus is payable to the Company and as such the surplus shown in note 21 should be disclosed on the Balance Sheet, without impairment. Expected Credit Losses In accordance with IFRS 9 (Financial Instruments) the Group is required to assess the expected credit losses occurring through the life of its trade receivables. As a result of Covid-19 disruption to businesses worldwide the Directors expect the risk of credit default to have increased. As a result, the Directors have made a judgemental assessmentofthecreditlossesinthesefinancial statements, full provision of which is disclosed in note 17 (F). The expected credit loss provision decreased in the year to £72,000 (2020: £82,000). Timing and Recognition of Revenue and Cost Recognition IFRS 15 (Revenue Recognition) requires the Group to identify its performance obligations, determine the transaction price and allocate this to the performance obligations and recognise revenue at thepointeachperformanceobligationissatisfied within its contracts. Judgements are involved in determining the number of performance obligations in a contract and at which point to recognise income for services provided i.e. a point in time when a milestone is achieved or as work is performed. The main judgement is whether the design and engineering work should be a separate performance obligation to the supply of products. The design and engineering element is often a separate performance obligation on more complex GROUP FINANCIAL STATEMENTS | NOTES TO THE FINANCIAL STATEMENTS and bespoke projects where the level of such work ismoresignificant. Where design and engineering is determined to be a separate performance obligation, there is a further judgement on the level of contractual income to allocate to this work and whether the contractual terms support the recognition of this income over time, as the service is performed, rather than when complete. Provisions for Slow Moving or Obsolete Inventories Inventories are carried at the lower of cost and net realisable value (NRV), taking account of material costs and absorbed manufacturing costs which are inclusive of direct labour and a proportion of production overheads. These are based on normal levels of activity which require judgements and estimates to apply appropriate cost absorptions to achieve a manufactured cost. NRV is reviewed in detail on an ongoing basis and provision for obsolete inventory is made based on a number of factors including age of inventories, the risk of technical obsolescence and the expected future usage. Differencesbetweensuchestimatesandactual market conditions may have a material impact on the amount of the carrying value of inventories and may result in adjustments to cost of sales. Note 12 details theinventoryprovisionsandtheamountswrittenoff to consolidated income statement in the year. 63 ANNUAL REPORT & ACCOUNTS 2021 GROUP FINANCIAL STATEMENTS | NOTES TO THE FINANCIAL STATEMENTS 2. Operating Segments AlloftheGroup’soperationsandactivitiesarebasedin,anditsassetslocatedin,theUnitedKingdom.For management purposes the Group comprises three product groups (in accordance with IFRS 8) – electro- mechanical, lighting & electronics and distribution (which collectively design, manufacture and market industrial electrical and electronic products) – less centre costs, which operate across three market segments – Rail; Aerospace & Defence and Other. It is on this basis that the board of directors assess Group performance. The split is as follows: Electro-mechanical systems Engineered component distribution Lighting & Electronics systems Operational Revenue Revenue recognised over time Revenue recognised at a point in time 2021 £000 7,761 3,410 7,094 2020 £000 9,195 4,429 7,087 18,265 20,711 2021 £000 788 17,477 18,265 2020 £000 390 20,321 20,711 2020 % 77% 12% 11% 100% 2020 £000 13,929 4,402 2,380 20,711 All revenue originates in the UK. An analysis by geographical markets and market segments is given below: Rail Aerospace and Defence Other United Kingdom Rest of Europe Rest of World 2021 % 77% 10% 13% 100% 2021 £000 12,618 3,500 2,147 18,265 Three individual customers (2020: two) represented more than 10% of Group revenue, combined totalling 38% (2020: 30%). OperationalProfit Corporate Costs UnderlyingOperating(Loss)/Profit 2021 £000 652 (926) (274) 2020 £000 1,812 (1,029) 783 CorporateCostsandOperationalProfitareshownexcludingchargesleviedtosubsidiaryentitiesbyLPAGroupPlc relating to management charges and where the property is held by LPA Group Plc, property rent which combined totalled £426,000 (2020: £594,000). 64 ANNUAL REPORT & ACCOUNTS 2021 GROUP FINANCIAL STATEMENTS | NOTES TO THE FINANCIAL STATEMENTS 3. Employee Information The average number of people employed by the Group, including Directors, during the year was: 2021 Number 2020 Number Production Sales and Distribution Administration Theemployeebenefitexpensefortheyearamountedto: Wages and Salaries Social Security Costs PensionCosts–DefinedContributionArrangements(note21) Share based payments 114 27 23 164 2021 £000 5,462 550 277 28 6,317 Detailedinformationconcerningdirectors’emoluments,shareholdingsandoptionsisshowninthe Remuneration Report. Employee costs included above and capitalised as intangible development cost additions totalled £120,000 (2020: £30,000). 4. Finance Income Net Pension Interest Income (note 21) 5. Finance Costs Bank Loan and Overdraft Interest Interest on Lease Liabilities Finance Costs 2021 £000 47 2021 £000 56 30 86 127 30 23 180 2020 £000 5,627 536 273 36 6,472 2020 £000 41 2020 £000 68 38 106 65 ANNUAL REPORT & ACCOUNTS 2021 GROUP FINANCIAL STATEMENTS | NOTES TO THE FINANCIAL STATEMENTS 6. Operating (Loss)/Profit ThefollowingitemshavebeenchargedinarrivingatOperating(loss)/profit. A. Component costs in arriving at Operating (Loss)/Profit Materials (to Added Value) Production Overhead & Direct Labour Cost of Sales Selling & Distribution Costs Administrative Expenses Other Operating Income B. Expenses/(credits) by nature within Underlying Operating (Loss)/Profit Amortisation of Intangible Assets Depreciation of Tangible Assets Depreciation of Right of Use Assets Loss on Disposal of Assets Operating Lease Rentals / Short Term Hire Charges – Plant, Equipment & Motor Vehicles Foreign Exchange Loss/(Gain) Other Operating Income: – Covid-19 Job Retention Scheme grants (CJRS) – Other grants FeesPayabletoTheCompany’sAuditor: –FortheAuditofTheCompany’sAnnualAccounts –TheAuditofTheCompany’sSubsidiariesPursuanttoLegislation C. Within Exceptional Costs Reorganisation costs Dual running management costs 2021 £000 9,036 5,522 14,558 1,562 2,710 (217) 2021 £000 111 484 273 62 16 96 (217) - 22 71 2021 £000 - 46 46 2020 £000 10,653 5,364 16,017 1,514 2,897 (333) 2020 £000 95 494 241 61 20 (50) (308) (25) 20 67 2020 £000 122 9 131 Dual running costs of £46,000 (2020: £9,000) relate to an extended crossover between the appointment and retirement of Board Directors related to the board rejuvenation process commenced in 2018, to be concluded on 31 December2021.Dualrunningandreorganisationcostsareincludedwithinnote3,Employeeinformation,andreflect theexceptionalchangesthathavetakenplacebycomparisontotheGroup’shistory.Allboardmemberswhoserved at the 2018 AGM retired on, or before, 31 December 2021. Reorganisation costs of £123,000 in 2020 related to a Group wide cost base review. Ongoing and adhoc reorganisation costs through 2021 are seen as non-exceptional. 66 ANNUAL REPORT & ACCOUNTS 2021 GROUP FINANCIAL STATEMENTS | NOTES TO THE FINANCIAL STATEMENTS 7. Taxation A. Recognised in The Income Statement Current Tax Expense UK Corporation Tax Adjustment in Respect of Prior Years Deferred Taxation Net Origination and (Recognition) / Reversal of TemporaryDifferences Net change as a result of rate increase (note 18) Total Corporation Tax (Credit) B. Reconciliation of Effective Tax Rate (Loss)/ProfitBeforeTax Tax at The UK Corporation Tax Rate of 19% (2020: 19%) Effectsof: – Tax Rate Change (note 18) – Enhanced Deduction for Qualifying R&D Expenditure – Prior Period Adjustments – Prior Periods losses recognised (note 18) –OtherDifferences Total Income Tax (Credit) C. Deferred Tax Recognised in Other Comprehensive Income Deferred Tax on Actuarial Gain/(Loss) on Pension Scheme D. Current and Deferred Tax Recognised Directly in Equity Tax (Credit)/Charge Arising on Share Options 2021 £000 (4) (46) (50) (232) (71) (353) 2021 £000 (387) (74) (71) (80) (46) (55) (27) (353) 2021 £000 601 2021 £000 (20) 2020 £000 (37) (78) (115) 71 - (44) 2020 £000 551 105 - (76) (78) - 5 (44) 2020 £000 (28) 2020 £000 5 67 ANNUAL REPORT & ACCOUNTS 2021 GROUP FINANCIAL STATEMENTS | NOTES TO THE FINANCIAL STATEMENTS 8. (Loss)/Earnings Per Share Thecalculationofearningspershareisbaseduponthelossfortheyearof£34,000(2020:profit£595,000) and the weighted average number of ordinary shares in issue during the year, less investment in own shares, of 12.590m (2020: 12.358m). 2021 2020 Weighted Average No of Shares (Loss) Per Share Earnings Earnings Weighted Average No of Shares Earnings Per Share £000 Million Pence £000 Million Pence Basic (Loss)/Earnings Per Share EffectofShareOptions Diluted Earnings Per Share (34) - (34) 12.590 (0.27) - - 12.590 (0.27) 595 - 595 12.358 0.442 12.800 4.82 (0.17) 4.65 Diluted Earnings Per Share Basic and diluted earnings per share are equal for the year ended to 30 September 2021, since where a loss is incurredtheeffectofoutstandingshareoptionsandwarrantsisconsideredanti-dilutiveandisignoredforthe purpose of the loss per share calculation. As at 30 September 2021 there were 565,000 outstanding share options (2020: 1,350,000), of which 155,000 were exercisable (2020: 825,000). 9. Intangible Assets Goodwill Goodwill acquired in a business combination is allocated, at acquisition, to the cash-generating unit that is expectedtobenefit.TheGroup’sgoodwillsolelyrelatestoitsinvestmentinthelightingandelectronicssegment through the acquisition of Excil Electronics Ltd. Therecoverableamountofthecash-generatingunit(“CGU”)towhichthegoodwillrelatesistestedannuallyfor impairment, or more frequently if there are indications that goodwill might be impaired. The recoverable amount of the cash-generating unit was determined from value in use calculations, and the key assumptions in these calculationsweretheassessmentofinitialcashflows,thelong-termgrowthrateofthosecashflows,andthe discount rate applied. Initialcashflowsreflectthemostrecentplansapprovedbymanagement.Theyarebasedonpastexperience and take into account management expectations of future developments in markets and operations. The initial cashflowscoveredthefirsttwoyearsoftheprojections:thereaftercashflowprojectionswereextrapolated into perpetuity at a growth rate of 2.00% (2020: 1.00%) which is considered to be consistent with the long term average growth rate for the businesses concerned. The discount rate applied was 10.0% (2020: 12.0%), a pre- taxratethatreflectsanassessmentofthetimevalueofmoneyandtherisksspecifictothecash-generating units concerned. No impairment arose in the year. Management believes that the key assumptions on which the recoverable amount is based are appropriate and that any reasonable change in these assumptions would not leadtoamateriallydifferentconclusion.KeytotheassessmentofimpairmentofGoodwillaretheachievement of future revenue assumptions. Were the CGU to not achieve growth assumptions but trade at the levels reported in the 2021 year, the carrying amount would still exceed the recoverable amount of goodwill. 68 ANNUAL REPORT & ACCOUNTS 2021 GROUP FINANCIAL STATEMENTS | NOTES TO THE FINANCIAL STATEMENTS Goodwill £000 Development Costs Software £000 £000 1,234 - - 1,234 - - 1,234 85 - - 85 - - 85 1,149 1,149 466 100 (288) 278 167 (83) 362 311 66 (288) 89 80 (30) 139 223 189 539 22 - 561 16 - 577 484 29 - 513 31 - 544 33 48 Total £000 2,239 122 (288) 2,073 183 (83) 2,173 880 95 (288) 687 111 (30) 768 1,405 1,386 Cost At 1 October 2019 Additions Disposals At 1 October 2020 Additions Disposals At 30 September 2021 Amortisation At 1 October 2019 Charge for the year Disposals At 1 October 2020 Charge for the year Disposals At 30 September 2021 Net Carrying Amount At 30 September 2021 At 30 September 2020 The amortisation charge is recognised across Cost of Sales and Administrative Expenses within the consolidated income statement. 69 ANNUAL REPORT & ACCOUNTS 2021 GROUP FINANCIAL STATEMENTS | NOTES TO THE FINANCIAL STATEMENTS 10. Tangible Fixed Assets Cost At 1 October 2019 Transferred ** Additions Disposals At 1 October 2020 Additions Transferred ** Re-presented Disposals Freehold Land and Buildings £000 Plant, Vehicles and Equipment Total £000 £000 4,647 - - - 4,647 - - 13 - 7,822 (1,226) 117 (574) 6,139 100 57 (13) (280) 12,469 (1,226) 117 (574) 10,786 100 57 - (280) At 30 September 2021 4,660 6,003 10,663 Depreciation At 1 October 2019 Transferred ** Charge for the year Disposals At 1 October 2020 Charge for the year Transferred Re-presented Disposals At 30 September 2021 Net Carrying Amount 401 - 101 - 502 91 - (48) - 545 5,062 (210) 393 (507) 4,738 393 31 48 (280) 5,463 (210) 494 (507) 5,240 484 31 - (280) 4,930 5,475 At 30 September 2021 4,115 1,073 5,188 At 30 September 2020 4,145 1,401 5,546 The depreciation charge has been recognised across Cost of Sales and Administrative Expenses within the consolidated income statement. **InaccordancewithIFRS16,assetsheldunderfinanceleasesweretransferredat1October2019toRightof Use Assets (see note 11). Included within plant, vehicles and equipment is £1.02m as at 30 September 2019 in respectofassetsacquiredunderfinanceleases.Transfersduring2021relatetoassetswhicharenolongsubject toleaseobligations.Costandaccumulateddepreciationhasbeenrepresentedtocorrectlyreflectassetsbetween plantandmachineryandfreeholdlandandbuildings,withnoeffecttotheconsolidatedincomestatementornet carrying amount. 70 ANNUAL REPORT & ACCOUNTS 2021 GROUP FINANCIAL STATEMENTS | NOTES TO THE FINANCIAL STATEMENTS 11. Right of Use Assets Cost Recognised on adoption of IFRS 16 – 1 October 2019 Transferred ** Additions Disposals At 1 October 2020 Additions Transferred Disposals At 30 September 2021 Depreciation Transferred ** Charge for the year Disposals At 1 October 2020 Charge for the year Transferred ** Disposals At 30 September 2021 Net Carrying Amount At 30 September 2021 At 30 September 2020 Plant, Vehicles and Equipment £000 157 1,226 506 (3) 1,886 115 (57) (88) 1,856 210 241 (3) 448 273 (31) (79) 611 1,245 1,438 The depreciation charge has been recognised across Cost of Sales and Administrative Expenses within the Consolidated Income Statement. **Assetsheldunderfinanceleasesat1October2019,togetherwithaccumulateddepreciationwererecognised as a Right of Use asset and shown as a transfer from Tangible Fixed Assets (note 10). Assets which are no longer subjecttofinanceleaseobligationsaretransferredtoTangibleFixedAssets(note10). Assets utilised under operating leases were introduced at 1 October 2019 as a Right of Use Asset. Lease Liabilities secured on the above assets are detailed in note 16. 71 ANNUAL REPORT & ACCOUNTS 2021 GROUP FINANCIAL STATEMENTS | NOTES TO THE FINANCIAL STATEMENTS 12. Inventories Raw Materials and Consumables Work in Progress Finished Goods and Goods for Resale 2021 £000 2,051 875 1,776 2020 £000 Restated 1,704 645 1,619 4,702 3,968 Followingareviewofinventoryclassificationsrelatedtoitemsdefinedassub-assemblies,areclassificationof finishedgoodsandgoodsforresalehasbeenadopted.The2020comparativevaluesshownabovereflectthis reclassification,includingareductionof£0.8mtoFinishedGoodsandGoodsforResale,WorkinProgressincreases by £0.2m and Raw Materials and Consumables by £0.6m. There is no impact to the Consolidated Income statement. Inventories are reported inclusive of the following provisions: Opening provisions Additional provisions Utilised(inventoryscrapped/writtenoff) Released (inventory utilised/sold) 2021 £000 (839) (119) 13 15 2020 £000 (734) (158) 38 15 Closing provisions (930) (839) 13. Trade and Other Receivables Trade Receivables Other Receivables Prepayments Accrued income 2021 £000 3,540 64 366 141 2020 £000 4,819 - 538 90 4,111 5,447 Trade Receivables are stated after credit losses provided of: 72 82 Thedirectorsestimatethatthecarryingvalueoffinancialassetswithintradeandotherreceivablesapproximate theirfairvalue.DetailsoftheGroup’sexposuretocreditandmarketriskrelatedtotradeandotherreceivables together with an analysis of the movement in the expected credit loss are disclosed in note 17. Accrued income is recognised in line with the Revenue Recognition policy, taking account of works carried out where a contractual underwriting exists such that in the event of cancellation, the Company is entitled to recover such costs as incurred to that point in time. All amounts are expected to be invoiced within 12 months. 72 ANNUAL REPORT & ACCOUNTS 2021 14. Trade and Other Payables Current Trade Payables Other Taxation and Social Security Other Payables Accruals Deferred Income GROUP FINANCIAL STATEMENTS | NOTES TO THE FINANCIAL STATEMENTS 2021 £000 2020 £000 3,009 2,324 278 21 501 371 589 55 746 479 4,180 4,193 The directors estimate that the carrying value of trade and other payables is approximate to their fair value. Deferred income recognised at year end was represented by seven contracts (2020: four), as follows: Deferred Income at 1 October Invoiced during the year Sales recognised in the year Deferred Income at 30 September 2021 £000 479 537 (645) 371 2020 £000 279 374 (174) 479 All deferred income relates to the rail sector, with 88% expected to be recognised within one year. 15. Borrowings ThenoteprovidesinformationaboutthecontractualtermsoftheGroup’sborrowings,excludingleasecommitments represented under Lease Liabilities from 1 October 2019. Further information is provided in notes 16 and 17. Current Bank Loan Non-Current Bank Loan Total Borrowings Bank Loan and Overdraft 2021 £000 2020 £000 191 188 2,123 2,314 2,313 2,501 TheGroup’sprincipalbankingfacilitiesarewithBarclays,comprisingabankloanandanoverdraftfacility. TheGroup’smainfinanceisabankloandrawndownin2019at£2.6m,repayableover5years.Theloanhasa5year termandbulletrepaymentandwasdrawntorefinanceapreviousloanwiththesameprofile.Asat30September 2021 the amount outstanding was £2.3m (2020: £2.5m); the loan is to be repaid from October 2021 through 10 quarterly instalments of £62,000, including interest, with the residual repayable in March 2024. Interest is chargeable at base rate plus 2.25%. The loan is provided with a debt service covenant, measured annually. Following discussions with the bank, the covenant was withdrawn in the year with no measurement as at 30 September 2021. The overdraft agreement provides for a facility limited to 1/3 of the value of eligible trade debtors, up to a maximum of £1.5m. At the year-end and throughout the year the facility was unutilised, with £1.13m of facility available (2020: £1.44m). Interest is payable at base plus 2.0%. The following security is provided to the bank in respect of the above facilities: (i) a legal charge over the developed freehold land and buildings owned by the Group; (ii) a debenture from each Group company; and (iii) a composite guarantee by each Group company as guarantor in favour of the Bank. 73 ANNUAL REPORT & ACCOUNTS 2021 GROUP FINANCIAL STATEMENTS | NOTES TO THE FINANCIAL STATEMENTS 16. Lease Liabilities Right of Use Liabilities Rightofuseliabilities,asfinanceleases,typicallyhaveafourtofiveyeartermandbearinterestfixedatthetimeof thecommitment.TheGroup’sobligationsunderrightofuseleasesaresecuredbythefinanceproviderstitletothe asset held under lease and have an incremental borrowing rate of 3.63% (2020: 3.77%). The minimum payments under right of use obligations, fall due as follows: Within one year Betweenoneandfiveyears Leasepayments–cashoutflowintheyear Operating lease expenses 2021 £000 323 354 677 450 Future minimum rentals payable under non-cancellable operating leases or short term hire contracts, representing short term or minimal value Lease obligations are as follows: Within one year Operating lease expenses and short term hire costs – expensed through the Consolidated Income Statement in the year 17. Financial Instruments A. Financial Risk Management 2021 £000 1 16 2020 £000 406 584 990 399 2020 £000 4 20 TheGroup’streasurypolicyseekstoensurethatadequatefinancialresourcesareavailableforthedevelopment oftheGroup’sbusinesswhilstmanagingitsforeigncurrency,interestrate,liquidityandcreditrisks.TheGroup’s principalfinancialinstrumentscomprisebankloansandoverdrafts,leaseliabilities,cashandcashequivalents, together with trade and other receivables and trade and other payables that arise directly from its operations. ThemainrisksarisingfromtheGroup’sfinancialinstrumentsandtheapproachestothemaredetailedbelow. B. Capital Management TheGroup’spolicyistominimiseitscostofcapital,byoptimisingthebalancebetweenequityanddebt,whilst ensuringitsabilitytocontinueasagoingconcern,toprovidereturnstoshareholdersandbenefitsforother stakeholders. In practice decisions to fund transactions through either equity or debt are made on a case by case basis and are based upon circumstances at the time. TheGroup’scapitalstructureisasfollows: Equity Net debt – Borrowings plus Lease Liabilities less cash balances Overall Financing Gearing (Net Debt as a % of Total Equity) 74 2021 £000 14,113 1,633 15,746 11.6% 2020 £000 12,551 2,646 15,197 21.1% ANNUAL REPORT & ACCOUNTS 2021 GROUP FINANCIAL STATEMENTS | NOTES TO THE FINANCIAL STATEMENTS Gearing, which is the principal measure used by the Group to monitor its capital structure, reduced 45% to 11.6%, principallythroughcashmanagement,benefitingfromenhanceddebtorcollections,reducedworkingcapitalat year end, receipts from share issues in the year following share option exercises and the policy of distributions by way of dividends being paused, whilst all commitments have continued to be repaid reducing borrowings and lease commitments. TheBoardroutinelymonitorsotheraspectsoffinancialperformancetoensurecompliancewithbankborrowing requirements.TherewerenochangesintheGroup’sapproachtocapitalmanagementduringtheyear. C. Currency risk Currency exposure arises on sale or purchase transactions in currencies other than sterling, the functional currency ofthecompanieswithintheGroup.ItistheGroup’spolicytominimiserisktoexchangeratemovementsaffecting sales and purchases by hedging or netting currency exposures at the time of commitment, or when there is a high probability of future commitment arising, using forward exchange contracts. A proportion of forecast exposures are structurally or naturally hedged. The Group does not trade in derivatives or make speculative hedges. Currency Exposures ThetablebelowshowstheGroup’scurrencyexposureaftertakingintoaccounttheeffectofanycurrencyhedges entered into: 2021 2020 Cash and Cash Equivalents Other Net Monetary Assets and Liabilities Total Net Monetary Assets and Liabilities Cash and Cash Equivalents Other Net Monetary Assets and Liabilities Total Net Monetary Assets and Liabilities £000 £000 £000 £000 £000 £000 Euro US Dollar Aus Dollar 395 80 - 475 476 4 33 513 871 84 33 988 385 14 - 399 441 2 10 453 826 16 10 852 Sterling:forexratesincreasedfromthestarttotheendoftheyear,Euroratesby5.7%,USD4.7%.TheGroup’s opening cash and cash equivalents would have been reduced £21,000 were the 2021 rates have been in place at 30 September 2020. Sensitivity At 30 September 2021 if sterling had weakened / strengthened by 10% against the euro with all other variables heldconstanttheeffectwouldhavebeentoincrease/(decrease)pre-taxprofitandequityasaresultofforeign exchange gains / (losses) on translation by: 2021 2020 Effect on Profit Before Tax Effect on Equity Effect on Profit Before Tax Effect on Equity £000 £000 £000 £000 Sterling Weakens By 10% Against the Euro Sterling Strengthens By 10% Against the Euro 97 (79) - - 92 (75) - - 75 ANNUAL REPORT & ACCOUNTS 2021 GROUP FINANCIAL STATEMENTS | NOTES TO THE FINANCIAL STATEMENTS D. Interest Rate Risk TheGroupisexposedtoriskfromtheeffectofchangesinfloatinginterestratesonthelevelofinterestitpayson its borrowings and receives on its cash deposits. TheonlyfinancialliabilitiesoftheGroupwhicharesubjecttointerestchargesarebankloans,overdrafts,andlease liabilities.Thedirectorsmonitortheoveralllevelofborrowingsandinterestcoststolimitanyadverseeffectson financialperformanceoftheGroup. Interest Rate Risk Profile Interestratesaremanagedbyusingfixedandfloatingrateborrowings.Floatingrateliabilitiescomprisebankloan and overdraft. During the year their weighted average interest rate was 2.4% (2020: 2.6%). Fixed rate liabilities comprise Lease liabilities which bear interest at the negotiated market rate prevailing at the time the commitment ismade.Intheyeartheweightedaverageinterestrateofthefixedratefinancialliabilities,was3.6%(2020:3.8%). Thecompositeinterestrateacrossfixedandfloatingborrowingsandliabilitieswas2.7%(2020:2.9%). TheinterestrateprofileoftheGroup’sfinancial(assets)andliabilitiesat30Septemberwas: Floating Rate Cash and Cash Equivalents Bank Loan Fixed Rate Lease Liabilities Sensitivity 2021 £000 (1,358) 2,314 956 2020 £000 (845) 2,501 1,656 677 990 Ifmarketinterestratesonfloatingrateborrowingsandcashdepositshadbeen1%(100basispoints)higher duringtheyearto30September2021,withallothervariablesheldconstantthepre-taxprofitwouldhavebeen lower by £11,000 (2020: £20,000). E. Liquidity Risk LiquidityriskistheriskthattheGroupwillnotbeabletomeetitsfinancialobligationsastheyfalldue. TheGroup’sapproachistoensurethat,asfaraspossible,itwillhaveadequateresourcestomeetitsforeseeable financingrequirements,withheadroomtocopewithadversemarketconditions.TheGroup’soperationsare fundedthroughacombinationofretainedprofits,acquiringanelementofitsfixedassetsunderHirePurchase, medium-termbankloanswithshort-termflexibilityachievedthroughtheuseofoverdraftfacilities. Un-Drawn Committed Facilities TheGroup’sun-drawncommittedborrowingfacilitiesavailableat30September2021compriseitsbankoverdraft expiring in one year or less at £1.13m (2020: £1.44m), of the total overdraft facility of £1.5m (2020: £1.5m). See note 15 for the terms of the facility. 76 ANNUAL REPORT & ACCOUNTS 2021 GROUP FINANCIAL STATEMENTS | NOTES TO THE FINANCIAL STATEMENTS Maturity Profile of the Group’s Financial Liabilities ThetablebelowsummarisesthematurityprofileoftheGroup’sfinancialliabilitiesbasedoncontractual undiscounted payments: Within 1 Year £000 244 341 3,531 4,116 Within 1 Year £000 244 433 3,125 3,802 Between 1 and 2 Years Between 2 and 3 Years Between 3 and 4 Years Between 4 and 5 Years Over 5 Years £000 £000 £000 £000 £000 244 285 - 529 1,958 74 - 2,032 - 4 - 4 - - - - - - - - Between 1 and 2 Years Between 2 and 3 Years Between 3 and 4 Years Between 4 and 5 Years Over 5 Years £000 £000 £000 £000 £000 244 341 - 585 244 245 - 489 1,958 61 - 2,019 - 5 - 5 - - - - Total £000 2,446 704 3,531 6,681 Total £000 2,690 1,085 3,125 6,900 2021 Borrowings – Bank Loan Lease Liabilities Trade and Other Payables 2020 Borrowings – Bank Loan Lease Liabilities Trade and Other Payables F. Credit Risk CreditriskistheriskoffinanciallosstotheGroupifacustomerorcounterpartytoafinancialinstrumentfails to meet its contractual obligations and arises principally from trade receivables, but also from cash and cash equivalents,andotherfinancialassets. Trade Receivables TheGroup’sexposuretocreditriskisprincipallyinfluencedbytheindividualcharacteristicsofeachcustomer as opposed to a more general demographic of the customer base. Credit risk is managed on an ongoing basis by monitoring the aggregate amount and duration of exposure to any one customer depending upon their credit rating.Creditriskisminimisedthroughcashflowmanagementandtheuseofproformaremittancesorguarantees where appropriate. Cash and Cash Equivalents TheGroupmonitorscounterpartieswithwhomitdepositscashandtransactsotherfinancialinstrumentssoasto control exposure to any one institution. The Group have assessed Barclays Bank to provide a low risk of exposure. Exposure to Credit Risk The maximum exposure to credit risk at the reporting date is the fair value of each class of receivables mentioned above. At the end of 2021 these totalled £3.54m (2020: £4.82m). The Group held no collateral as security against any trade receivables. Theconcentrationofcreditriskissensitivetothetimingoflargerprojects.TheGroup’smostsignificantcustomer accounted for 19.0% of trade receivables at 30 September 2021 (2020: 31.6%). 77 ANNUAL REPORT & ACCOUNTS 2021 GROUP FINANCIAL STATEMENTS | NOTES TO THE FINANCIAL STATEMENTS Impairment Losses In determining the recoverability of trade receivables, the Group considers the ageing of each debtor and any change in the circumstances of the individual customer to determine the expected credit loss. Following adoption ofIFRS9(FinancialInstruments),theexpectedcreditlossreflectsacompositejudgmentoftheGroup’sloss experience and the market conditions at a point in time. Whilst the Group has no relevant credit loss experience, a2%flatrateprovisionhasbeenapplied(2020:expectedloss1.7%)torecognisetheincreasedglobalriskatthis time. This provision is applied across the trade receivables in equal proportion. The ageing of trade receivables at the reporting date was: Not past due Past due 1-30 days Past due 31-90 days Past due 91 days to less than a year 2021 2020 Gross £000 1,913 1,239 417 43 3,612 Expected credit loss £000 (38) (25) (8) (1) (72) Gross £000 2,256 1,485 913 247 4,901 Expected credit loss £000 (15) - - (67) (82) The Group works closely with customers, which are predominantly represented by blue chip entities, to recover all trade receivables without loss. In circumstances where this cannot be achieved the Group utilises third party collection agencies and specialists to recover all such receivables. Only where there is reasonable expectation thatthesestepswillnotbesuccessfulwouldanimpairmentbewrittenoff. The movement in the expected credit loss in respect of trade receivables during the year was: Balance at start of year (Released)/Charged to the Income Statement Balance at end of year 2021 £000 82 (10) 72 2020 £000 66 16 82 Theimpairmentreductionof£10k(2020:£16k)relatestotheincreaseintheGroup’sassessmentoftherisk of non-recovery from a range of customers, by reference to the reduced total debtor book. 78 ANNUAL REPORT & ACCOUNTS 2021 GROUP FINANCIAL STATEMENTS | NOTES TO THE FINANCIAL STATEMENTS G. Classification and Fair Values of Financial Assets and Liabilities ThetablebelowsetsouttheGroup’saccountingclassificationofeachclassoffinancialassetandfinancialliability. Thedirectorsconsiderthatthecarryingvalueoffinancialassetsandliabilitiesapproximatetheirfairvalues. Forcashandcashequivalentsandfloatingrateborrowingsthefairvaluesarethesameasthecarryingvalue. 2021 Financial Assets – Loans and Receivables Trade and other receivables Cash and cash equivalents Financial Liabilities – At Amortised Cost Borrowings – Bank loan Lease Liabilities Trade and other payables Net Financial (Liabilities) 2020 Financial Assets – Loans and Receivables Trade and other receivables Cash and cash equivalents Financial Liabilities – At Amortised Cost Borrowings – Bank loan Lease Liabilities Trade and other payables Net Financial (Liabilities) H. Fair Value Hierarchy Amortised Cost £000 3,557 1,358 4,915 (2,314) (677) (3,531) (6,522) (1,607) Amortised Cost £000 4,863 845 5,708 (2,501) (990) (3,125) (6,616) (908) Total Carrying Value £000 3,557 1,358 4,915 (2,314) (677) (3,531) (6,522) (1,607) Total Carrying Value £000 4,863 845 5,708 (2,501) (990) (3,125) (6,616) (908) Fair Value £000 3,557 1,358 4,915 (2,314) (677) (3,531) (6,522) (1,607) Fair Value £000 4,863 845 5,708 (2,501) (990) (3,125) (6,616) (908) TheGroup’susesthefollowinghierarchyfordetermininganddisclosingthefairvalueoffinancialinstrumentsby valuation technique. • Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities. • Level2:othertechniquesforwhichallinputswhichhaveasignificanteffectontherecordedfairvalueare observable, either directly or indirectly. • Level3:techniqueswhichuseinputswhichhaveasignificanteffectontherecordedfairvaluethatarenot based on observable market data. 79 ANNUAL REPORT & ACCOUNTS 2021 32 (7) (569) (723) GROUP FINANCIAL STATEMENTS | NOTES TO THE FINANCIAL STATEMENTS 18. Deferred Tax Property, Plant and Equipment Retirement Benefits Tax Losses At 1 October 2019 Recognised in Income Statement Recognised in Other Comprehensive Income/Equity £000 (70) (79) - £000 (394) (7) 28 At 1 October 2020 (149) (373) £000 78 19 - 97 Other £000 34 (3) 5 36 Total £000 (352) (70) 33 (389) Recognised in Income Statement Recognised in Other Comprehensive Income/Equity 20 - (601) - (12) 302 (75) 235 At 30 September 2021 (129) (986) 399 Deferred tax has been provided at 24.9% at 30 September 2021 (2020: 19.0%) in recognition of the UK corporationtaxincreaseto25%from1April2023.Therateusedreflectsacompositerateattributedtothose assets which are expected to be realised prior to or post the rate increase. The rate increase increases the deferred tax asset by £0.19m. Deferred tax assets of £0.21m (2020: £0.21m) have not been recognised in respect of unrelieved tax losses of £0.83m (2020: £1.12m) because of uncertainty over their recoverability. Tax losses relating to group management charges of £0.83m, have no expiry date. Trading losses, previously excluded as an asset have been recognised as the Directors believe there is reasonable expectation of these being utilised in the future, representing an additional deferred tax asset of £55,000. An analysis of the deferred tax balances for reporting purposes is given below: Property, Plant and Equipment Retirement Benefits Tax Losses Deferred Tax Assets Deferred Tax Liabilities £000 35 (164) £000 - (986) At 30 September 2021 (129) (986) Deferred Tax Assets Deferred Tax Liabilities 20 (169) - (373) At 30 September 2020 (149) (373) £000 399 - 399 97 - 97 Other £000 22 (29) Total £000 456 (1,179) (7) (723) 55 (19) 172 (561) 36 (389) 80 ANNUAL REPORT & ACCOUNTS 2021 GROUP FINANCIAL STATEMENTS | NOTES TO THE FINANCIAL STATEMENTS 19. Equity Share Capital Share capital is the total of the nominal value (10p) of shares issued. Issued and Fully Paid Number £000 Number £000 2021 2020 In Issue at the start of the year Allotted Under Share Plans 12,658,229 1,266 12,658,229 1,266 790,000 79 - - In Issue at the end of the year 13,448,229 1,345 12,658,229 1,266 During the year 790,000 options were exercised at an average exercise price of 38.0p (2020: nil). ThemarketpriceoftheCompany’sshareson30September2021was75.5ppershare(2020:72.0p)andtheprice range during the year was 66.5p to 98.2p per share (2020: 64.0p to 114.0p). Proposed Dividends No dividends were proposed by the directors during the year or after the balance sheet date. Investment in Own Shares This reserve records the share capital acquired in the Company including share premium paid, by the Company as TreasurySharesorbytheLPAGroupPlcEmployeeBenefitTrust(“EBT”).Sharesheldat30September2021bythe EBT totalled 300,000 (2020: 300,000). Share Premium Account This reserve records the premium for shares issued at a value that exceeds their nominal value. Share Based Payment Reserve This reserve represents equity-settled share-based employee remuneration for outstanding options recognised over the vesting period. Merger Reserve This reserve records the premium for shares issued, as part consideration on the acquisition of Haswell Engineers, atavaluethatexceededtheirnominalvalue,andwhichqualifiedformergerrelief. Retained Earnings Reserve This reserve records the retained earnings in the current and prior periods at the balance sheet date. 81 ANNUAL REPORT & ACCOUNTS 2021 GROUP FINANCIAL STATEMENTS | NOTES TO THE FINANCIAL STATEMENTS 20. Share Based Payments The Group operated two equity-settled share-based payment arrangements in the year and a summary of each of the schemes is given below. The schemes are open to executive directors and selected senior managers within the Group. The 2007 Employee Share Option scheme: The option price for grants under this scheme is the mid-market price on the dealing day preceding the date of the grant. Options will normally be exercisable between three and ten years following grant: no performance criteria apply. No further options may be granted under this scheme. The rules of the scheme were amended to permit the period over which an option is exercisable to be extended by the Board, at the same time the terms of 771,500 options were amended such that they would not lapse on 30 July 2017 but would instead remain exercisable until 7 February 2022. Outstanding at 30 September 2021: Nil (2020: 540,000). The 2018 Performance Share Plan: The option price for grants under this scheme is nil, or at a discretionary valueasspecifiedotherwiseintheawardcertificateortheawardagreement.Optionswillnormallybeexercisable between three and ten years following grant. Any performance criteria are at the discretion of the Remuneration Committee at each award. Outstanding options to subscribe for ordinary shares of 10p each at 30 September 2021 are as follows: Scheme Date of Grant Exercise price Dates when Exercisable Number of Options 2021 2020 2007 Employee Share Option Scheme 2018 Performance Share Plan Jul 2007 Apr 2011 Feb 2012 36.0p 32.0p 49.0p 31/07/10 to 07/02/22 01/04/14 to 31/03/21 08/02/15 to 07/02/22 - - 35,000 35,000 540,000 100,000 185,000 825,000 Aug 2018 Feb 2020 July 2020 Mar 2021 104.8p 109.3p 63.2p 83.5p 02/08/21 to 01/08/28 120,000 150,000 20/02/23 to 19/02/30 220,000 255,000 23/07/23 to 22/07/30 110,000 120,000 02/03/24 to 01/03/31 80,000 - Total options A reconciliation of the movement in the number of share options is given below: 2021 Weighted Average Exercise Price (P) 61.4 83.5 38.0 101.4 92.0 92.2 Number of Options 1,350,000 80,000 (790,000) (75,000) 565,000 155,000 Outstanding at the Beginning of the Year Granted During the Year Exercised During the Year Cancelled During the year Outstanding at the End of the Year Exercisable at the End of the Year 82 530,000 525,000 565,000 1,350,000 2020 Weighted Average Exercise Price (P) 48.6 94.5 - - Number of Options 975,000 375,000 - - 61.4 1,350,000 38.4 825,000 ANNUAL REPORT & ACCOUNTS 2021 GROUP FINANCIAL STATEMENTS | NOTES TO THE FINANCIAL STATEMENTS The options outstanding at the end of the year have an exercise price in the range of 49p to 109.33p and a weighted average contractual life of 7.8 years (2020: 4.3 years). There were 790,000 options exercised during the year with an average exercise price of 38.0p (2020: nil). 100,000 optionswerecancelledduringtheyearfollowingtheawardeesleavingtheGroup’semployment,terminatingthe award agreements, with an average exercise price of 103.2p (2020: nil). During the year 80,000 share options (2020: 375,000) were awarded under the Performance Share Plan 2018. The share based remuneration expense recognised is calculated using the Black-Scholes valuation model, the principal assumptions being: Date of award Share price at date of award (p) Exercise price of option at date of award (p) Fair value of option at date of award (p) Weighted average vesting period (years) Expected option life (years) Expected forfeitures (%) Volatility (%) Risk free interest rate (%) Dividend yield (%) 2021 02/03/21 82.5 83.5 22.0 3 10 5.0 42.0 0.14 1.32 TheGroup’sshare-basedremunerationexpenserecognisedintheyearwas£28,000(2020:£36,000). 21. Employee Benefits A. Defined Contribution Scheme TheGroupmakescontributionstoadefinedcontributionarrangement.Thepensioncostchargedtotheincome statement for the year in respect of these schemes was £277,000 (2020: £273,000). B. Defined Benefit Scheme TheGroupalsosponsorsafundeddefinedbenefitpensionarrangement.Thereisaseparatetrusteeadministered fund holding the pension plan assets to meet long term pension liabilities for some 139 past employees as at 31 March2021(2020:159).Thelevelofretirementbenefitisprincipallybasedonsalaryearnedinthelastthreeyears ofemploymentpriortoleavingactiveserviceandislinkedtochangesininflationuptoretirement. The plan is subject to the funding legislation, which came into force on 30 December 2005, outlined in the Pension Act 2004. This, together with documents issued by the Pensions Regulator, and Guidance Notes adopted by the FinancialReportingCouncil,setouttheframeworkforfundingdefinedbenefitoccupationalpensionplansinthe UK.Thetrusteesoftheplanarerequiredtoactinthebestinterestsoftheplan’sbeneficiaries.Theappointment ofthetrusteesisdeterminedbytheplan’strustdocumentation.Itispolicythatonethirdofalltrusteesshouldbe nominated by the members. During the year the scheme assets and liabilities were transferred to a Section of the Deloitte Master Trust, the trustee having reviewed the scheme structure determined this would provide both cost savings and advisory benefits,memberadministrationbenefitsandassistde-risktheschemewhilstthestructure,governanceand membershiprightsandbenefitsremainunchanged.Asaresultofthistransfertheoldscheme,withnoassets or liabilities remaining, has been subject to a winding up exercise. A full actuarial valuation was carried out as at 31 March 2021 in accordance with the scheme funding requirements ofthePensionAct2004,byMarkMcClintockofDeloitteTotalRewardandBenefits,andthefundingoftheplanis agreed between the Group and the trustees in line with those requirements. These in particular require the surplus / deficittobecalculatedusingprudent,asopposedtobestestimateactuarialassumptions. 83 ANNUAL REPORT & ACCOUNTS 2021 GROUP FINANCIAL STATEMENTS | NOTES TO THE FINANCIAL STATEMENTS This actuarial valuation at 31 March 2021 reported a surplus of £2.83m. The Group has agreed with the trustees that it will continue to meet the expenses of the plan and levies to the Pension Protection Fund. Following higher than anticipated gains and surplus recorded through the period to 30 September 2021, the trustee has undertaken a review of the investment strategy, resulting in the de-risking of the scheme assets, which was concluded in January 2022. As a result of this it was concluded that the voluntary contributions were no longer required, £100k paid in the year to 30 September 2021. ForthepurposesofIAS19theactuarialvaluationasat31March2021,whichwascarriedoutbyaqualifiedindependent actuary, has been updated on an approximate basis to 30 September 2021. There have been no changes in the valuationmethodologyadoptedforthisperiod’sdisclosurescomparedtothepreviousperiod’sdisclosures. Amounts included in the Balance Sheet Fair Value of Scheme Assets PresentValueofDefinedBenefitObligation Asset to be Recognised 2021 £000 17,056 (13,113) 3,943 2020 £000 16,596 (14,632) 1,964 2019 £000 16,655 (14,405) 2,250 Thepresentvalueofschemeliabilitiesismeasuredbydiscountingthebestestimateoffuturecashflowstobe paidoutbytheplanusingtheprojectedunitcreditmethod.Thismethodisanaccruedbenefitsvaluationmethod inwhichallowanceismadeforprojectedearningsincreases.Thevaluecalculatedinthiswayisreflectedinthe asset to be recognised in the balance sheet as shown above. All actuarial gains and losses will be recognised in the year in which they occur in other comprehensive income. Reconciliation of the Impact of the Asset Ceiling The Group has reviewed implications of the guidance provided by IFRIC 14 and has concluded that it is not necessarytomakeanyadjustmentstotheIAS19figuresinrespectofanassetceilingorMinimumFunding Requirement as at 30 September 2021. Reconciliation of Opening and Closing Present Value of the Defined Benefit Obligation DefinedBenefitObligationatStartofTheYear Interest expense Actuarial (gain)/loss due to Scheme Experience Actuarial loss/(gain) due to Changes in Demographic Assumptions Actuarial (gain)/loss due to Changes in Financial Assumptions Reduction in obligation following settlements Past service cost BenefitsPaid 2021 £000 14,632 241 (1,170) 312 (286) (170) 5 (451) 2020 £000 14,405 255 13 (29) 502 - - (514) DefinedBenefitObligationatEndofTheYear 13,113 14,632 AnallowancehasbeenmadeforGMPEqualisationwithinthescheme’sliabilities,theimpacthasbeenallowed for as a plan amendment, updated following the latest court ruling on 20 November 2020. Settlements in the periodrelatetoWindingUpLumpSums(“WULS”)offeredandwhereacceptedpaidtoqualifyingmembers followingtheScheme’stransferintotheMasterTruststructureandsubsequentwindingupoftheprevious scheme which is expected to be concluded in early 2022. An additional allowance of £40,000 has been provided intheyearfollowingreviewbythetrusteeofcertainbenefitsandtheinflationarycapappliedtothesesince2005. 84 ANNUAL REPORT & ACCOUNTS 2021 GROUP FINANCIAL STATEMENTS | NOTES TO THE FINANCIAL STATEMENTS Reconciliation of Opening and Closing Values of the Fair Value of Plan Assets Fair Value of Scheme Assets at Start of The Year Interest Income Return on Plan Assets (Excluding Amounts Included in Interest Income) Assets distributed on settlements Contributions by the Group BenefitsPaid 2021 £000 2020 £000 16,596 16,655 288 705 (182) 100 (451) 296 59 - 100 (514) Fair Value of Scheme Assets at End of The Year 17,056 16,596 The actual return on the plan assets over the period ending 30 September 2021 was £993,000 (2020: £355,000). Defined Benefit Income Recognised in Profit or Loss Interest Income Interest Cost Net Interest Income Defined Benefit Costs Recognised in the Statement of Other Comprehensive Income Return on Plan Assets (excluding Amounts Included in Interest Income) – Gain ExperienceGains/(Losses)arisingontheDefinedBenefitObligation EffectofchangesintheDemographicAssumptionsUnderlyingthePresentValue oftheDefinedBenefitObligation–(Loss)/Gain EffectofchangesintheFinancialAssumptionsUnderlyingthePresentValueof theDefinedBenefitObligations–Gain/(Loss) 2021 £000 288 (241) 47 2021 £000 705 1,170 (312) 286 2020 £000 296 (255) 41 2020 £000 59 (13) 29 (502) Amount Recognised in Other Comprehensive Income – Gain / (Loss) 1,849 (427) Assets Equities Corporate Bonds Government Bonds DiversifiedGrowthFunds Cash and Net Current Assets 2021 £000 4,770 3,937 6,472 1,822 55 2020 £000 4,508 4,161 6,246 1,673 8 Total Assets 17,056 16,596 85 ANNUAL REPORT & ACCOUNTS 2021 GROUP FINANCIAL STATEMENTS | NOTES TO THE FINANCIAL STATEMENTS NoneofthefairvalueoftheassetsshownaboveincludeanydirectinvestmentsintheGroup’sownfinancial instruments or any property occupied by, or other assets used by, the Group. All of the scheme assets have a quoted marketpriceinanactivemarketwiththeexceptionofthetrustee’sbankaccountbalance. It is the policy of the trustees and the Group to review the investment strategy at the time of each funding valuation. Thetrustees’investmentobjectivesandtheprocessesundertakentomeasureandmanagetherisksinherentinthe planinvestmentstrategyaredocumentedintheplan’sStatementofInvestmentPrinciples. Theschemeholdssomeassetsintheformofbondstomatchoffcertainliabilityrisks,beinginterestrateand inflationsensitivity. Significant Actuarial Assumptions Rate of Discount Inflation(RPI) Inflation(CPI) Allowance for Pension in Payment Increases of RPI or 5% max Allowance for Pension in Payment Increases of CPI or 3% max Allowance for GMP equalisation – % of DBO Allowance for Commutation of Pension for Cash at Retirement 2021 2020 % Per Annum % Per Annum 2.00 3.50 2.80 3.35 2.30 2.9% 75% 1.60 3.05 2.65 2.90 2.10 2.7% 80% Therevaluationofnon-GMPpensionsindefermentisinlinewithCPIinflationsubjecttostatutorylimits. The mortality assumptions adopted at 30 September 2021 are 100% of the standard tables S3PxA, Year of Birth, no age rating for males and females, projected using CMI_2020 converging to 1.25% p.a. (at 30 September 2020 are 100% of the standard tables S2PxA, Year of Birth, no age rating for males and females, projected using CMI_2021 converging to 1.25% p.a.). These imply the following life expectancies: Life Expectancy at Age 65 (years) 2021 22.3 24.7 23.6 26.1 2020 21.8 23.7 23.1 25.2 Male Retiring In 2021: Female Retiring In 2021: Male Retiring In 2041: Female Retiring In 2041: 86 ANNUAL REPORT & ACCOUNTS 2021 GROUP FINANCIAL STATEMENTS | NOTES TO THE FINANCIAL STATEMENTS Analysis of the Sensitivity to the Principal Assumptions of the Present Value of the Defined Benefit Obligation Assumption Change in Assumption Change in Liabilities Discount Rate Increase/decrease of 0.10% 2021 £000 / % change (200) / 200 2020 % change Increase of 0.10% P.A. Decrease by 1.5% Decrease by 1.6% RateofInflation Increase/decrease of 0.10% 140 / (100) Increase of 0.10% P.A. Increase by 1.1% Increase by 1.0% Rate of Mortality Increase in Life Expectancy Of 1 Year (510) / 510 Increase by 3.9% Increase by 3.2% Commutation Members Commute an Extra 10% of Post A Day Pension on Retirement (60) Decrease by 0.5% Decrease by 0.4% Thesensitivitiesshownaboveareapproximate.Eachsensitivityconsidersonechangeinisolation.Theinflation sensitivity includes the impact of changes to the assumptions for revaluation and pension increases. The average durationofthedefinedbenefitobligationattheperiodending30September2021is15years(2020:16years). The plan typically exposes the Group to actuarial risks such as investment risk, interest rate risk, mortality risk and longevityrisk.Adecreaseincorporatebondyields,ariseininflationoranincreaseinlifeexpectancywouldresultinan increase to plan liabilities. This would detrimentally impact the balance sheet position and may give rise to increased chargesinfutureP&Laccounts.Thiseffectwouldbepartiallyoffsetbyanincreaseinthevalueoftheplan’sbond holding.Additionally,capsoninflationaryincreasesareinplacetoprotecttheplanagainstextremeinflation. The contributions expected to be paid by the Group to the plan for the period commencing 1 October 2021 are £nil (2020: £100,000). 22. Financial Commitments Capital Commitments Contracted for but not provided in the accounts amounted to £326,000 (2020: £40,000). Contingent Liabilities As at 30 September 2021 Group contingent liabilities relating to guarantees in the normal course of business amounted to £109,000 (2020: £169,000). 87 ANNUAL REPORT & ACCOUNTS 2021 GROUP FINANCIAL STATEMENTS | NOTES TO THE FINANCIAL STATEMENTS 23. Related Party Transactions Remuneration of Key Management Personnel The remuneration of the directors, who are considered to be the key management personnel of the Group, is set out below in aggregate for each of the categories required by IAS 24 Related Party Disclosures together with dividends received by them. Detailed information about the remuneration of individual directors is disclosed in the Remuneration Report. Short-termemployeebenefits Post-employmentbenefits Share based payments Dividends Other Related Party Transactions 2021 £000 614 46 14 674 - 2020 £000 615 37 27 679 - The transactions between the Company and its subsidiaries have been eliminated on consolidation and are not disclosed in this note. There are no other related party transactions (2020: none). 88 ANNUAL REPORT & ACCOUNTS 2021 COMPANY FINANCIAL STATEMENTS Company Balance Sheet Company Statement of Changes in Equity Company Notes to the Financial Statements 90 91 92 89 ANNUAL REPORT & ACCOUNTS 2021STRATEGIC REPORT | CHAIRMAN’S STATEMENT COMPANY FINANCIAL STATEMENTS Company Balance Sheet At 30 September 2021 Company number: 00686429 Fixed Assets Investments Tangible Assets Current Assets Debtors Cash at Bank and In Hand Note C5 C6 C7 2021 £000 5,411 2,328 7,739 475 133 608 2020 £000 5,411 2,434 7,845 595 3 598 Creditors: Amounts Falling Due Within One Year C8 (2,120) (2,118) Net Current Liabilities (1,512) (1,520) Total Assets Less Current Liabilities 6,228 6,325 Creditors: Amounts Falling Due After More Than One Year C9 (2,823) (3,013) Net Assets Capital and Reserves Called Up Share Capital Investment In Own Shares Share Premium Account Share Based Payment Reserve Merger Reserve Retained Earnings † 3,405 3,312 1,345 (324) 929 60 784 611 1,266 (324) 708 118 784 760 C12 C13 C13 C13 C13 C13 Total Equity Shareholders’ Funds 3,405 3,312 † The Company has not presented a separate Income statement account as permitted by Section 408 of the CompaniesAct2006.ThelossdealtwithinthefinancialstatementsoftheCompanyamountedto£0.26m(2020:profit £0.57m). ThefinancialstatementswereapprovedbytheBoardon27January2022andsignedonitsbehalfby: P V Curtis Director C J Buckenham Director 90 ANNUAL REPORT & ACCOUNTS 2021 COMPANY FINANCIAL STATEMENTS Company Statement of Changes in Equity For the year ended 30 September 2021 Investment in own shares Share Premium Account Share Based Payment Reserve Merger Reserve Retained Earnings £000 £000 £000 £000 £000 Total £000 Share Capital £000 2021 At 1 October 2020 1,266 (324) 708 118 784 760 3,312 (Loss) for the Year Total Comprehensive Income - - Proceeds from Issue of shares 79 Share based payments Tax on share based payments Transfer on exercise of share options - - - Transactions with owners At 30 September 2021 79 1,345 - - - - - - - (324) - - 221 - - - 221 929 - - - 28 - (86) (58) 60 - - - - - - - 784 (255) (255) (255) (255) - - 20 86 300 28 20 - 106 611 348 3,405 Investment in own shares Share Premium Account Share Based Payment Reserve Merger Reserve Retained Earnings £000 £000 £000 £000 £000 Total £000 Share Capital £000 2020 At 1 October 2019 1,266 (324) 708 82 784 196 2,712 ProfitfortheYear Total Comprehensive Income Share based payments Taxbenefiton share-based Payments Transactions with owners - - - - - - - - - - - - - - - - - 36 - 36 - - - - - 569 569 569 569 - (5) (5) 36 (5) 31 At 30 September 2020 1,266 (324) 708 118 784 760 3,312 91 ANNUAL REPORT & ACCOUNTS 2021 COMPANY FINANCIAL STATEMENTS Company Notes to the Financial Statements For the year ended 30 September 2021 C1. Company Information LPAGroupplcisapubliclimitedcompanyincorporatedinEngland.TheaddressofitsregisteredofficeisLight &PowerHouse,ShireHill,SaffronWalden,CB113AQ,UK.Theprincipalactivityisthatofaholdingcompany. C2. Basis of Preparation ThesefinancialstatementshavebeenpreparedinaccordancewithapplicableUnitedKingdomaccounting standards, including Financial Reporting Standard 102 – ‘The Financial Reporting Standard applicable in the UnitedKingdomandRepublicofIreland’(“FRS102”asrevisedDecember2017),andwiththeCompaniesAct 2006.Thefinancialstatementshavebeenpreparedonthehistoricalcostbasisexceptforthemodification toafairvaluebasisforcertainfinancialinstrumentsasspecifiedintheaccountingpoliciesbelow. ThefinancialstatementsarepresentedinSterling(£)whichisthefunctionalandpresentationalcurrencyofthe Company.Monetaryamountsinthesefinancialstatementsareroundedtothenearest£’000. The Company has taken advantage of the following disclosure exemptions under FRS102 on the basis that the equivalent disclosures are included in the Group Financial Statements: • The requirements of Section 4 Statement of Financial Position 4.12 (a)(iv); • The requirements of Section 7 Statement of Cash Flows; • The requirement of Section 3 Financial Statement Presentation paragraph 3.17(d); • The requirements of Section 33; Key management and personnel paragraph 33.7 and Related Party Disclosures paragraph 33.3; • The requirements of Section 11 Basic Financial Instruments; Section 12 Other Financial Instrument Issues; and • The requirements of Section 26 Share Based Payments. ThisinformationisincludedintheconsolidatedfinancialstatementsofLPAGroupplcasat30September2021. C3. Accounting Policies The following are the principal accounting policies of the Company which have been applied consistently throughout the year and the preceding year. A. Tangible Fixed Assets Tangiblefixedassetsaremeasuredatcost,netofdepreciationandanyprovisionforimpairment. Depreciationiscalculatedtowritedownthecost,lessestimatedresidualvalue,ofalltangiblefixedassets, other than freehold land, by equal annual instalments over their estimated useful economic lives. The rates generally applicable are: Buildings Plant and Machinery 2% 10% Aprofitorlossondisposalisrecognisedintheincomestatementatthesurplusordeficitofdisposalproceeds over net carrying amount of the asset at the time of disposal. 92 ANNUAL REPORT & ACCOUNTS 2021 COMPANY FINANCIAL STATEMENTS | COMPANY NOTES TO THE FINANCIAL STATEMENTS B. Investments Investments in subsidiaries are shown at cost less any provision for impairment. The investments are assessed for indications of impairment at each reporting date. If any such indication exists, the recoverable amount of the investment is estimated in order to determine the extent of the impairment loss (if any). The recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated futurecashflowsarediscountedtotheirpresentvalueusingapre-taxdiscountratethatreflectscurrentmarket assessmentsofthetimevalueofmoneyandtherisksspecifictotheinvestment.Iftherecoverableamount of an investment is estimated to be less than its carrying amount, the carrying amount of the investment is reducedtoitsrecoverableamount.Animpairmentlossisrecognisedimmediatelyinprofitorloss. C. Taxation Currenttaxisrecognisedfortheamountofincometaxpayableinrespectofthetaxableprofitforthecurrentor past reporting periods using the tax rates and laws that that have been enacted or substantively enacted by the reporting date. Deferredtaxisrecognisedinrespectofalltimingdifferencesatthereportingdate,exceptasotherwise indicated.Timingdifferencesaredifferencesbetweentaxableprofitsandtotalcomprehensiveincomethat arisefromtheinclusionofincomeandexpensesintaxassessmentsindifferentperiodsfromtheirrecognition inthefinancialstatements. Deferred tax assets are only recognised to the extent that it is probable that they will be recovered against the reversalofdeferredtaxliabilitiesorotherfuturetaxableprofits. Deferred tax is calculated using the tax rates and laws that that have been enacted or substantively enacted by thereportingdatethatareexpectedtoapplytothereversalofthetimingdifference. Taxexpense/(income)ispresentedeitherinprofitorloss,othercomprehensiveincomeorequitydepending on the transaction that resulted in the tax expense (income). D. Equity-Settled Share-Based Payments The cost of share-based employee compensation arrangements, whereby Groupwide employees receive remunerationintheformofshareoptions,isrecognisedasanemployeebenefitexpenseintheprofitandloss account, with a corresponding credit to the share based payment reserve. Thetotalexpensetobeapportionedoverthevestingperiodofthebenefitisdeterminedbyreference to the fair value of the share options awarded (at the date of grant) and the number of options that are expected to vest. The Company has adopted the Black-Scholes model for the purposes of computing the fair valueofoptions.Theimpactoftherevisionoftheoriginalestimates,ifany,isrecognisedinprofitorlosssuch thatthecumulativeexpensereflectstherevisedestimate,withacorrespondingadjustmenttothesharebased payment reserve. The proceeds received net of any directly attributable transaction costs are credited to share capital (nominal value) and the share premium account when the options are exercised. Where the Company grants options over its shares to employees in subsidiaries, it recognises this as a capital contribution equivalent to the share-basedpaymentchargerecognisedintheincomestatement.InthefinancialstatementsoftheCompany, this capital contribution is recognised as an increase in the cost of investment in subsidiaries, with the corresponding credit being recognised directly in equity. E. Defined Contribution Pension Schemes Thepensioncostschargedagainstoperatingprofitsarethecontributionspayableinrespectofthe accounting period. 93 ANNUAL REPORT & ACCOUNTS 2021 COMPANY FINANCIAL STATEMENTS | COMPANY NOTES TO THE FINANCIAL STATEMENTS F. Significant Judgements and Estimates Thepreparationofthefinancialstatementsrequiresmanagementtomakejudgementsontheapplicationof itsaccountingpoliciesandmakeestimatesaboutthefuture.Actualresultsmaydifferfromtheseassumptions. Therearenokeysourcesofestimationuncertaintythathaveasignificantriskofcausingamaterialadjustment tothecarryingamountsofassetsandliabilitiesinthenextfinancialyear.Thecriticaljudgementsmadein arrivingattheamountsincludedinthesefinancialstatementsaredetailedbelow. Impairment of investments The determination of whether investments have been impaired requires an estimate of the value in use of the cash-generating units to which the investment relates. The value in use calculation requires management to makeanestimateoftheexpectedfuturecashflowsofthecash-generatingunitsandtochooseanappropriate discountrateinordertocalculatethepresentvalueofthosecashflows.Thecarryingamountofinvestments are disclosed in note C5. C4. Employee Information With the exception of the directors, the number of people employed by the Company was one (2020: one). Detailed informationconcerningdirectors’emoluments,shareholdingsandoptionsisshownintheRemunerationReport. The average number of people employed by the Company during the year was: Administration Theemployeebenefitexpensefortheyearamountedto: Wages and Salaries Social Security Costs PensionCosts–DefinedContributionArrangements Share Based Payments 2021 Number 2020 Number 7 6 2021 £000 591 67 42 28 728 2020 £000 581 61 38 36 716 Detailedinformationconcerningdirectors’emoluments,shareholdingsandoptionsisshownintheRemuneration ReportwithintheGroupFinancialStatements.Employeebenefitsexpensesincludeitemscontainedwithin exceptional costs of £46,000 (2020: £9,000) see note 6 within the Group Financial Statements. C5. Investments Investments in Subsidiary Undertakings At 1 October 2020 and 30 September 2021 Provision for Impairment Carrying Amount £000 (1,048) £000 5,411 Cost £000 6,459 94 ANNUAL REPORT & ACCOUNTS 2021 COMPANY FINANCIAL STATEMENTS | COMPANY NOTES TO THE FINANCIAL STATEMENTS Details of the investments, which are all registered in England and Wales in which the Group holds directly and indirectly 20% or more of the nominal value of any class of share capital are as follows: Name of Company Holding Subsidiary Undertakings Proportion Voting Rights and Shares Held Nature of Business Channel Electric Equipment Holdings Limited Ordinary Shares 100% Holding Company Channel Electric Equipment Limited t/a LPA Channel Electric Ordinary Shares 100% Electrical Components LPA Industries Limited t/a LPA Connection Systems Haswell Engineers Limited t/a LPA Connection Systems Excil Electronics Limited t/a LPA Lighting Systems Ordinary Shares 100% Electro-Mechanical Components Ordinary Shares 100% Metal Fabrication Ordinary Shares 100% Electrical Components The Group also holds 100% of the ordinary share capital of the following dormant companies: Niphan Limited, Light and Power Accessories Company Limited, W M Engineering (Ramsden) Limited and Lazell Bros. Engineers Limited. All of the above investments are held directly by LPA Group plc with the exception of Channel Electric Equipment Limited (which is held by Channel Electric Equipment Holdings Limited) and Lazell Bros. Engineers Limited (which is held by Light and Power Accessories Company Limited). LPA Group plc is the sole member and guarantor of LPA Industries Pension Trustees Limited, a company limited byguarantee,whichactsastrusteetothecloseddefinedbenefitpensionschemeoperatedwithintheGroup andtheGroup’sLifeAssuranceScheme. TheregisteredofficeforallGroupentitiesisLight&PowerHouse,ShireHill,SaffronWalden,CB113AQ,UK. C6. Tangible Fixed Assets Cost At 1 October 2020 and 30 September 2021 Depreciation At 1 October 2020 Charge for the year At 30 September 2021 Net book value At 30 September 2021 At 30 September 2020 Freehold Land and Buildings £000 2,393 231 35 266 2,127 2,162 Plant and Machinery £000 Total £000 716 3,109 444 71 515 201 272 675 106 781 2,328 2,434 95 ANNUAL REPORT & ACCOUNTS 2021 COMPANY FINANCIAL STATEMENTS | COMPANY NOTES TO THE FINANCIAL STATEMENTS C7. Debtors Amounts falling due within one year Amounts due from Subsidiary Undertakings Other Receivables Prepayments Deferred Taxation (note C11) C8. Creditors: Amounts Falling Due within One Year Bank Overdraft Bank Loan Debt Trade Creditors 2021 £000 115 32 10 318 475 2021 £000 - 191 191 7 2020 £000 345 - 123 127 595 2020 £000 149 188 337 121 Amounts owed to Subsidiary Undertakings 1,758 1,453 Other Creditors Other Taxation and Social Security Accruals Amounts owed to subsidiary undertakings are interest free and repayable on demand. C9. Creditors: Amounts Falling Due after More than One Year Debt – Bank Loan Amounts owed to subsidiary undertakings - - 164 2,120 2021 £000 2,123 700 2,823 3 4 200 2,118 2020 £000 2,313 700 3,013 Amountsowedtosubsidiaryundertakingsareinterestfree.TheCompanyhasconfirmedthattheintra-group indebtedness above will not be called upon within 12 months from the date of these accounts and as such the Directorshavedeemeditappropriatetoreflecttheseaspayableinmorethanoneyear. 96 ANNUAL REPORT & ACCOUNTS 2021 COMPANY FINANCIAL STATEMENTS | COMPANY NOTES TO THE FINANCIAL STATEMENTS C10. Borrowings Due Within One Year Bank Overdraft Bank Loan Non-Current Bank Loan Total Borrowings Repayable Within One Year Between One and Two Years Between Two and Five Years 2021 £000 - 191 191 2,123 2,314 191 196 1,927 2,314 ThefollowingsecurityisprovidedtoBarclaysBankplcinrespectoftheCompany’s£2.3mtermloan outstanding at 30 September 2021 (2020: £2.5m): (i) a legal charge over the developed freehold property owned by the Company; (ii) a debenture from the Company; and (iii) a cross guarantee by the Company as guarantor on account of the obligations of each Group company to Barclays Bank plc. See Group Financial Statements Note 15 for the terms of borrowing. C11. Deferred Tax Asset At 1 October 2020 Chargedtoprofitintheyear Recognised Directly in Equity At 30 September 2021 Recognised Deferred Tax Assets and Liabilities Deferred Taxation Assets recognised in the Accounts are as Follows: Accelerated Capital Allowances TaxBenefitonLosses TaxBenefitonShare-BasedPayments 2021 £000 34 262 22 318 2020 £000 149 188 337 2,313 2,650 337 193 2,120 2,650 £000 127 171 20 318 2020 £000 18 54 55 127 Deferred tax is provided at a composite rate based on enacted rates expected to apply at the year end. The rate provided in the year is 24.9% (2020: 19.0%). The increase in the rate provided attributed to an increase of £75,000 to the deferred tax asset. Deferred tax assets are disclosed in Note C7. Unrecognised Deferred Tax A deferred tax asset of £0.21m (2020: £0.16m) has not been recognised in respect of unrelieved management expenses of £0.83m (2020: £0.83m). The unrelieved management expenses have no expiry date and have not been recognised because of uncertainty over the timing of their recoverability. 97 ANNUAL REPORT & ACCOUNTS 2021 COMPANY FINANCIAL STATEMENTS | COMPANY NOTES TO THE FINANCIAL STATEMENTS C12. Share Capital Issued and Fully Paid Number £000 Number £000 2021 2020 In Issue at the Start of the year Allotted Under Share Plans 12,658,229 1,266 12,658,229 1,266 790,000 79 - - In Issue at the End of the year 13,448,229 1,345 12,658,229 1,266 During the year 790,000 options were exercised at a weighted average exercise price of 38.0p, (2020: nil). At the yearend, 300,000 (2020: 300,000) ordinary shares in the Company were held as Investment in Own Shares,theshareshavingbeenacquiredbytheLPAGroupPlcEmployeeBenefitTrust. C13. Reserves Called-Up Share Capital Called up share capital represents the nominal value of shares that have been issued. Investment in Own Shares This reserve records the share capital acquired in the Company, by the Company as Treasury Shares or by the LPAGroupPlcEmployeeBenefitTrust,atnominalvalue.Asat30September2021,300,000ordinaryshares of 10p each were held (2020: 300,000). Share Premium Account This reserve records the premium for shares issued at a value that exceeds their nominal value. Share Based Payment Reserve This reserve represents equity-settled share-based employee remuneration for outstanding options recognised over the vesting period. Merger Reserve This reserve records the premium for shares issued, as part consideration on the acquisitions of Channel Electric Equipment Holdings Ltd and Haswell Engineers Ltd, at a value that exceeded their nominal value, andwhichqualifiedformergerrelief. Retained Earnings Thisreserveincludesallcurrentandpriorperiodretainedprofitsandlosses. C14. Share Based Payments DetailsoftheCompany’sshareoptionschemes,areconciliationofmovementsthereinandoptionsgranted in the year are given in note 20 to the Group Financial Statements. The fair value of services received in return for share options granted are measured by reference to the fair value of share options granted. The Company recognised a share-based remuneration expense in the year of £28,000 (2020: £36,000). C15. Related Party Transactions Related Party Transactions with directors of the Company are set out in note 23 to the Group Financial Statements. C16. Contingent Liabilities Security is provided to Barclays Bank plc in respect of the group overdraft facility by way of a cross guarantee betweenthecompanyanditssubsidiaries.Asat30September2021thecompany’sexposureinrelationtothe overdraft facility was £784,000 (2020: £729,000). 98 ANNUAL REPORT & ACCOUNTS 2021 OTHER INFORMATION Five Year Summary Alternative Performance Measures Glossary 100 101 99 ANNUAL REPORT & ACCOUNTS 2021OTHER INFORMATION Five Year Summary Unaudited Information Summary Income Statement Revenue EBITDA † Depreciation and Amortisation UnderlyingOperatingProfit/(Loss) Share Based Payments / Exceptional Items Net Finance Costs Profit/(Loss)BeforeTaxation Taxation Profit/(Loss)forTheYear Summary Balance Sheet Property, Plant and Equipment ^* IntangibleAssets–excludingGoodwill^” Net Trading Assets Net Operating Assets ^^ Net Debt ^* Deferred Taxation Net Assets before Pension and Goodwill Goodwill Pension Asset net of Deferred Tax 2017 £000 2018 £000 2019 £000 2020 £000 2021 £000 22,482 27,979 19,533 20,711 18,265 2,474 (579) 1,895 73 (54) 1,914 (146) 1,768 2016 £000 6,851 36 4,348 11,235 (2,753) 28 8,510 1,149 1,062 2,908 (664) 2,244 (175) (45) 2,024 (253) 1,771 2017 £000 7,216 51 4,286 11,553 (1,971) 4 9,586 1,149 1,974 945 (741) 204 (406) (35) (237) 185 (52) 2019 £000 7,006 210 4,482 1,613 (830) 783 (167) (65) 551 44 595 2020 £000 6,984 239 5,252 594 (868) (274) (74) (39) (387) 353 (34) 2021 £000 6,433 257 4,686 11,698 12,475 11,376 (2,420) 42 9,320 1,149 1,855 (2,646) (1,633) (18) 9,811 1,149 1,591 264 10,007 1,149 2,957 Net Assets 10,721 12,709 12,324 12,551 14,113 Other Information EBITDA To Sales Basic Earnings (Loss) Per Share Dividends Per Ordinary Share Net Assets Per Ordinary Share Net Debt/EBITDA Gearing (Net Debt as A % of Total Equity) ^* Key 2017 11.0% 14.40p 2.70p 86.6p 1.11 25.7% 2018 10.4% 14.34p 2.90p 102.7p 0.68 15.5% 2019 4.8% (0.43)p 1.10p 97.4p 2.56 19.6% 2020 7.8% 4.82p - 99.2p 1.64 21.1% 2021 3.3% (0.27)p - 105.0p 2.75 11.6% † – earnings before interest, tax, depreciation, amortisation of intangible assets, non-cash charges for equity-settled share based payments and exceptional costs. ^^ Net Operating Assets – The total of Inventories and Receivables less Payables, excluding Net Debt and Right of Use liabilities. ^* Inclusive of Right of Use Assets from 2020, excluding software assets from 2019. Net Debt inclusive of Lease Liabilities from 2020. ^”–Inclusiveofsoftwareassetsfrom2019,previouslyincludedwithinProperty,PlantandEquipment. 100 ANNUAL REPORT & ACCOUNTS 2021OTHER INFORMATION Alternative Performance Measures Glossary The Annual report and Accounts include alternative Performancemeasures(“APM’s”)whicharenotdefined orspecifiedundertherequirementsofInternational FinancialreportingStandards(“IFRS”).TheCompany believesthattheseAPM’sprovideallreadersofthe document with relevant additional information on theGroup,suchmeasuresutilisedbytheGroup’s management also. Order book The combined value of all orders received (order intake), representing future revenues less revenue recognised in the period and adjustments for foreign exchange movements. The measure allows management to assess the future success and visibility of potential earnings. Order Intake The value of contractual commitments represented by a purchase order or comparable binding commitment from a customer received during any period for the delivery of the performance obligation / revenue at a point in the future. Order intake excludes framework agreements or contract awards representing a basis, agreement or intention to place future orders and referenceonlytheproductspecificationandbasis ofagreement,withoutcommitmentordefinition. The measure allows management to assess the achievement of its selling activities. Pipeline Opportunitiesidentifiedandtargetedtowin,generating order intake. This measure allows management to identify the activities that, with a sensitivity, should result in order intake.Suchactivitiesrepresentdefinedcustomer intentions or work streams that are reasonably expected tobeawardedtoalevelthatoncesensitised,issufficient to generate adequate Order Intake in future periods . Funnel ActivitiesidentifiedthatfeedthePipeline,ultimately leading to Order Intake. This forward looking measure is used by management to ensuresufficientactivityandinterestisidentifiedwithin theCompany’stargetmarketsandacrossitscustomer base and those targeted that will feed the Pipeline. Added Value The margin generated through the conversion of raw materials. A standard manufacturing measure utilised by the Group providesmanagementcomfortthatsufficientmarginis available within the manufacturing processes through the conversion of material, to fund overhead and variable cost absorption. 101 ANNUAL REPORT & ACCOUNTS 2021OTHER INFORMATION Notice of Meeting NOTICE IS HEREBY GIVEN that the Sixtieth Annual GeneralMeeting(“AGM”)ofLPAGroupPlc(the “Company”)willbeheldattheofficesoffinnCap,1 Bartholomew Close, London, EC1A 7BL on Thursday 24 March 2022 at 10.30 am for the following purposes: Routine Business 1. To receive the accounts for the year ended 30 September 2021, together with the reports of the directors and the auditors thereon. 2. To re-elect as a director Paul Curtis who retires by rotation,inaccordancewiththeCompany’sArticles of Association. 3. To re-elect as a director Chris Buckenham who retires by rotation, in accordance with the Company’sArticlesofAssociation. 4. To re-appoint Andrew Jenner as a director of the Company. 5. To re-appoint RSM UK Audit LLP as auditors to the Company,toholdofficeuntiltheendofthenext general meeting at which accounts are laid before theCompany,andtoauthorisethedirectorstofix theauditors’remuneration. Special Business Share Capital Toconsider,andifthoughtfit,passresolution6asan ordinary resolution: 6. That, the directors be generally and unconditionally authorised pursuant to section 551 of the Companies Act 2006 to allot shares in the Company and to grant rights to subscribe for or to convert any security into shares in the Company up to an aggregate nominal amount of £154,177 provided that this authority shall expire at the end of the next annual general meeting of the Company after the passing of this resolution or at the close of business on the date falling 15 months after the date of the passing of this resolution, whichever is earlier, save that the Company may before such expirymakeanofferoragreementwhichwould or might require shares to be allotted or rights to subscribe for or convert securities into shares to be granted after such expiry and the directors may allot shares or grant rights to subscribe for 102 or convert securities into shares in pursuance ofsuchanofferorarrangementasiftheauthority conferred hereby had not expired. Toconsiderand,ifthoughtfit,passresolution7asa special resolution: 7. That subject to the passing of resolution 6 above, the directors be given power pursuant to section 570 of the Companies Act 2006 to allot equity securities(asdefinedinsection560ofthesaid Act) for cash pursuant to the authority conferred by resolution 6 above and be empowered pursuant to section 573 of the said Act to sell ordinary shares (asdefinedinsection560ofthesaidAct)heldby theCompanyastreasuryshares(asdefinedin section 724 of the said Act) for cash, as if section 561(1) of the said Act did not apply to any such allotment or sale provided that this power shall be limited to the allotment of equity securities or the sale of treasury shares: a. b. inconnectionwithorpursuanttoanofferby wayofrights,openofferorotherpre-emptive offertotheholdersofsharesintheCompany and other persons entitled to participate therein in proportion (as nearly as practicable) to their respective holdings, subject to such exclusions or other arrangements as the directors may consider necessary or expedient to deal with fractional entitlements or legal or practical problems under the laws of any territory or the regulations or requirements of any regulatory authority or any stock exchange in any territory; and (otherwise than pursuant to sub-paragraph (a) above) up to an aggregate nominal value of £134,582 (representing 10% of the issued share capital excluding treasury shares), such authority to expire at the end of the next annual general meeting of the Company after the passing of this resolution or the close of business on the date falling 15 months after the date of the passing of this resolution, whichever is earlier, save that the Company maybeforesuchexpirymakeanofferor agreement which would or might require equity securities to be allotted (and treasury shares to be sold) after such expiry and the directors may allot equity securities (and sell ANNUAL REPORT & ACCOUNTS 2021NOTICE OF MEETING treasuryshares)inpursuanceofsuchanoffer or arrangement as if the power conferred hereby had not expired. Toconsiderand,ifthoughtfit,passresolution8asa special resolution: 8. That subject to and in accordance with the Company’sArticlesofAssociationandpursuant to section 701 of the Companies Act 2006, the Company is hereby generally and unconditionally authorisedtomakemarketpurchases(asdefined in section 693(4) of the Companies Act 2006) of any of its Ordinary Shares on such terms and in such manner as the directors of the Company may from time to time determine, provided that: a. The maximum number of Ordinary Shares hereby authorised to be purchased is 1,345,823 representing 10% of the issued share capital of the Company; b. The minimum price (excluding expenses) which may be paid for an Ordinary Share is 10p; c. The maximum price (excluding expenses) which may be paid for an Ordinary Share shallnotbemorethanthehigherof(i)five per cent above the average middle market quotation for Ordinary Shares as derived from the AIM appendix to London Stock Exchange DailyOfficialListforthefivebusinessdays before the date on which the contract for the purchase is made, and (ii) an amount equal to the higher of the price of the last independent trade and highest current independent bid as derived from the trading venue where the purchase was carried out; d. The authority hereby conferred shall, unless renewed prior to such time, expire at the end of the annual general meeting of the Company to be held in 2023 or on 24 March 2023, whichever is earlier, provided that the Company may, before such expiry, make a contract to purchase its own shares which would or might be executed wholly or partly after such expiry, and the Company may make a purchase of its own shares in pursuance of such contract as if the authority hereby conferred had not expired. Toconsiderand,ifthoughtfit,passresolution9asan ordinary resolution: 9. ThattheCompany’sauthorisedsharecapitalbe and is hereby increased to £2,500,000 divided into 25,000,000 ordinary shares of 10 pence each. By order of the Board Chris Buckenham Secretary 18 February 2022 Registered office: Light & Power House ShireHill,SaffronWalden CB11 3AQ, UK Notes: Entitlement to Attend and Vote 1. To be entitled to attend and vote at the Meeting (and for the purposes of the determination by the Company of the votes that may be cast in accordancewithRegulation41oftheUncertified Securities Regulations 2001), only those members registeredintheCompany’sregisterofmembers at close of business on 22 March 2022 (or, if the Meeting is adjourned, close of business on the date which is two business days before the adjourned Meeting) shall be entitled to attend and vote at the Meeting. Changes to the register of members of the Company after the relevant deadline shall be disregarded in determining the rights of any person to attend and vote at the Meeting. Website Giving Information Regarding the Meeting 2. Information regarding the Meeting is available from www.lpa-group.com. Attending in Person 3. If you wish to attend the Meeting in person, please bringsomeformofidentification. Appointment of Proxies 4. If you are a member of the Company at the time set out in note 1 above, you are entitled to appoint a proxy to exercise all or any of your rights to attend, speak and vote at the Meeting. You can appoint a proxy only using the procedures set out in these notes and the notes to the proxy form. 5. A proxy does not need to be a member of the Company but must attend the Meeting to represent you. If you wish your proxy to speak on your behalf 103 ANNUAL REPORT & ACCOUNTS 2021NOTICE OF MEETING at the Meeting you will need to appoint your own choice of proxy (not the Chairman) and give your instructions directly to them. 6. You may appoint more than one proxy provided each proxy is appointed to exercise rights attached todifferentshares.Youmaynotappointmore than one proxy to exercise rights attached to any one share. To appoint more than one proxy, please indicate on your proxy submission how many shares it relates to. 7. A vote withheld is not a vote in law, which means that the vote will not be counted in the calculation of votes for or against the Resolution. If no voting indication is given, your proxy will vote or abstain from voting at his or her discretion. Your proxy will vote(orabstainfromvoting)asheorshethinksfit in relation to any other matter which is put before the Meeting. Appointment of a Proxy Online 10. You may submit your proxy electronically using the Share Portal service at www.signalshares.com. Shareholders can use this service to vote or appoint a proxy online. The same voting deadline of 48 hours (excluding non-working days) before the time of the Meeting applies. Shareholders will need tousetheuniquepersonalidentificationInvestor Code(“IVC”)printedonyoursharecertificate. If you need help with voting online, please contact ourRegistrar,LinkGroup’sportalteamon 0371 664 0391. Calls are charged at the standard geographical rate and will vary by provider. Calls outside the United Kingdom will be charged at the applicable international rate. Lines are open between 09:00 – 17:30, Monday to Friday excluding public holidays in England and Wales. Or via email at shareholderenquiries@linkgroup.co.uk . Appointment of Proxy Using Hard Copy Proxy Form Appointment of Proxies Through Crest 11. CREST members who wish to appoint a proxy 8. A form of proxy has not been sent to you, but you can request a form of proxy, directly from the registrarsLinkGroup’sgeneralhelplineteamonTel: 0371 664 0300. Calls are charged at the standard geographical rate and will vary by provider. Calls outside the United Kingdom will be charged at the applicable international rate. Lines are open between 09:00 – 17:30, Monday to Friday excluding public holidays in England and Wales. Or via email at shareholderenquiries@linkgroup.co.uk or via postal address at Link Group, 10th Floor, Central Square, 29 Wellington St, Leeds LS1 4DL. In the case of a member which is a company, the proxy form must be executed under its common seal or signedonitsbehalfbyanofficerofthecompany or an attorney for the company. In the case of an individual, the form of proxy must be signed by the individual or their attorney. Any power of attorney or any other authority under which the proxy form issigned(oradulycertifiedcopyofsuchpoweror authority) must be included with the proxy form. For the purposes of determining the time for delivery of proxies, no account has been taken of any part of a day that is not a working day. 9. Tobeeffective,theformofproxy,dulyexecuted together with the power of attorney or other authority (if any) under which it is signed (or a notariallycertifiedcopythereof)mustbelodged at the Company Registrars not less than 48 hours (excluding any part of a day which is a non-working day) before the time appointed for the holding of the Meeting or adjourned meeting. 104 or proxies by utilising the CREST electronic proxy appointment service may do so for the Meeting and any adjournment(s) of it by using the procedures described in the CREST Manual (available from www.euroclear.com/site/ public/ EUI). CREST Personal Members or other CREST sponsored members, and those CREST members who have appointed a voting service provider(s), should refer to their CREST sponsor or voting service provider(s), who will be able to take the appropriate action on their behalf. In order for a proxy appointment made by means of CREST to be valid, the appropriate CREST message (a CREST Proxy Instruction) must be properly authenticated in accordance with Euroclear UK & Ireland Limited’s(EUI)specificationsandmustcontain the information required for such instructions, as described in the CREST Manual. The message must betransmittedsoastobereceivedbytheissuer’s agent (ID: RA10) by 10.30 am on 22 March 2022. For this purpose, the time of receipt will be taken to be the time (as determined by the timestamp applied to the message by the CREST Applications Host)fromwhichtheissuer’sagentisableto retrieve the message by enquiry to CREST in the manner prescribed by CREST. CREST members and, where applicable, their CREST sponsors or voting service providers should note that EUI does not make available special procedures in CREST for any particular messages. Normal system timings and limitations will therefore apply in relation to the input of CREST Proxy Instructions. It is the responsibility of the CREST member concerned to take (or, if ANNUAL REPORT & ACCOUNTS 2021NOTICE OF MEETING the CREST member is a CREST personal member or sponsored member or has appointed a voting service provider(s), to procure that his CREST sponsor or voting service provider(s) take(s)) such action as shall be necessary to ensure that a message is transmitted by means of the CREST system by any particular time. In this connection, CREST members and, where applicable, their CREST sponsors or voting service providers are referred, in particular, to those sections of the CREST Manual concerning practical limitations of the CREST system and timings. The Company may treat as invalid a CREST Proxy Instruction in the circumstances set out in Regulation35(5)(a)oftheUncertificatedSecurities Regulations 2001. Appointment of Proxy by Joint Members 12. In the case of joint holders, where more than one of the joint holders purports to appoint a proxy, only the appointment submitted by the most senior holder will be accepted. Seniority is determined by the order in which the names of the joint holders appearintheCompany’sregisterofmembersin respectofthejointholding,thefirst-namedbeing the most senior. Changing Proxy Instructions 13. To change your proxy instructions simply submit a new proxy appointment using the methods set outabove.Notethatthecut-offtimesforreceipt of proxy appointments (see above) also apply in relation to amended instructions; any amended proxyappointmentreceivedaftertherelevantcut-off time will be disregarded. Where you have appointed a proxy using the hard-copy proxy form and would like to change the instructions using another hard- copy proxy form, please contact Link Group as per the communication methods shown in note 8. If you submit more than one valid proxy appointment, the appointment received last before the latest time for the receipt of proxies will take precedence. Termination of Proxy Appointments 14. In order to revoke a proxy instruction, you will need to inform the Company by sending a signed hard copy notice clearly stating your intention to revoke your proxy appointment to Link Group, at the address shown in note 8. In the case of a member which is a company, the revocation notice must be executed under its common seal or signed on its behalfbyanofficerofthecompanyoranattorney for the company. Any power of attorney or any other authority under which the revocation notice issigned,oradulycertifiedcopyofsuchpower or authority, must be included with the revocation notice. The revocation notice must be received by Link Group no later than 48 hours before the Meeting. If you attempt to revoke your proxy appointment but the revocation is received after thetimespecifiedthen,subjecttotheparagraph directly below, your proxy appointment will remain valid. Appointment of a proxy does not preclude you from attending the Meeting and voting in person. If you have appointed a proxy and attend the Meeting in person, your proxy appointment will automatically be terminated. Issued Shares and Total Voting Rights Corporate Representatives 15. A corporation which is a member can appoint one or more corporate representatives who may exercise, on its behalf, all its powers as a member provided that no more than one corporate representative exercises powers over the same share. Issued Share Capital 16. Asat27January2022,theCompany’sissued share capital comprised 13,458,229 Ordinary Shares of 10p each (nil held in Treasury). Each Ordinary Share carries the right to one vote at a General Meeting of the Company and, therefore, the total number of voting rights in the Company on 27 January 2022 is 13,458,229. The website referred to in note 2 will include information on the number of shares and voting rights. Documents on Display 17. Copies of the letters of appointment of the Directors of the Company and a copy of the Articles of Association of the Company will be availableforinspectionattheregisteredofficeof the Company from the date of this notice until the end of the Meeting. Shareholders requiring a hard copy Form of Proxy should contact the Company’s Registrar – see note 8 Appointment of Proxy Using Hard Copy Proxy Form. 105 ANNUAL REPORT & ACCOUNTS 2021NOTICE OF MEETING 106 ANNUAL REPORT & ACCOUNTS 2021STRATEGIC REPORT | CHAIRMAN’S STATEMENT Group Directory LPA Group Plc Light & Power House Shire Hill SaffronWalden Essex CB11 3AQ, UK Tel: +44 (01)1799 512800 Email: enquiries@lpa-group.com Website: www.lpa-group.com Electro-mechanical systems LPA Connection Systems Light & Power House Shire Hill SaffronWalden CB11 3AQ, UK Tel: +44 (0)1799 512800 Email: enquiries@lpa-connect.com Auxiliary battery power systems Control panels & boxes Enclosures, fabrications, form & weld Laser cutting Rail, aircraft & industrial connectors Shore supply systems Transport turnkey services Engineered component distribution LPA Channel Electric Bath Road Thatcham Berkshire RG18 3ST, UK Tel: +44 (0)1635 864866 Email: enquiries@lpa-channel.com Circuit breakers Connectors Fans & motors Relays & contactors Switches USB charging LED lighting and electronic systems LPA Lighting Systems LPA House Ripley Drive Normanton West Yorkshire WF6 1QT, UK Tel: +44 (0)1924 224100 Email: enquiries@lpa-light.com Electronic control & monitoring Emergency lighting systems Fluorescent & dichroic lighting systems Inverters LED lighting systems Power supply units 107 ANNUAL REPORT & ACCOUNTS 2021 108 ANNUAL REPORT & ACCOUNTS 2021STRATEGIC REPORT | CHAIRMAN’S STATEMENT LPA Group Plc Light & Power House Shire Hill SaffronWalden CB11 3AQ UK +44 (0) 1799 512800 This report is printed on FSC certified material and fully recyclable