Motorola Solutions
Annual Report 2015

Plain-text annual report

MS INTERNATIONAL plc Annual Report 2015 4046 - MSI R+A 001_1 18/06/2015 15:22 Page 1 M S I N T E R N A T I O N A L p l c Contents The year in brief Chairman’s Statement Directors Advisors Strategic report Statement of directors’ responsibilities Report of the auditors Consolidated income statement Consolidated and company statement of comprehensive income Consolidated and company statement of changes in equity Consolidated statements of financial position Cash flow statements Notes to the financial statements Summary of group results 2011 – 2015 Corporate governance statement Report of the directors Directors’ remuneration report Principal operating subsidiaries Notice of Annual General Meeting 2 3 5 6 7 8 8 10 10 11 12 13 14 39 40 42 46 49 50 1 4046 - MSI R+A 001_1 18/06/2015 15:22 Page 2 The year in brief M S I N T E R N A T I O N A L p l c £000 222222222222222222222222222222222222222222222222 £000 Revenue 47,130 222222222222222222222222222222222222222222222222 45,503 Profit before taxation 2,928 222222222222222222222222222222222222222222222222 1,541 2015 Total 2014 Total 14.6p Earnings per share 222222222222222222222222222222222222222222222222 Dividends payable per share 8.00p 222222222222222222222222222222222222222222222222 8.00p 8.20p Financial Calendar Key Dates Annual Results Announced Annual General Meeting Final Dividend Payable Half-Year Results Announced Interim Dividend Payable June July July November December 2 4046 - MSI R+A 001_1 18/06/2015 15:22 Page 3 M S I N T E R N A T I O N A L p l c Chairman’s Statement Results and review I am pleased to announce that there has been a much improved performance by the Group during the second half of the year. Accordingly, for the 12 months to 2nd May, 2015, profit before tax was £1.54m (2014 – £2.93m) on revenue of £45.50m (2014 – £47.13m). Earnings per share were 8.20p (2014 – 14.6p). Net cash and short term deposits increased once again to a record high of £17.15m (2014 – £14.29m) at year-end. The Group’s current order book remains very strong. While marginally lower at year-end than that the £46m reported for 2014, it has since increased following the award of a follow-on two year contract by the UK MoD for the maintenance and support of MSI-DS 30mm naval gun systems and associated ancillary equipment in the RN fleet. Although the exact value of that contract is confidential, I can reveal that it is in excess of £12m. ‘Defence’ the global equipment markets of which remain constrained, despite the incredibly high number of conflicts and threats to international stability that are erupting, or intensifying, around the world. Restricted financial budgets, political instability and tensions, are critical factors that continue to disrupt military procurement plans and planning. As a consequence ‘Defence’ revenue was 15% lower than the previous year. This, combined with the essential investment committed to a number of major ‘in-house’ research and development programmes for new products – aimed at broadening our product range and extending our market opportunities – resulted in a full year loss, albeit considerably reduced from that reported at the interim stage. ‘Forgings’ achieved advances in both revenue and profit over the previous year. The UK and USA operations performed extremely well and ahead of our expectations, reaping the benefit of operational improvements, supported by plant and equipment upgrades. The South America operation, although highly efficient, had to contend with the negative impact of a weakening market and currency, owing to the region’s current fiscal difficulties. ‘Petrol Station Superstructures’ overall revenue was similar to that of the previous year, with an increase from the UK operation as a result of strong growth in the number of forecourt convenience stores completed in the period. Conversely, there was a distinct reduction in activity of the Poland based business that traditionally services many of the East European countries. Political uncertainty in the region discouraged many customers and potential developers to commit to their plans for new petrol station construction projects and station upgrades. Outlook ‘Defence’, we are predicting an improvement in the level of activity for our business in the second half of the current year, even though markets remain constrained. A very positive result from our substantial new product development programme is the winning of the first order for our new MSI-DS 20mm naval gun system. The requirement for three systems – received from a European shipbuilder – will be delivered in the current year and installed on new ships for an overseas navy. This is an important breakthrough for the Group, and is part of our commitment to broaden the range of our product offering directed at the growing international market for small naval vessels. We look forward to completing the development of other new products that will become available to market in the course of the next 12 months. ‘Forgings’, should maintain a relatively stable position. The division’s short lead-time order books are highly sensitive to variations in demand and the prevailing economic conditions in its individual global markets. Currently, we are planning to expand our capacity and capability in the United States to accommodate opportunities in that market. Throughout the division, we remain firmly committed to ensuring that we maintain and develop highly efficient production equipment and systems. ‘Petrol Station Superstructures’ markets continue to transform with the major oil companies leading the way in withdrawing from front line retailing by disposing of parts of their estates to independent dealers, dealer groups and operators. We perceive this to be an opportunity to expand our position in the market through providing an enhanced service to customers not only in terms of new build but also in relation to station maintenance and upgrades. Post year-end event; Acquisition I am pleased, also, to announce that the Company has acquired the entire issued share capital of Petrol Sign B.V., a company based in the Netherlands. The consideration for the acquisition is €3.4 million on a cash and debt free basis and includes “normalised” working capital. The consideration has been satisfied from the Company’s existing cash resources. 3 4046 - MSI R+A 001_1 18/06/2015 15:22 Page 4 M S I N T E R N A T I O N A L p l c Chairman’s Statement Continued Petrol Sign designs, restyles, produces and installs the complete branding and signage appearance of petrol station superstructures and forecourts throughout many parts of Western Europe. The acquisition will enhance our ability to offer and include branding and signage services as an option to petrol station markets and customers and will become an integral part of the Groups ‘Petrol Station Superstructures’ division. The vendor and managing director of Petrol Sign will continue to be employed by the company as its managing director. Further details relating to this acquisition are set out in a separate announcement. All matters considered the Board recommends the payment of a maintained final dividend of 6.5p per share (2014 – 6.5p), making the total for the year of 8p (2014 – 8p). The final dividend is expected to be paid on 24th July, 2015 to those shareholders on the register at the close of business on 26th June, 2015. Michael Bell 17th June, 2015 4 4046 - MSI R+A 001_1 18/06/2015 15:22 Page 5 M S I N T E R N A T I O N A L p l c Directors Directors Executive Michael Bell ARICS (Executive Chairman) Michael O’Connell FCA (Finance) Nicholas Bell Non-executive Roger Lane-Smith – Age 69 Appointed a director on 21st January, 1983. He is a non-executive director of Dolphin Capital Investors, Timpson Group plc, Lomond Capital Partners and a number of other private companies. He is also a Senior Consultant at DLA Piper UK LLP. David Pyle – Age 69 Appointed an executive director on 9th July, 1980. He stepped down as an executive director on 27th April, 2013 and was appointed a non-executive director. David Hansell – Age 69 Appointed a non-executive director on 3rd June, 2014. David has been with MS INTERNATIONAL plc, working at MSI-Defence Systems Ltd since 1962, becoming managing director in 2002. 222222222222222222222222222222222222222222222222 Company Secretary David Kirkup FCA 222222222222222222222222222222222222222222222222 Registered Office Balby Carr Bank, Doncaster, DN4 8DH England 222222222222222222222222222222222222222222222222 5 4046 - MSI R+A 001_1 18/06/2015 15:22 Page 6 M S I N T E R N A T I O N A L p l c Advisors Auditors Ernst & Young LLP, 1 Bridgewater Place, Water Lane, Leeds, LS11 5QR 222222222222222222222222222222222222222222222222 Registrars and Transfer Office Capita Asset Services, The Registry, 34 Beckenham Road, Beckenham, Kent, BR3 4TU 222222222222222222222222222222222222222222222222 Solicitors DLA Piper UK LLP, 3 Noble Street, London, EC2V 7EE 222222222222222222222222222222222222222222222222 Nominated Advisor Shore Capital & Corporate Limited, Bond Street House, 14 Clifford Street, London, W15 4JU 222222222222222222222222222222222222222222222222 Brokers Shore Capital & Corporate Limited, Bond Street House, 14 Clifford Street, London, W15 4JU 222222222222222222222222222222222222222222222222 Bankers Lloyds Bank, First Floor, 14 Church Street, Sheffield, S1 1HP 222222222222222222222222222222222222222222222222 6 4046 - MSI R+A 001_1 18/06/2015 15:22 Page 7 M S I N T E R N A T I O N A L p l c Strategic report Business review The Group is engaged in the design and manufacture of specialist engineering products and the provision of related services. A review of the operations of the Company and subsidiaries and their position at 2nd May, 2015 are provided in the Chairman’s Statement. Segment information for the year under review is provided in note 4 “Segment Information” to the Group financial statements. 222222222222222222222222222222222222222222222222 Principal risks and uncertainties The principal risk and uncertainties facing the Group relate to levels of customer demand for the Group’s products and services. Customer demand is driven mainly by general economic conditions but also by pricing, product quality and delivery performance of MS INTERNATIONAL plc and in comparison with our competitors. Sterling exchange rates against other currencies can influence pricing. The principal financial risks and uncertainties in the business are set out in note 23 “Financial Instruments” to these Group financial statements. 222222222222222222222222222222222222222222222222 Key performance indicators Revenue Profit before taxation Earnings per share 2015 £000 45,503 1,541 8.20p 2014 £000 47,130 2,928 14.6p Change % (3.5) (47.4) (43.8) A review of the changes in the key performance indicators is provided in the Chairman’s Statement. By order of the Board, David Kirkup Secretary 17th June, 2015 7 4046 - MSI R+A 001_1 18/06/2015 15:22 Page 8 M S I N T E R N A T I O N A L p l c Statement of directors’ responsibilities The directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable United Kingdom law and regulations. Company law requires the directors to prepare such financial statements for each financial year. Under that law, the directors are required to prepare Group and Parent Company financial statements under IFRSs as adopted by the European Union. Under company law the directors must not approve the accounts unless they are satisfied that they give a true and fair view of the state of affairs of the Group and Parent Company and of the profit or loss of the Group for that period. In preparing those financial statements, the directors are required to: l l l l l l present fairly the financial position, financial performance and cash flows of the Group and Parent Company; select suitable accounting policies in accordance with IAS 8: Accounting policies, Changes in accounting Estimates and Errors and then apply them consistently; present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information; make judgements that are reasonable; provide additional disclosures when compliance with the specific requirements in IFRSs as adopted by the European Union is insufficient to enable users to understand the impact of particular transactions, other events and conditions on the Group and Parent Company’s financial position and financial performance; and state whether the Group and Parent Company financial statements have been prepared in accordance with IFRSs as adopted by the European Union, subject to any material departures disclosed and explained in the financial statements. The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group and Parent Company’s transactions and disclose with reasonable accuracy at any time the financial position of the Group and Parent Company and to enable them to ensure that the financial statements comply with the Companies Act 2006 and Article 4 of the IAS Regulation. They are also responsible for safeguarding the assets of the Group and Parent Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. The directors are also responsible for preparing the Report of the directors, the Directors’ remuneration report and the Corporate governance statement in accordance with the Companies Act 2006 and applicable regulations, including the requirements of the Listing Rules and the Disclosure and Transparency Rules. Independent auditors’ report to the members of MS INTERNATIONAL plc – Registration Number 653735 We have audited the financial statements of MS INTERNATIONAL plc for the 52 weeks ended 2nd May 2015 which comprise the consolidated group income statement, the consolidated and company statement of comprehensive income, the consolidated and company statement of changes in equity, the consolidated statement of financial position, the group and company cashflow statements, and the related notes 1 to 31. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union and, as regards the parent company financial statements, as applied in accordance with the provisions of the Companies Act 2006. This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed. Respective responsibilities of directors and auditor As explained more fully in the Directors’ Responsibilities Statement set out on page 8, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law 8 4046 - MSI R+A 001_1 18/06/2015 15:22 Page 9 M S I N T E R N A T I O N A L p l c Independent auditors’ report to the members of MS INTERNATIONAL plc Continued and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors. Scope of the audit of the financial statements An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the group’s and the parent company’s circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the directors; and the overall presentation of the financial statements. In addition, we read all the financial and non-financial information in the annual report to identify material inconsistencies with the audited financial statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report. Opinion on financial statements In our opinion: l l l l the financial statements give a true and fair view of the state of the group’s and of the parent company’s affairs as at 2nd May, 2015 and of the Group’s profit for the year then ended; the Group financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union; the parent company financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union and as applied in accordance with the provisions of the Companies Act 2006; and the financial statements have been prepared in accordance with the requirements of the Companies Act 2006. Opinion on other matters prescribed by the Companies Act 2006 In our opinion the information given in the Strategic Report and the Directors’ Report for the financial year for which the financial statements are prepared is consistent with the financial statements. Matters on which we are required to report by exception We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion: l l l l adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or the parent company financial statements are not in agreement with the accounting records and returns; or certain disclosures of directors’ remuneration specified by law are not made; or we have not received all the information and explanations we require for our audit. Alistair Denton (Senior statutory auditor) for and on behalf of Ernst & Young LLP, Statutory Auditor Leeds 17th June, 2015 9 4046 - MSI R+A 001_1 18/06/2015 15:22 Page 10 M S I N T E R N A T I O N A L p l c Consolidated income statement For the 52 weeks ended 2nd May, 2015 2014 Total £000 47,130 Revenue Cost of sales (34,266) 2222222222222222222222222222222222222 2222 2222 12,864 Gross profit Distribution costs (2,707) (6,954) Administrative expenses 2222222222222222222222222222222222222 2015 Total £000 45,503 (34,763) 10,740 (2,357) (6,643) Notes 3/4 (9,000) (9,661) 2222222222222222222222222222222222222 2222 2222 3,203 Group operating profit Finance revenue 48 (69) Finance costs Other finance costs – pensions (254) (275) 2222222222222222222222222222222222222 2222 2222 2,928 Profit before taxation Taxation (354) 2222222222222222222222222222222222222 2222 2222 Profit for the period attributable to equity holders of the parent 2,574 2222222222222222222222222222222222222 2222 2222 Earnings per share: basic and diluted 14.6p 2222222222222222222222222222222222222 2222 2222 1,740 70 (32) (237) (199) 4/5 7 8 21 1,541 (188) 1,353 8.2p 10 9 Consolidated and company statement of comprehensive income For the 52 weeks ended 2nd May, 2015 Group Company 2015 Total £000 2014 Total £000 2015 Total £000 2014 Total £000 – 955 (244) (106) (106) 2,574 1,353 1,605 Profit for the period attributable to equity holders of the parent 22222222222222222222222222 2222 2222 2222 2222 Exchange differences on retranslation of foreign operations – 22222222222222222222222222 2222 2222 2222 2222 Net other comprehensive loss to be reclassified to profit or loss in subsequent periods – 22222222222222222222222222 2222 2222 2222 2222 Remeasurement (losses)/gains on defined benefit pension scheme Deferred taxation on remeasurement (losses)/gains on defined benefit scheme Revaluation surplus on land and buildings Deferred taxation on revaluation surplus on land and buildings (473) 22222222222222222222222222 2222 2222 2222 2222 Net other comprehensive (loss)/profit not being reclassified to profit or loss in subsequent periods 2,139 22222222222222222222222222 2222 2222 2222 2222 Total comprehensive income for the period attributable to equity holders of the parent 3,744 22222222222222222222222222 2222 2222 2222 2222 (396) 2,056 (396) 1,939 193 – 193 – 2,049 4,379 (771) (771) (964) (964) (244) (446) 952 184 476 952 – – – 10 4046 - MSI R+A 001_1 18/06/2015 15:22 Page 11 M S I N T E R N A T I O N A L p l c Consolidated and company statement of changes in equity (a) Group At 27th April, 2013 Capital Issued redemption reserve capital £000 £000 Other Revaluation reserve £000 reserves £000 Special reserve £000 Foreign exchange reserve £000 Treasury shares £000 Retained earnings £000 1,840 901 2,815 2,532 1,629 61 (100) 19,376 Total £000 29,054 – Profit for the period 2,574 – Other comprehensive income/(loss) 1,805 – Total comprehensive income/(loss) 4,379 – Dividends paid (note 11) (1,452) – Purchase of own shares (note 20) (2,959) Change in taxation rates – 121 222222222222 222 222 222 222 222 222 222 222 222 At 3rd May, 2014 29,143 – – – – (2,959) – 2,574 556 3,130 (1,452) – – – 1,493 1,493 – – 121 – (244) (244) – – – (3,059) 21,054 – – – – – – – – – – – – – – – – – – 4,146 2,815 1,629 1,840 (183) 901 – Profit for the period 1,353 – Other comprehensive loss (877) – Total comprehensive (loss)/income 476 Dividends paid (note 11) – (1,320) 222222222222 222 222 222 222 222 222 222 222 222 At 2nd May, 2015 28,299 222222222222 222 222 222 222 222 222 222 222 222 1,353 (771) 582 (1,320) – (106) (106) – (3,059) 20,316 – – – – – – – – – – – – – – – – – – – – 1,840 4,146 2,815 1,629 (289) 901 (b) Company At 27th April, 2013 1,840 901 1,565 2,532 1,629 – (100) 17,670 26,037 – Profit for the period 1,605 – Other comprehensive income 2,139 – Total comprehensive income 3,744 – Dividends paid (note 11) (1,452) 311 – Dividend received from subsidiary – Purchase of own shares (note 20) (2,959) Change in taxation rates – 125 222222222222 222 222 222 222 222 222 222 222 222 At 3rd May, 2014 25,806 – – – – – (2,959) – 1,605 556 2,161 (1,452) 311 – – – 1,583 1,583 – – – 125 (3,059) 18,690 _ – – – – – – – – – – – – – – – – – – – – – – – – – – – 4,240 1,565 1,629 1,840 901 – – Profit for the period 955 – Other comprehensive loss (771) – Total comprehensive income 184 Dividends paid (note 11) – (1,320) 222222222222 222 222 222 222 222 222 222 222 222 At 2nd May, 2015 24,670 222222222222 222 222 222 222 222 222 222 222 222 955 (771) 184 (1,320) (3,059) 17,554 – – – – – – – – – – – – – – – – – – – – – – – – 1,840 4,240 1,629 1,565 901 – 11 4046 - MSI R+A 001_1 18/06/2015 15:22 Page 12 M S I N T E R N A T I O N A L p l c Consolidated statements of financial position At 2nd May, 2015 Group Company 2015 £000 2014 £000 2015 £000 2014 £000 Notes 18 16 17 19,262 31,206 24,754 18,474 35,696 33,339 54,170 12 13 14 15 12,608 13 11,741 392 14,563 3,818 – 93 15,127 4,135 – – 8,464 9,454 40 590 17,148 7,393 9,252 – 495 16,199 8,162 8,260 51 447 14,286 ASSETS Non-current assets 12,955 Property, plant and equipment Intangible assets 21 Investments in subsidiaries 11,829 Deferred income tax asset 167 22222222222222222222222222 2222 2222 2222 2222 24,972 22222222222222222222222222 2222 2222 2222 2222 Current assets 7,250 Inventories Trade and other receivables 8,276 Income tax receivable – Prepayments 363 Cash and short-term deposits 13,241 22222222222222222222222222 2222 2222 2222 2222 29,130 22222222222222222222222222 2222 2222 2222 2222 54,102 TOTAL ASSETS 22222222222222222222222222 2222 2222 2222 2222 EQUITY AND LIABILITIES Equity 1,840 Equity share capital Capital redemption reserve 901 Other reserve 1,565 Revaluation reserve 4,240 Special reserve 1,629 Currency translation reserve – Treasury shares (3,059) Retained earnings 18,690 22222222222222222222222222 2222 2222 2222 2222 25,806 22222222222222222222222222 2222 2222 2222 2222 Non-current liabilities 5,889 Defined benefit pension liability Deferred income tax liability – 22222222222222222222222222 2222 2222 2222 2222 5,889 22222222222222222222222222 2222 2222 2222 2222 Current liabilities 22,294 Trade and other payables Income tax payable 113 22222222222222222222222222 2222 2222 2222 2222 22,407 22222222222222222222222222 2222 2222 2222 2222 54,102 TOTAL EQUITY AND LIABILITIES 22222222222222222222222222 2222 2222 2222 2222 1,840 901 2,815 4,146 1,629 (183) (3,059) 21,054 1,840 901 2,815 4,146 1,629 (289) (3,059) 20,316 1,840 901 1,565 4,240 1,629 – (3,059) 17,554 19 20 20 20 20 20 20 20 26,454 92 18,994 – 15,225 – 6,877 – 6,877 – 5,889 211 54,170 26,546 18,994 58,093 58,093 28,299 24,670 50,468 15,225 29,143 50,468 6,877 6,877 21 15 6,100 22 These accounts and notes on pages 14 to 38 were approved by the Board of Directors on 17th June, 2015, and signed on its behalf by Michael Bell, Executive Chairman Michael O’Connell, Finance Director 12 4046 - MSI R+A 001_1 18/06/2015 15:22 Page 13 M S I N T E R N A T I O N A L p l c Cash flow statements For the 52 weeks ended 2nd May, 2015 Profit before taxation 1,541 2,928 Note 2015 £000 2014 £000 2015 £000 943 2014 £000 1,709 Group Company 12 13 14 21 Adjustments to reconcile profit before taxation to net cash in flow from operating activities Depreciation charge 1,028 Amortisation charge 9 Impairment in investment in subsidiary undertaking 40 Administration expenses-pension fund 350 Profit on sale of fixed assets (130) Finance costs 236 Foreign exchange gains/(losses) – Increase in inventories (1,594) (Increase)/decrease in receivables 5,562 (Increase)/decrease in prepayments 56 Decrease in payables (2,877) Increase in progress payments 1,869 Pension fund payments (529) 22222222222222222222222222 2222 2222 2222 2222 5,729 Cash generated from operating activities 18 Interest received/(paid) Taxation paid (257) 22222222222222222222222222 2222 2222 2222 2222 5,490 Net cash inflow from operating activities 1,227 316 – 350 (124) 275 (136) (1,626) 4,805 73 (2,550) 1,632 (529) 1,117 317 – 316 (78) 199 65 (302) (1,194) (143) (389) 4,158 (529) 931 8 88 316 (75) 178 – (143) (976) (132) (38) 4,198 (529) 4,769 59 (41) 5,078 38 (288) 6,641 (21) (708) 4,828 4,787 5,912 (940) 278 (693) 184 (833) 187 Investing activities (842) 12 Purchase of property, plant and equipment Sale of property, plant and equipment 12 178 22222222222222222222222222 2222 2222 2222 2222 (664) Net cash outflow from investing activities 22222222222222222222222222 2222 2222 2222 2222 Financing activities (1,452) Dividends paid Dividend received from subsidiary 311 Purchase of own shares 20 (2,959) 22222222222222222222222222 2222 2222 2222 2222 (4,100) Net cash outflow from financing activities 22222222222222222222222222 2222 2222 2222 2222 726 Increase in cash and cash equivalents 12,515 Opening cash and cash equivalents 22222222222222222222222222 2222 2222 2222 2222 13,241 18 Closing cash and cash equivalents 22222222222222222222222222 2222 2222 2222 2222 (1,320) – – (1,320) – – (1,452) – (2,959) 2,862 14,286 2,958 13,241 839 13,447 (1,320) (1,320) 16,199 17,148 (4,411) 14,286 (646) (509) (662) 13 4046 - MSI R+A 002_002 18/06/2015 15:22 Page 14 M S I N T E R N A T I O N A L p l c Notes to the financial statements At 2nd May, 2015 1 Authorisation of financial statements and statement of compliance with IFRSs The Group’s and Company’s financial statements of MS INTERNATIONAL plc (the ‘Company’) for the year ended 2nd May, 2015 were authorised for issue by the board of the directors on 17th June, 2015 and the statements of financial position were signed on the board’s behalf by Michael Bell and Michael O’Connell. MS INTERNATIONAL plc is a public limited company incorporated and domiciled in England and Wales. The Company’s Ordinary shares are traded on the London Stock Exchange. The Group’s and Company’s financial statements have been prepared in accordance with International Financial Reporting Standards as adopted by the EU as they apply to the financial statements of the Group and Company for the year ended 2nd May, 2015 applied in accordance with the provisions of the Companies Act 2006. The Company has taken advantage of the exemption provided under section 408 of the Companies Act 2006 not to publish its individual income statement and related notes. 222222222222222222222222222222222222222222222222 2 Accounting Policies Basis of preparation The consolidated financial statements are presented in pounds sterling and all values are rounded to the nearest thousand (£000) except when otherwise indicated. The preparation of financial statements requires management to make judgements, estimates and assumptions that affect the amounts reported for assets and liabilities as at the balance sheet date and the amounts reported for revenues and expenses during the year. However, the nature of estimation means that actual outcomes could differ from those estimates. The following judgements have had the most significant effect on amounts recognised in the financial statements: Defined benefit pension obligations Measurement of defined benefits obligations requires estimation of future changes in salaries and inflation, as well as mortality rates and the selection of a suitable discount rate (see note 21). Contract sales Assessment of the extent to which contract outcomes can be measured reliability. Taxation The Group establishes provisions, based on reasonable estimates, for possible consequences of audits by the tax authorities of the respective countries in which it operates. The amount of such provisions is based on various factors, such as experience with previous tax audits and differing interpretations of tax regulations by the taxable entity and the responsible tax authority. Impairment of non-financial assets The Group’s impairment test for goodwill and intangible assets with indefinite useful lives is based either on fair value less costs to sell or a value in use calculation. The fair value less costs to sell calculation is based on available data from binding sales transactions in an arm’s length transaction on similar assets or observable market prices less incremental costs for disposing of the asset. The value in use calculation is based on a discounted cash flow model. 222222222222222222222222222222222222222222222222 Statement of compliance The consolidated financial statements of MS INTERNATIONAL plc have been prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted in the EU. 222222222222222222222222222222222222222222222222 Basis of consolidation The consolidated financial statements comprises the financial statements of MS INTERNATIONAL plc and its subsidiaries as at the Saturday nearest to the 30th April each period. The financial statements of the subsidiaries are prepared for the same reporting period as the parent Company, using consistent accounting policies. All intra-group balances, transactions, income and expenses and profits and losses resulting from intra-Group transactions that are recognised in assets, are eliminated in full. Subsidiaries are fully consolidated from the date of acquisition, being the date on which the Group obtains control, and continue to be consolidated until the date that such control ceases. 14 4046 - MSI R+A 002_002 18/06/2015 15:22 Page 15 M S I N T E R N A T I O N A L p l c Notes to the financial statements Continued 2 Accounting policies (continued) Change in accounting policies There were no changes in accounting policies during the year which impacted the Group. 222222222222222222222222222222222222222222222222 The Company’s investments in subsidiaries In its separate financial statements the Company’s investments in subsidiaries are carried at cost less provision for impairment. 222222222222222222222222222222222222222222222222 Foreign currency translation The consolidated financial statements are presented in pounds sterling which is the Company’s functional and presentation currency. Each entity in the Group determines its own functional currency and items included in the financial statements of each entity are measured using that functional currency. Transactions in foreign currencies are initially recorded at the functional currency rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the functional currency rate of exchange ruling at the balance sheet date. All differences are taken to profit or loss. Non-monetary items measured at fair value in foreign currency are translated using the exchange rates at the date when the fair value was determined. The main functional currencies of the Group’s overseas subsidiaries are the US$, the Polish Zloty and the Brazilian Real. As at the reporting date, the assets and liabilities of the overseas subsidiaries are translated into the presentation currency of the Group at the rate of exchange ruling at the balance sheet date and their income statements are translated at the weighted average exchange rates for the year. The exchange differences arising on the retranslation are taken directly to a separate component of equity. On disposal of a foreign entity, the deferred cumulative amount recognised in equity relating to that particular foreign operation is recognised in the income statement. 222222222222222222222222222222222222222222222222 Property, plant and equipment Plant and equipment is stated at cost less accumulated depreciation and accumulated impairment losses. Such cost includes costs directly attributable to making the asset capable of operating as intended. Borrowing costs attributable to assets under construction are recognised as an expense as incurred. Land and buildings are recognised initially at cost and thereafter carried at fair value less depreciation and impairment charged subsequent to the date of the revaluation. Fair value is based on periodic valuations by an external independent valuer and is determined from market-based evidence by appraisal. Valuations are performed frequently enough to ensure that the fair value of a revalued asset does not differ materially from its carrying amount. Any revaluation surplus is credited to the revaluation reserve in equity except to the extent that it reverses a decrease in the carrying value of the same asset previously recognised in profit or loss, in which case the increase is recognised in profit or loss. A revaluation deficit is recognised in profit or loss, except to the extent of any existing surplus in respect of that asset in the revaluation reserve. Additionally, accumulated depreciation as at revaluation date is eliminated against the gross carrying amount of the asset and the net amount is restated to the revalued amount of the asset. Upon disposal any revaluation reserve relating to the particular asset being sold is transferred to retained earnings. Depreciation is provided on all property, plant and equipment, other than freehold land, at rates calculated to write off the cost, less estimated residual value based on prices prevailing at the balance sheet date, of each asset evenly over its expected useful life as follows: Property other than freehold land – over 50 years Plant and machinery – over 3 to 8 years Computer equipment – over 3 to 5 years Fixtures and fittings – over 3 to 8 years The carrying values of property, plant and equipment are reviewed for impairment when events or changes in circumstances indicate the carrying value may not be recoverable. 222222222222222222222222222222222222222222222222 15 4046 - MSI R+A 002_002 18/06/2015 15:22 Page 16 M S I N T E R N A T I O N A L p l c Notes to the financial statements Continued 2 Accounting policies (continued) Intangible assets Intangible assets acquired separately are measured at cost on initial recognition. Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and impairment losses. Internally generated intangible assets, excluding capitalised development costs, are not capitalised and expenditure is reflected in the income statement in the year in which the expenditure is incurred. The useful lives of intangible assets are assessed to be either finite or indefinite. Intangible assets with finite lives are amortised over the useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method are reviewed at least at each financial year end. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset is accounted for by changing the amortisation period or method, as appropriate, and are treated as changes in accounting estimates. The useful economic lives of each tangible asset with finite lives are as follows: Tradename – over 20 years Design database – over 10 years Customer relationships – over 8 years Software costs – over 3 to 5 years Order backlog – over 1 year Intangible assets with indefinite useful lives are tested for impairment annually either individually or at the cash generating unit level and are not amortised. The useful life of an intangible asset with an indefinite life is reviewed annually to determine whether indefinite life assessment continues to be supportable. If not, the change in the useful life assessment from indefinite to finite is made on a prospective basis. Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the income statement when the asset is derecognised. 222222222222222222222222222222222222222222222222 Derivative financial instruments and hedging The Group uses derivative financial instruments such as forward currency contracts to hedge its risks associated with foreign currency fluctuations. Derivative financial instruments are initially recognised at fair value on the date on which a derivative contract is entered into and are subsequently remeasured at fair value. Derivatives are carried as assets when the fair value is positive and as liabilities when the fair value is negative. The fair value of forward currency contracts is calculated by reference to current forward exchange rates for contracts with similar maturity profiles. A hedge of the foreign currency risk of a firm commitment is accounted for as a cash flow hedge. Any gains or losses arising from changes in the fair value of derivatives that do not qualify for hedge accounting are taken to the income statement. 222222222222222222222222222222222222222222222222 Inventories Inventories are valued at the lower of historic cost and net realisable value. Costs incurred in bringing each product to its present location and condition is accounted for as follows: Raw materials – purchase cost on a first-in, first-out basis. Finished goods and work in progress – cost of direct materials and labour and a proportion of manufacturing overheads based on normal operating capacity but excluding borrowing costs. Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs necessary to make the sale. Progress payments received and receivable are deducted from the value of raw materials and work in progress to which they relate. Any excess progress payments are included in trade and other payables. 222222222222222222222222222222222222222222222222 16 4046 - MSI R+A 002_002 18/06/2015 15:22 Page 17 M S I N T E R N A T I O N A L p l c Notes to the financial statements Continued 2 Accounting policies (continued) Trade and other receivables Trade receivables, which generally have 30 days terms, are recognised and carried at original invoice amount less an allowance for any uncollectable amounts. Provision is made when there is objective evidence that the Group may not be able to collect the debts. Bad debts are written off when identified. 222222222222222222222222222222222222222222222222 Treasury shares Own shares held by the Company and Group are classified in equity and are recognised at cost. No gain or loss is recognised on the purchase, sale, issue or cancellation of the Group’s own equity instruments. 222222222222222222222222222222222222222222222222 Cash and cash equivalents Cash and cash equivalents in the balance sheet comprise cash at bank, on short-term deposit and in hand. For the purpose of the consolidated cash flow statement, cash and cash equivalents consist of cash and cash equivalents as defined above. 222222222222222222222222222222222222222222222222 Pension scheme The cost of providing benefits under the defined benefit plan is determined using the projected unit credit method, which attributes entitlement to benefits to the current period (to determine current service cost) and to the current and prior periods (to determine the present value of defined benefit obligation) and is based on actuarial advice. Past service costs are recognised in profit or loss immediately. When a settlement (eliminating all obligations for benefits already accrued) or a curtailment (reducing future obligations as a result of a material reduction in the scheme membership or a reduction in future entitlement) occurs the obligation and related plan assets are remeasured using current actuarial assumptions and the resultant gain or loss recognised in the income statement during the period in which the settlement or curtailment occurs. The interest element of the defined benefit cost represents the change in present value of scheme obligations resulting from the passage of time, and is determined by applying the discount rate to the opening present value of the benefit obligation, taking into account material changes in the obligation during the year. Remeasurement gains and losses are recognised in full in the statement of recognised income and expense in the period in which they occur. Actual gains/losses less amount included in net interest costs are included in other comprehensive income. The defined benefit pension asset or liability in the balance sheet comprises the total for each plan of the present value of the defined benefit obligation (using a discount rate based on high quality corporate bonds) less the fair value of plan assets out of which the obligations are to be settled directly. Fair value is based on market price information and in the case of quoted securities is the published bid price. The value of a net pension benefit asset is restricted to the sum of any unrecognised past service costs and the present value of any amount the Group expects to recover by way of refunds from the plan or reductions in the future contributions. Contributions to defined contribution schemes are recognised in the income statement in the period in which they become payable. 222222222222222222222222222222222222222222222222 Business combinations Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of the consideration transferred, measured at acquisition date fair value and the amount of any non-controlling interest in the acquiree. The choice of measurement of non-controlling interest, either at fair value or at the proportionate share of the acquiree’s identifiable net assets is determined on a transaction by transaction basis. Acquisition costs incurred are expensed and included in administrative expenses. When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic circumstances and pertinent conditions as at the acquisition date. This includes the separation of embedded derivatives in host contracts by the acquiree. Any contingent consideration to be transferred by the acquirer will be recognised at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration which is deemed to be an asset or liability will be recognised in accordance with IAS 39 either in profit or loss or in other comprehensive income. If the contingent consideration is classified as equity, it should not be remeasured until it is finally settled within equity. 17 4046 - MSI R+A 002_002 18/06/2015 15:22 Page 18 M S I N T E R N A T I O N A L p l c Notes to the financial statements Continued 2 Accounting policies (continued) Business combinations (continued) Goodwill is initially measured at cost being the excess of the aggregate of the acquisition-date fair value of the consideration transferred and the amount recognised for the non-controlling interest (and where the business combination is achieved in stages, the acquisition-date fair value of the acquirer’s previously held equity interest in the acquiree) over the net identifiable amounts of the assets acquired and the liabilities assumed in exchange for the business combination. Assets acquired and liabilities assumed in transactions separate to the business combinations, such as the settlement of pre-existing relationships or post-acquisition remuneration arrangements are accounted for separately from the business combination in accordance with their nature and applicable IFRSs. Identifiable intangible assets, meeting either the contractual-legal or separability criterion are recognised separately from goodwill. Contingent liabilities representing a present obligation are recognised if the acquisition-date fair value can be measured reliably. If the aggregate of the acquisition-date fair value of the consideration transferred and the amount recognised for the non-controlling interest (and where the business combination is achieved in stages, the acquisition-date fair value of the acquirer’s previously held equity interest in the acquiree) is lower than the fair value of the assets, liabilities and contingent liabilities and the fair value of any pre-existing interest held in the business acquired, the difference is recognised in profit and loss. After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Group’s cash-generating units (or Groups of cash generating units) that are expected to benefit from the combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units. Each unit or group of units to which goodwill is allocated shall represent the lowest level within the entity at which the goodwill is monitored for internal management purposes and not be larger than an operating segment before aggregation. Where goodwill forms part of a cash-generating unit and part of the operation within that unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation. Goodwill disposed of in this circumstance is measured based on the relative values of the operation disposed of and the portion of the cash-generating unit retained. 222222222222222222222222222222222222222222222222 Revenue Revenue represents the turnover, net of discounts, derived from services provided to customers and sales of products applicable to the period. Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured. The following specific recognition criteria must also be met before revenue is recognised. Revenue, in respect of products, is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer and the amount of revenue can be measured reliably, this is usually on despatch. Revenue from the provision of engineering services is recognised as the work is performed. Contract sales are recognised by reference to the stage of completion. Stage of completion is measured by reference to the value of cost completed as a percentage of the total estimated value of the costs of the contract. Where the contract outcome cannot be measured reliably revenue is recognised only to the extent of the costs recognised that are recoverable. 222222222222222222222222222222222222222222222222 Government grants Government grants are recognised where there is reasonable assurance that the grant will be received and all attaching conditions will be complied with. When the grant relates to an expense item, it is recognised as income over the period necessary to match the grant on a systematic basis to the costs that it is intended to compensate. Where the grant relates to an asset, the fair value is credited to a deferred income account and is released to the income statement over the expected useful life of the relevant asset by equal annual instalments. 222222222222222222222222222222222222222222222222 18 4046 - MSI R+A 002_002 18/06/2015 15:22 Page 19 M S I N T E R N A T I O N A L p l c Notes to the financial statements Continued 2 Accounting policies (continued) Taxes Income tax is charged or credited directly to other comprehensive income or equity if it relates to items that are credited or charged to, respectively, other comprehensive income or equity. Otherwise income tax is recognised in the income statement. 222222222222222222222222222222222222222222222222 Current tax Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the balance sheet date. 222222222222222222222222222222222222222222222222 Deferred tax Deferred income tax is recognised on all temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements, with the following exceptions: l l l where the temporary difference arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss; in respect of taxable temporary differences associated with investments in subsidiaries, associates and joint ventures, where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future; and deferred income tax assets are recognised only to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, carried forward tax credits or tax losses can be utilised. Deferred income tax assets and liabilities are measured on an undiscounted basis at the tax rates that are expected to apply when the related asset is realised or liability is settled, based on tax rates and laws enacted or substantively enacted at the balance sheet date. 222222222222222222222222222222222222222222222222 Dividends payable Dividends are recognised when they become legally payable. In the case of interim dividends this is when paid, in the case of final dividends this is when approved by the shareholders. 222222222222222222222222222222222222222222222222 Exceptional items The Group presents as exceptional items on the face of the income statement, those material items of income and expense which, because of the nature and unexpected infrequency of the events giving rise to them merit separate presentation to allow shareholders to understand better the elements of financial performance in the year, so as to facilitate comparison with prior periods and to assess better trends in financial performance. 222222222222222222222222222222222222222222222222 Share-based payments The Group measures the cost of equity-settled transactions with employees by reference to the fair value of the equity instruments at the date at which they are granted and is recognised as an expense over the vesting period, which ends on the date on which the relevant employees become fully entitled to the award. Judgement is required in determining the most appropriate valuation model for a grant of equity instruments, depending on the terms and conditions of the grant. Management are also required to use judgement in determining the most appropriate inputs to the valuation model including expected life of the option, volatility and dividend yield. 19 4046 - MSI R+A 002_002 18/06/2015 15:22 Page 20 M S I N T E R N A T I O N A L p l c Notes to the financial statements Continued 2 Accounting policies (continued) Share-based payments (continued) New standards and interpretations not applied – The IASB and IFRIC have issued the following standards, amendments and interpretations with an effective date after the date of these financial statements: International Accounting Standards (IAS/IFRSs) IAS 1 Amendment IAS 19 Amendment IFRS 9 IFRS 15 Annual improvements 2010-2012 cycle Annual improvements 2011-2013 cycle Annual improvements 2012-2014 cycle presentation of financial statements employee benefits Financial instruments Revenue from contracts with customers Effective date (1) 01 January 2016 01 July 2014 01 January 2018 01 January 2017 01 July 2014 01 July 2014 Friday, January 01, 2016 1 The effective dates stated above are those given in the original IASB/IFRIC standards and interpretations. As the Group prepares its financial statements in accordance with IFRS as adopted by the European Union, the application of new standards and interpretations will be subject to their having being endorsed for use in the EU via the EU endorsement mechanism. In the majority of cases, this will result in an effective date consistent with that given in the original standard or interpretation but the need for endorsements restricts the Group’s discretion to early adopt standards. The Group has adopted all applicable amendments to standards with an effective date from 1st April, 2014. Adoption of these standards did not have any material impact on financial performance or position of the Group. 222222222222222222222222222222222222222222222222 3 Revenue 2015 £000 2014 £000 Sale of goods 32,820 13,881 Revenue under contract accounting 2222222222222222222222222222222222222 2222 2222 46,701 Rendering of services 429 2222222222222222222222222222222222222 2222 2222 47,130 2222222222222222222222222222222222222 2222 2222 44,932 571 31,652 13,280 45,503 No revenue was derived from exchanges of goods or services (2014 – £Nil). 222222222222222222222222222222222222222222222222 20 4046 - MSI R+A 002_002 18/06/2015 15:22 Page 21 M S I N T E R N A T I O N A L p l c Notes to the financial statements Continued 4 Segment information The following table presents revenue and profit and certain assets and liability information regarding the Group’s divisions for the periods ended 2nd May, 2015 and 3rd May, 2014. The reporting format is determined by the differences in manufacture and services provided by the Group. The Defence division is engaged in the design, manufacture and service of defence equipment. The Forgings division is engaged in the manufacture of forgings. The Petrol Station Superstructures division is engaged in the design and construction of petrol station superstructures. Management monitors the operating results of its business units separately for the purpose of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on operating profit or loss which in certain respects, as explained in the table below, is measured differently from operating profit or loss in the consolidated financial statements. Group financing (including finance costs and finance revenue) and income taxes are managed on a Group basis and are not allocated to operating segments. Defence Forgings 2015 £000 2014 £000 2015 £000 2014 £000 Petrol Station Superstructures 2014 2015 £000 £000 Total 2015 £000 2014 £000 Revenue External 22222222 Total revenue 22222222 Segment result Net finance costs 22222222 Profit before taxation Taxation 22222222 Profit for the period 22222222 Segmental assets Unallocated assets (see below) 22222222 Total assets 22222222 Segmental liabilities Unallocated liabilities(see below) 22222222 Total liabilities 22222222 Capital expenditure Depreciation 22222222 591 926 855 (151) 1,686 1,036 14,058 19,445 19,445 13,627 14,058 13,627 13,373 15,120 13,373 15,120 1,740 (199) 45,503 47,130 17,010 222 222 222 222 222 222 222 222 45,503 47,130 17,010 222 222 222 222 222 222 222 222 3,203 (275) 222 222 2,928 (354) 222 222 2,574 222 222 39,968 37,618 14,202 12,850 222 222 54,170 50,468 222 222 18,061 16,775 4,550 7,810 222 222 25,871 21,325 222 222 1,541 (188) 28,460 14,407 10,234 24,619 1,353 2,045 6,299 5,209 1,609 2,763 3,778 6,658 6,341 121 330 222 222 222 222 222 222 168 276 526 424 82 217 450 454 134 189 Unallocated assets includes certain fixed assets, intangible assets, current assets and deferred tax assets. Unallocated liabilities includes the defined pension benefit scheme liability and certain current liabilities. Geographical analysis The following table presents revenue and expenditure and certain assets and liabilities information by geographical segment for the periods ended 2nd May, 2015 and 3rd May, 2014. The Group’s geographical segments are based on the location of the Group’s assets. Revenue from external customers is based on the geographical location of its customers. Europe 2015 £000 2014 £000 North America 2014 2015 £000 £000 Rest of the World 2014 2015 £000 £000 Total 2015 £000 2014 £000 Revenue External Non-current assets Current assets Liabilities Capital expenditure 2222222222 36,255 18,174 34,063 25,593 751 45,503 47,130 4,487 18,474 19,262 61 35,696 31,206 1,191 25,871 21,325 390 940 – 222 222 222 222 222 222 222 222 32,803 19,026 29,682 20,805 904 9,840 175 856 653 36 4,438 108 201 19 – 4,810 192 1,432 259 135 886 21 4046 - MSI R+A 002_002 18/06/2015 15:22 Page 22 M S I N T E R N A T I O N A L p l c Notes to the financial statements Continued 4 Segment information (continued) Information about major customers Revenue from major customers arising from sales reported in the Defence Segment: 2015 £000 2014 £000 – 10,796 222222222222222222222222222222222222222222222222 Customer 1 Customer 1 10,715 – 5 Group operating profit This is stated after charging: Audit of the financial statements Other fees for auditors Other assurance services Taxation service 2015 £000 76 11 40 2014 £000 79 11 28 1,227 316 220 682 60 17,507 1,050 194 222222222222222222222222222222222222222222222222 Depreciation Amortisation of intangible assets Foreign exchange losses Hire of plant and machinery Other operating leases – minimum lease payments Cost of inventories recognised as an expense Research and development costs Redundancy and terminations costs 1,117 317 18 785 51 18,925 1,200 59 6 Employee Information 2015 Number 2014 Number The average number of employees, including executive directors, during the period was: Production Technical Distribution Administration 199 62 25 51 2222222222222222222222222222222222222 2222 2222 337 2222222222222222222222222222222222222 2222 2222 210 65 27 54 356 (a) Staff costs Their, including executive directors, employment costs were as follows: 2015 £000 2014 £000 Wages and salaries Social Security costs Other pension costs 11,162 1,302 408 2222222222222222222222222222222222222 2222 2222 12,872 2222222222222222222222222222222222222 2222 2222 11,967 1,313 506 13,786 (b) Directors’ emoluments 2014 £000 2013 £000 1,112 2222222222222222222222222222222222222 2222 2222 Aggregate directors’ emoluments (note 28) 1,141 22 4046 - MSI R+A 002_002 18/06/2015 15:22 Page 23 M S I N T E R N A T I O N A L p l c Notes to the financial statements Continued 7 Finance revenue 2015 £000 2014 £000 Bank interest Other 48 – 2222222222222222222222222222222222222 2222 2222 48 2222222222222222222222222222222222222 2222 2222 46 24 70 8 Finance costs 2015 £000 2014 £000 Bank interest Interest on taxation 69 – 2222222222222222222222222222222222222 2222 2222 69 2222222222222222222222222222222222222 2222 2222 32 – 32 9 (a) Taxation The charge for taxation comprises: 2015 £000 2014 £000 Current tax United Kingdom corporation tax Tax over provided in previous years Foreign corporation tax 236 (32) 381 2222222222222222222222222222222222222 2222 2222 585 2222222222222222222222222222222222222 2222 2222 Group current tax 19 (5) 286 300 Deferred tax Origination and reversal of temporary differences (note 15) Adjustments in respect of prior years Impact of reduction in deferred tax rate to 20% (72) (67) (92) 2222222222222222222222222222222222222 2222 2222 (231) 2222222222222222222222222222222222222 2222 2222 354 2222222222222222222222222222222222222 2222 2222 Group deferred tax (50) (62) – Tax on profit (112) 188 Tax relating to items charged or credited to other comprehensive income Deferred tax Deferred tax on remeasurement gains/losses on pension scheme current year Impact of reduction in deferred tax rate to 20% Deferred taxation on revaluation surplus on land and buildings 219 177 446 2222222222222222222222222222222222222 2222 2222 842 2222222222222222222222222222222222222 2222 2222 Income tax in the statement of comprehensive income (193) – – (193) 23 4046 - MSI R+A 002_002 18/06/2015 15:22 Page 24 M S I N T E R N A T I O N A L p l c Notes to the financial statements Continued 9 (b) Factors affecting the tax charge for the year The tax assessed for the period differs to the standard rate of corporation tax in the UK (21%). The differences are explained below: 2015 £000 2014 £000 Profit before tax 2,928 2222222222222222222222222222222222222 2222 2222 673 (128) (99) (92) 2222222222222222222222222222222222222 2222 2222 354 2222222222222222222222222222222222222 2222 2222 Profit multiplied by standard rate of corporation tax of 21% (2014 – 23%) Expenses not deductible for tax purposes Adjustment in respect of prior periods Impact of reduction in deferred tax rate to 20% Total tax charge for the period 324 (69) (67) – 1,541 188 10 Earnings per share The calculation of basic earnings per share is based on: (a) (b) Profit for the period attributable to equity holders of the parent of £1,353,000 (2014 – 2,574,000). 16,504,691 (2014 – 17,603,561) Ordinary shares, being the weighted average number of Ordinary shares in issue. This represents 18,396,073 (2014 – 18,396,073) being the weighted average number of Ordinary shares in issue less 1,891,382 (2013 – less 792,512) being the weighted average number of shares both held within the ESOT 245,048 (2014 -245,048) and purchased by the Company 1,646,334 (2014 – 547,464). 222222222222222222222222222222222222222222222222 11 Dividends paid and proposed 2015 £000 2014 £000 Declared and paid during the year On Ordinary shares Final dividend for 2014 : 6.50p (2013 – 6.50p) Interim dividend for 2015 : 1.50p (2014 – 1.50p) 1,180 272 2222222222222222222222222222222222222 2222 2222 1,452 2222222222222222222222222222222222222 2222 2222 1,073 247 1,320 Proposed for approval by shareholders at the AGM Final dividend for 2015: 6.50p (2014 – 6.50p) 1,073 2222222222222222222222222222222222222 2222 2222 1,073 24 4046 - MSI R+A 002_002 18/06/2015 15:22 Page 25 M S I N T E R N A T I O N A L p l c Notes to the financial statements Continued 12 Property, plant and equipment Freehold property £000 Plant and equipment £000 (a) Group Cost or valuation At 27th April, 2013 Additions Disposals Revaluation Exchange differences 13,586 940 (652) – (149) 2222222222222222222222222222222 2222 2222 13,725 833 (522) (88) 2222222222222222222222222222222 2222 2222 13,948 2222222222222222222222222222222 2222 2222 At 3rd May, 2014 Additions Disposals Exchange differences 10,892 – – 1,495 (54) 12,333 – – (112) At 2nd May, 2015 12,221 Accumulated depreciation At 27th April, 2013 Depreciation charge for the period Disposals Revaluation Exchange differences 10,431 1,074 (498) – (76) 2222222222222222222222222222222 2222 2222 10,931 936 (413) (23) 2222222222222222222222222222222 2222 2222 11,431 2222222222222222222222222222222 2222 2222 2,517 2222222222222222222222222222222 2222 2222 2,794 2222222222222222222222222222222 2222 2222 At 3rd May, 2014 Depreciation charge for the period Disposals Exchange differences 292 153 – (444) (1) Net book value at 2nd May, 2015 Net book value at 3rd May, 2014 – 181 – (6) At 2nd May, 2015 12,046 12,333 175 Analysis of cost or valuation At professional valuation 2014 At cost – 13,948 2222222222222222222222222222222 2222 2222 13,948 2222222222222222222222222222222 2222 2222 12,221 – 12,221 Analysis of cost or valuation At professional valuation 2011 At cost – 13,725 2222222222222222222222222222222 2222 2222 13,725 2222222222222222222222222222222 2222 2222 12,333 – 12,333 25 Total £000 24,478 940 (652) 1,495 (203) 222 26,058 833 (522) (200) 222 26,169 222 10,723 1,227 (498) (444) (77) 222 10,931 1,117 (413) (29) 222 11,606 222 14,563 222 15,127 222 12,221 13,948 222 26,169 222 12,333 13,725 222 26,058 222 4046 - MSI R+A 002_002 18/06/2015 15:22 Page 26 M S I N T E R N A T I O N A L p l c Notes to the financial statements Continued 12 (b) Property, plant and equipment (continued) Company Freehold property £000 Plant and equipment £000 Cost or valuation At 27th April, 2013 Additions Disposals Revaluation 12,428 842 (514) – 2222222222222222222222222222222 2222 2222 12,756 693 (504) 2222222222222222222222222222222 2222 2222 12,945 2222222222222222222222222222222 2222 2222 At 3rd May, 2014 Additions Disposals 9,250 – – 1,700 10,950 – – At 2nd May, 2015 10,950 Accumulated depreciation At 27th April, 2013 Depreciation charge for the period Disposals Revaluation At 3rd May, 2014 Depreciation charge for the period Disposals 10,305 912 (466) – 2222222222222222222222222222222 2222 2222 10,751 785 (395) 2222222222222222222222222222222 2222 2222 11,141 2222222222222222222222222222222 2222 2222 1,804 2222222222222222222222222222222 2222 2222 2,005 2222222222222222222222222222222 2222 2222 Net book value at 2nd May, 2015 Net book value at 3rd May, 2014 240 116 – (356) At 2nd May, 2015 – 146 – 10,804 10,950 146 Analysis of cost or valuation At professional valuation 2014 At cost – 12,945 2222222222222222222222222222222 2222 2222 12,945 2222222222222222222222222222222 2222 2222 10,950 – 10,950 Analysis of cost or valuation At professional valuation 2011 At cost – 12,428 2222222222222222222222222222222 2222 2222 12,428 2222222222222222222222222222222 2222 2222 9,250 – 9,250 Total £000 21,678 842 (514) 1,700 222 23,706 693 (504) 222 23,895 222 10,545 1,028 (466) (356) 222 11,107 931 (395) 222 11,643 222 12,608 222 12,955 222 10,950 12,945 222 23,895 222 9,250 12,428 222 21,678 222 (c) (d) Depreciation has not been charged on freehold land which is included at a book value of £3,877,000 (2014 – £3,943,000) Company £3,380,000 (2014 – £3,380,000) at 2nd May, 2015. On 30th April, 2014 the Group’s land and buildings which consist of manufacturing and office facilities in the UK and Poland, were valued by Dove Haigh Phillips (UK) and KonSolid-Nieruchomosci (Poland). Management determined that these constitute one class of asset under IFRS 13 (designated as level 3 fair value assets), based on the nature, characteristics and risks of the properties. If land and buildings were valued using the cost method, carrying amounts would be £7,332,000 (2014 – £7,332,000) at 2nd May, 2015. The UK properties were valued on the basis of an existing use value in accordance with the Appraisal and Valuation Standards (5th Edition) published by the Royal Institution of Chartered Surveyors. The Poland property was valued based on the income approach, converting anticipated future benefits in the form of rental income into present value. For all properties, there is no difference between current use and highest and best use. 26 4046 - MSI R+A 002_002 18/06/2015 15:22 Page 27 M S I N T E R N A T I O N A L p l c Notes to the financial statements Continued 12 Property, plant and equipment (continued) Significant unobservable valuation input Basis of measurement Value Range UK Properties Value in use £293-315 sq./m Poland Property Monthly rental £4-£11 sq./m pcm Significant increases/(deceases) in the above measurements would result in a significant higher/(lower) fair value. The valuation has given rise to a revaluation surplus of £1,939,000. 222222222222222222222222222222222222222222222222 13 Intangible assets Group Cost At 27th April, 2013 Additions 222222222222222 At 3rd May, 2014 Additions 222222222222222 At 2nd May, 2015 222222222222222 Amortisation At 27th April, 2013 Amortisation during the year 222222222222222 At 3rd May, 2014 Amortisation during the year 222222222222222 At 2nd May, 2015 222222222222222 Net book value at 2nd May, 2015 222222222222222 Net book value at 3rd May, 2014 222222222222222 Goodwill £000 Trade name £000 Design Customer database relationship £000 £000 Order Development costs £000 backlog £000 Software costs £000 Group £000 111 – 865 – 1,020 – 2,064 – 1,370 – 6,039 – 222 222 222 222 222 222 222 222 6,039 – 222 222 222 222 222 222 222 222 6,039 222 222 222 222 222 222 222 222 1,370 – 2,064 – 1,020 – 330 – 279 – 865 – 111 – 2,064 1,370 1,020 330 – 279 – 330 279 865 111 – – 111 – 279 – 400 137 126 43 372 127 300 9 – – 169 44 537 138 1,588 316 222 222 222 222 222 222 222 222 1,904 317 222 222 222 222 222 222 222 222 2,221 222 222 222 222 222 222 222 222 3,818 222 222 222 222 222 222 222 222 4,135 222 222 222 222 222 222 222 222 309 8 499 127 279 – 111 – 2,064 2,064 317 279 213 626 695 111 394 675 652 521 696 833 13 21 – – – – – Development costs £000 Software costs £000 Company £000 Company Cost At 27th April, 2013 Additions 330 – 2222222222222222222222222222222 2222 2222 330 – 2222222222222222222222222222222 2222 2222 330 2222222222222222222222222222222 2222 2222 At 3rd May, 2014 Additions At 2nd May, 2015 279 – 279 – 279 Amortisation At 27th April, 2013 Amortisation during the year At 3rd May, 2014 Amortisation during the year 300 9 2222222222222222222222222222222 2222 2222 309 8 2222222222222222222222222222222 2222 2222 317 2222222222222222222222222222222 2222 2222 13 2222222222222222222222222222222 2222 2222 21 2222222222222222222222222222222 2222 2222 Net book value at 2nd May, 2015 Net book value at 3rd May, 2014 At 2nd May, 2015 279 – 279 – 279 – – 27 609 – 222 609 – 222 609 222 579 9 222 588 8 222 596 222 13 222 21 222 4046 - MSI R+A 002_002 18/06/2015 15:22 Page 28 M S I N T E R N A T I O N A L p l c Notes to the financial statements Continued 13 Intangible assets (continued) Goodwill acquired through business combinations and licences has been allocated for impairment testing purposes to the petrol station superstructures division which is an operating segment. Impairment testing Goodwill considered significant in comparison to the Group’s total carrying amount of such assets has been allocated to cash-generating units or groups of cash-generating units as follows: Goodwill 2015 £000 Goodwill 2014 £000 2,064 2222222222222222222222222222222222222 2222 2222 Petrol station superstructure division 2,064 Group The performance of the petrol station superstructure division is the lowest level at which goodwill is monitored for internal management purposes. At the year end, value in use was determined by discounting the future cash flows generated from the continuing operations of the company over the next 5 years and was based on the following key assumptions: l l l Detailed 5 year management forecast. A growth in cashflows estimated for 5 years, and a growth rate of 2% assumed thereafter. Cash flows were discounted at a rate of 17.97%. This is the discount rate as calculated using the Weighted Average Cost of Capital. Based on the above assumptions, the value in use calculated for Global-MSI did not indicate the need for impairment. The growth rates used in the value in use calculation reflect management’s expectations for the business based upon previous experience and taking into consideration recent sales wins. No likely changes in the assumptions used would give rise to an impairment. 222222222222222222222222222222222222222222222222 14 Investment in subsidiary undertakings Principal subsidiary undertakings are set out on page 49. Company At 3rd May, 2014 Impairment in investment in MSI-Forks Garfos Industriais Ltda 2222222222222222222222222222 At 2nd May, 2015 2222222222222222222222222222 2015 £000 2015 £000 Cost Impairment 2015 £000 Net book value 13,875 (2,046) 11,829 – (88) 2222 2222 2222 11,741 2222 2222 2222 (2,134) 13,875 (88) The impairment of £88,000 represents the write down of the investment in MSI-Forks Garfos Industriais Ltda to fair value. Fair value was determined by the net assets of MSI-Forks Garfos Industriais Ltda. This is subject to annual impairment testing. 28 4046 - MSI R+A 002_002 18/06/2015 15:22 Page 29 M S I N T E R N A T I O N A L p l c Notes to the financial statements Continued 15 Deferred income tax The deferred income tax included in the Group income statement is as follows: 2015 £000 2014 £000 Taxation deferred by capital allowances Other temporary differences Taxation on defined benefits pension Adjustments in respect of prior periods Impact of reduction in deferred tax rate (23% to 20%) (21) (34) (17) (67) (92) 2222222222222222222222222222222222222 2222 2222 (231) 2222222222222222222222222222222222222 2222 2222 9 (54) (5) (62) – (112) The deferred income tax included in the balance sheet is as follows: Group 2015 £000 2014 £000 Taxation deferred by capital allowances Other temporary differences Taxation on pension liability Taxation on buildings revaluation (327) (255) 1,178 (807) 2222222222222222222222222222222222222 2222 2222 (211) 2222222222222222222222222222222222222 2222 2222 Deferred income tax asset/(liability) (310) (166) 1,376 (807) 93 Company 2015 £000 2014 £000 Taxation deferred by capital allowances Other temporary differences Taxation on pension liability Taxation on buildings revaluation (321) 140 1,178 (830) 2222222222222222222222222222222222222 2222 2222 167 2222222222222222222222222222222222222 2222 2222 (304) 150 1,376 (830) Deferred income tax asset 392 Deferred taxation has been provided at 20%. This is the rate enacted at the balance sheet date. The Group and Company also has capital losses of £4,350,000 (2014 – £4,350,000). 222222222222222222222222222222222222222222222222 16 Inventories Group Company 2015 £000 2014 £000 2015 £000 2,950 4,795 417 3,407 4,375 682 2,976 4,241 176 2222 2222 2222 7,393 2222 2222 2222 8,464 8,162 2014 £000 2,504 4,675 71 222 7,250 222 Raw materials Work in progress Finished goods 222222222222222222222222 222222222222222222222222 29 4046 - MSI R+A 002_002 18/06/2015 15:22 Page 30 M S I N T E R N A T I O N A L p l c Notes to the financial statements Continued 17 Trade and other receivables Trade receivables Retentions on contracts Amounts owed by subsidiary undertakings Other receivables 222222222222222222222222 222222222222222222222222 Gross amounts due from customers for contract work – included above 222222222222222222222222 Group Company 2015 £000 2014 £000 2015 £000 5,572 2,644 – 44 7,772 1,681 – 1 6,646 1,681 924 1 2222 2222 2222 9,252 2222 2222 2222 9,454 8,260 224 2222 2222 2222 491 821 2014 £000 4,326 2,644 1,264 42 222 8,276 222 200 222 The aggregate amount of costs incurred and recognised profits to date on contracts is £13,280,000 (2014 – £13,881,000). (a) Trade receivables are denominated in the following currencies: Group Company Sterling Euro US dollar Other currencies 222222222222222222222222 222222222222222222222222 2015 £000 2014 £000 2015 £000 4,105 510 245 712 6,545 236 643 348 6,545 101 – – 2222 2222 2222 6,646 2222 2222 2222 7,772 5,572 2014 £000 4,105 221 – – 222 4,326 222 Trade receivables are non-interest bearing and are generally on 30 days terms and are shown net of provision for impairment. The aged analysis of trade receivables not impaired is as follows: Group 2015 2014 Total £000 7,772 5,572 Not past due £000 6,328 3,686 < 30 days £000 30-60 days £000 60-90 days £000 > 90 days £000 1,224 1,058 98 159 105 49 17 620 As at 2nd May, 2015 trade receivables at a nominal value of £52,000 (2014 – £184,000) were impaired and fully provided. Bad debts of £151,000 (2014 – £165,000) were recovered and bad debts of £42,000 (2014 – £21,000) were incurred. Company 2015 2014 6,646 4,326 5,604 2,666 905 922 57 96 80 28 – 614 As at 2nd May, 2015 trade receivables at a nominal value of £39,000 (2014 – £168,000) were impaired and fully provided. Bad debts of £143,000 (2014 – £165,000) were recovered and bad debts of £15,000 (2014 – £5,000) were incurred. (b) Retentions on contracts are denominated in the following currencies: Group Company Sterling Euro US dollar Other currencies 222222222222222222222222 222222222222222222222222 30 2015 £000 2014 £000 2015 £000 2,644 – – – 1,681 – – – 1,681 – – – 2222 2222 2222 1,681 2222 2222 2222 1,681 2,644 2014 £000 2,644 – – – 222 2,644 222 4046 - MSI R+A 002_002 18/06/2015 15:22 Page 31 M S I N T E R N A T I O N A L p l c Notes to the financial statements Continued 17 Trade and other receivables (continued) Retentions on contracts are non interest bearing and represent amounts contractually retained by customers on completion of contracts for specific time periods as follows: Group 2015 2014 Company Total £000 1,681 2,644 Up to 6 months £000 1,681 2,644 6-12 months £000 12-18 months £000 18-24 months £000 – – – – – – – 1,681 – 2,644 222222222222222222222222222222222222222222222222 1,681 2,644 2015 2014 – – – – 18 Cash Group Company Cash at bank and in hand Short-term deposits 222222222222222222222222 222222222222222222222222 19 Issued capital 2015 £000 2014 £000 2015 £000 4,786 9,500 9,884 7,264 8,935 7,264 2222 2222 2222 16,199 2222 2222 2222 17,148 14,286 2014 £000 3,741 9,500 222 13,241 222 Group Company 2015 £000 3,500 2014 £000 3,500 2015 £000 3,500 2014 £000 3,500 Ordinary shares at 10p each Authorised – 35,000,000 (2014 – 35,000,000) Allotted, issued and fully paid – 18,396,073 (2014 – 18,396,073) 1,840 222222222222222222222222222222222222222222222222 1,840 1,840 1,840 20 Reserves Share Capital The balance classified as share capital includes the nominal value on issue of the Company’s equity share capital, comprising 10p Ordinary shares. Capital redemption reserve The balance classified as capital redemption reserve represents the nominal value of issued share capital of the Company, repurchased. Other reserve This is the revaluation reserve previously arising under UK GAAP which is now part of non-distributable retained reserves. Revaluation reserve The asset revaluation reserve is used to record increases in the fair value of land and buildings and decreases to the extent that such decrease relates to an increase on the same assets previously recognised in equity. This also includes the impact of the change in related deferred tax due to the change in corporation tax (21% to 20%). Special reserve The balance classified as special reserve represents the share premium on the issue of the Company’s equity share capital. 31 4046 - MSI R+A 002_002 18/06/2015 15:22 Page 32 M S I N T E R N A T I O N A L p l c Notes to the financial statements Continued 20 Reserves (continued) Currency translation reserve The foreign currency translation reserve is used to record exchange differences arising from the translation of the financial statements of foreign subsidiaries. It is also used to record the effect of hedging net investments in foreign operations. Treasury shares 2015 £000 2014 £000 Employee Share Ownership Trust Shares in treasury (see below) 100 2,959 2222222222222222222222222222222222222 2222 2222 3,059 2222222222222222222222222222222222222 2222 2222 100 2,959 3,059 During 1991 the Company established an Employee Share Ownership Trust (“ESOT”). The trustee of the ESOT is Appleby Trust (Jersey) Ltd, an independent company registered in Jersey. The ESOT provides for the issue of options over Ordinary shares in the Company to Group employees, including executive directors, at the discretion of the Remuneration Committee. The trust has purchased an aggregate 245,048 (2014 – 245,048) Ordinary shares, which represents 1.3% (2014 – 1.3%) of the issued share capital of the Company at an aggregate cost of £100,006. The market value of the shares at 2nd May, 2015 was £346,000 (2014 – £508,000). The Company has made payments of £Nil (2014 – £Nil) into the ESOT bank accounts during the period. No options over shares (2014 – Nil) have been granted during the period. Details of the outstanding share options, for Directors are included in the Directors’ remuneration report. The assets, liabilities, income and costs of the ESOT have been incorporated into the Company’s financial statements. Total ESOT costs charged to the income statement in the period amounts to £4,000 (2014 – £4,000). During the period no options on shares were exercised (2014 – Nil) and no shares were purchased (2014 – Nil). The Company made the following purchases of its own 10p Ordinary shares to be held in Treasury: 11th December, 2013 1,000,000 shares from the Group’s pension scheme. 30th January, 2014 646,334 shares £000 1,722 1,237 222222222222222222222222222222222222222222222222 2,959 222222222222222222222222222222222222222222222222 21 Pension liability The Company operates an employee defined benefits scheme called the MS INTERNATIONAL plc Retirement and Death Benefits Scheme (the Scheme). IAS 19 requires disclosure of certain information about the Scheme as follows: l l l l Until 5th April, 1997 the Scheme provided defined benefits and these liabilities remain in respect of service prior to 6th April, 1997. From 6th April, 1997 until 31st May, 2007 the Scheme provided future service benefits on a defined contribution basis. The last formal valuation of the Scheme was performed at 5th April, 2011 by a professionally qualified actuary. The Company has paid contributions into the Scheme for life insurance premiums and other Scheme expenses. In addition from April 2013, the employer has paid £229,000 per annum to the defined benefits section of the Scheme. From 1st June, 2007 the Company has operated a defined contributions scheme for its UK employees which is administered by a UK pension provider. Members contributions are paid in line with this scheme’s documentation over the accounting period and the Company has no further payment obligations once the contributions have been made. The Company’s policy for recognising remeasurement gains and losses is to recognise them immediately through the statement of comprehensive income. 32 4046 - MSI R+A 002_002 18/06/2015 15:22 Page 33 M S I N T E R N A T I O N A L p l c Notes to the financial statements Continued 21 Pension liability (continued) Assumptions 2014 4.10% 3.70% 3.10% 1.90% 21.10yrs 22.40yrs 222222222222222222222222222222222222222222222222 Discount rate at year-end Future salary increases Pension increases – RPI inflation Pension increases – CPI inflation Life expectancy of current pensioners (from age 65) Life expectancy of future pensioners (from age 65) 2015 3.20% 3.50% 3.00% 1.80% 21.6yrs 23.3yrs A 0.5% reduction in the discount rate would lead to an increase in past service liabilities of around £1.8m. Members living around 1 year longer than expected would lead to an increase in past service liabilities of around £1.0m. In relation to the other assumptions there is no sensitivity analysis as small changes in these assumptions will not have a material impact. The average duration of the scheme is 12/13 years. Balance sheet 2015 £000 2014 £000 Present value of obligations Fair value of plan assets 28,786 22,897 2222222222222222222222222222222222222 2222 2222 5,889 2222222222222222222222222222222222222 2222 2222 30,102 23,225 Net liability 6,877 Profit & loss 2015 £000 2014 £000 Interest on net liabilities Administration expenses 254 350 2222222222222222222222222222222222222 2222 2222 604 2222222222222222222222222222222222222 2222 2222 Total profit and loss cost 237 316 553 Change in defined benefit obligation Opening defined benefit obligation Interest cost Experience (gains)/losses arising on scheme liabilities Changes in financial assumptions underlying the present value of scheme liabilities Changes in demographic assumptions underlying the present value of scheme liabilities Benefits paid 99 (1,409) 2222222222222222222222222222222222222 2222 2222 28,786 2222222222222222222222222222222222222 2222 2222 Defined benefit obligation (81) (1,360) 30,102 2015 £000 28,786 1,151 (1,088) 2014 £000 29,990 1,113 53 2,694 (1,060) 33 4046 - MSI R+A 002_002 18/06/2015 15:22 Page 34 M S I N T E R N A T I O N A L p l c Notes to the financial statements Continued 21 Pension liability (continued) Change in fair value of plan assets 2015 £000 2014 £000 Opening fair value of plan assets Interest income on assets Actual return on assets less amount included in net interest Contributions by employer Administration expenses Benefits paid 23,224 859 44 529 (350) (1,409) 2222222222222222222222222222222222222 2222 2222 22,897 2222222222222222222222222222222222222 2222 2222 22,897 914 561 529 (316) (1,360) Fair value of plan assets 23,225 Statement of comprehensive income 2015 £000 2014 £000 Actual return on assets less amounts included in net interest Remeasurement (losses)/gains 44 908 2222222222222222222222222222222222222 2222 2222 952 2222222222222222222222222222222222222 2222 2222 561 (1,525) (964) 229 2222222222222222222222222222222222222 2222 2222 Expected Group contribution to plan during next accounting year 229 2015 £000 2014 £000 Plan assets Asset allocation Breakdown of assets at 2nd May, 2015 Equities – UK market Equities – non-UK market Corporate Bonds Gilts Cash/other 35% 36% 15% 11% 2% 2222222222222222222222222222222222222 2222 2222 100% 2222222222222222222222222222222222222 2222 2222 8,181 8,472 3,511 2,623 438 23,225 Plan assets Asset allocation Breakdown of assets at 3rd May, 2014 Equities – UK market Equities – non-UK market Alternative assets Corporate Bonds Gilts Cash/other 34% 40% 0% 13% 11% 2% 2222222222222222222222222222222222222 2222 2222 100% 2222222222222222222222222222222222222 2222 2222 7,759 9,249 89 2,877 2,508 415 22,897 34 4046 - MSI R+A 002_002 18/06/2015 15:22 Page 35 M S I N T E R N A T I O N A L p l c Notes to the financial statements Continued 22 Trade and other payables Trade payables Amounts owed to subsidiary undertakings Other payables Accruals Progress payments 222222222222222222222222 222222222222222222222222 Gross amounts due to customers for contract work – included above 222222222222222222222222 23 Financial instruments Management of financial risks Group Company 2015 £000 2014 £000 2015 £000 4,555 – 3,105 1,762 5,803 4,254 – 2,829 1,950 9,961 3,966 8,107 2,722 1,799 9,860 2222 2222 2222 26,454 2222 2222 2222 18,994 15,225 125 2222 2222 2222 320 442 2014 £000 4,164 8,102 2,862 1,504 5,662 222 22,294 222 128 222 The major financial risks faced by the Group and Company are funding risks, interest rate risks and currency risks. Funding risk At the year end the Group had net cash of £17.15m – Company £16.20m (2014 Group – £14.29m – Company £13.24m). The Group and Company has available a bank multicurrency overdraft facility of £4.8m which is renewable on 1st January, 2016. Interest rate risk The bank multicurrency overdraft facility is at a floating rate of interest, based on the base rate of each respective currency. This position is monitored constantly by the Board to ensure any risk is minimised. The Board believe that the main interest rate risk relates to maximising interest income on cash balances. The following table demonstrates the sensitivity to a reasonable possible change in interest rates, with all other variables held constant of the Group’s profit before tax. There is no impact on the Group’s equity. 2015 Sterling 2014 Sterling Increase/decrease in basis points Effect on profit before tax +50 –50 +50 –50 50 (50) 50 (50) The interest rate profile of the financial assets of the Group and Company as at 2nd May, 2015 was as follows: Group Company 2015 Sterling US Dollar Euro Other 222222222222222222 Total 222222222222222222 Floating rate financial assets/ (liabilities) £000 Floating rate financial assets/ (liabilities) £000 Total £000 13,300 2,956 834 58 2222 17,148 2222 13,292 2,561 345 1 2222 16,199 2222 13,300 2,956 834 58 2222 17,148 2222 35 Total £000 13,292 2,561 345 1 222 16,199 222 4046 - MSI R+A 002_002 18/06/2015 15:22 Page 36 M S I N T E R N A T I O N A L p l c Notes to the financial statements Continued 23 Financial instruments (continued) 2014 Sterling US Dollar Euro Other 222222222222222222 Total 222222222222222222 Foreign currency risk 11,919 2,483 905 (1,021) 2222 14,286 2222 11,919 2,483 905 (1,021) 2222 14,286 2222 11,916 2,050 328 (1,053) 2222 13,241 2222 11,916 2,050 328 (1,053) 222 13,241 222 Exposure to risk is incurred by the Group and Company through overseas sales. This exposure is minimised by the following: (1) (2) invoicing in sterling where practicable. using foreign currency received for purchases where appropriate. Currency exposures The table below shows the Group’s currency exposures; i.e., those transactional exposures that give rise to the net currency gains and losses recognised in the income statement. Such exposures comprise the monetary assets and monetary liabilities of the Group that are not denominated in the operating (or “functional”) currency of the operating unit involved. As at 2nd May, 2015 these currency exposures are as follows: Functional currency of Group operations 2015 Sterling 222222222222222222222222 Total 222222222222222222222222 2014 Sterling 222222222222222222222222 Total 222222222222222222222222 Functional currency of Company operations 2015 Sterling 222222222222222222222222 Total 222222222222222222222222 2014 Sterling 222222222222222222222222 Total 222222222222222222222222 Net foreign currency monetary assets/(liabilities)d Sterling £000 US Dollar £000 Total £000 Euro £000 199 695 2222 2222 2222 695 2222 2222 2222 2,128 2,128 199 1,217 (1,532) 552 2222 2222 2222 552 2222 2222 2222 (1,532) 1,217 3,022 222 3,022 222 237 222 237 222 Net foreign currency monetary assets/(liabilities)d Sterling £000 US Dollar £000 Total £000 Euro £000 192 22 2222 2222 2222 22 2222 2222 2222 2,128 2,128 192 (954) 1,217 (84) 2222 2222 2222 (84) 2222 2222 2222 1,217 (954) 2,342 222 2,342 222 179 222 179 222 No significant differences exist between the book value and the fair value of the financial assets and liabilities as at 2nd May, 2015 and 3rd May, 2014. Fair values No significant differences exist between the book value and the fair value of the financial assets and liabilities as at 2nd May, 2015 and 3rd May, 2014. Credit risk There are no significant concentrations of credit risk within the Group or Company. The maximum credit risk exposure relating to financial assets is represented by carrying values at the balance sheet date. The Group and Company have established procedures to minimise the risk of default by trade debtors including credit checks undertaken before a customer is accepted and credit insurance where available and appropriate. Historically these procedures have proved effective in minimising the level of impaired and past due receivables. 36 4046 - MSI R+A 002_002 18/06/2015 15:22 Page 37 M S I N T E R N A T I O N A L p l c Notes to the financial statements Continued 24 Income statement The profit for the financial period dealt with in the financial statements of the Company was £955,000 (2014 – £1,605,000). 222222222222222222222222222222222222222222222222 25 Capital committments Group Company Contracted but not provided in the financial statements 72 22222222222222222222222222 2222 2222 2222 72 22222222222222222222222222 2222 2222 2222 185 185 72 72 2015 £000 2014 £000 2015 £000 2014 £000 185 222 185 222 26 Obligations under leases Future minimum rentals payable under non-cancellable operating leases are as follows: Group Company Amounts payable Within one year In two to five years 22 25 22222222222222222222222222 2222 2222 2222 47 22222222222222222222222222 2222 2222 2222 173 25 198 199 181 18 2015 £000 2014 £000 2015 £000 2014 £000 31 18 222 49 222 The Group has entered into commercial leases on certain properties, plant and equipment. These leases have an average duration of between 1 and 2 years. 222222222222222222222222222222222222222222222222 27 Contingent liabilities The Company is contingently liable in respect of guarantees, indemnities and performance bonds given in the ordinary course of business amounting to £6.772,100 at 2nd May, 2015 (2014 – £7,602,881). 222222222222222222222222222222222222222222222222 28 Related party transactions The following transactions took place, during the year, between the Company and other subsidiaries in the Group. Purchases of goods and services £15,780 (2014 – £1,309) Sales of goods and services £2,964,112 (2014 – £2,529,757) The following balances between the Company and other subsidiaries in the Group are included in the Company balance sheet as at 2nd May, 2015. Amounts owed by the Company £8,107,000 (2014 – £8,102,000) Amounts owed to the Company £924,000 (2014 – £1,264,000) Sales and purchases between related parties are made at normal market prices. Terms and conditions for transactions with subsidiaries and the joint venture are unsecured and interest free. Balances are placed on inter- company accounts with no specified credit period. Key management personnel (main board directors) compensation. Group Company 2015 £000 2014 £000 2015 £000 1,112 228 1,141 127 1,141 127 2222 2222 2222 1,268 2222 2222 2222 1,268 1,340 2014 £000 1,112 228 222 1,340 222 Short-term employee benefits Post-employment benefits 222222222222222222222222 222222222222222222222222 37 4046 - MSI R+A 002_002 18/06/2015 15:22 Page 38 M S I N T E R N A T I O N A L p l c Notes to the financial statements Continued 29 Share-based payments Share options are granted to senior executives in two schemes; the Employee Share Option Scheme and the Enterprise Management Incentive Scheme. The exercise price of the option is no less than the market price of the shares on the date of the grant. The options vest after the executives have been in service for specified times of not less than one year from the date of grant. The contractual life of the options vary up to 10 years. There are no cash settlement alternatives. The following table illustrates the number and weighted average exercise prices (WAEP) of and movements in, share options during the year. 2015 2015 2014 2014 Enterprise management incentive scheme Outstanding as at 3rd May, 2014 Options exercised Options lapsed 194.0p – – 222222222222222222222222222222222222222222222222 194.0p 222222222222222222222222222222222222222222222222 Outstanding as at 2nd May, 2015 214,000 – – 214,000 – – 194.0p – – 214,000 214,000 194.0p The expense recognised for share options during the year is £Nil (2014 – £Nil). 222222222222222222222222222222222222222222222222 30 Capital management The primary objective of the Group’s capital management is to ensure that it maintains a strong credit rating and healthy capital ratios in order to support its business and maximise shareholder value. The Group manages its capital structure and makes adjustments to it, in light of changes in economic conditions. To maintain or adjust the capital structure, the Group may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares. No changes were made to the objectives, policies or processes during the years ended 2nd May, 2015 and 3rd May, 2014. Capital comprises equity attributable to the equity holders of the parent company £28,299,000 (2014 – £29,143,000). 222222222222222222222222222222222222222222222222 31 Post balance sheet event On the 17th June, 2015 the Company acquired the 100% shareholding in Petrol Sign B.V., a Company based in The Netherlands from Lambooij Holdings B.V. The consideration for the acquisition is n3,400,000 on a cash and debt free basis and includes “normalised” working capital. Petrol Sign B.V. designs, restyles, produces and installs the complete appearance of petrol station superstructures and forecourt. The acquisition will enhance and widen the ability of our Petrol Station Superstructure Division to offer a more complete package of services to customers. For the financial year ended 31st December, 2014, Petrol Sign B.V. had unaudited revenues of n4,156,000 (2013 – n3,190,000) and an unaudited profit before taxation of n446,000 (2013 – n196,000). As at 31st December, 2014, Petrol Sign B.V. had unaudited net assets of n756,000. As a result of the acquisition date being so close to the financial statement approval date, the information to make the following disclosures was not available. 1. 2. The amounts recognised at the acquisition date for each class of the acquiree’s assets, liabilities and contingent liabilities, and the carrying amount of those classes, determined in accordance with IFRSs, immediately before the combination. A description of the factors that contributed to a cost that results in the recognition of goodwill, including a description of each intangible asset that was not recognised separately from goodwill and an explanation of why the intangible asset’s fair value could not be measured reliably. 3. For acquired receivables: (i) (ii) (iii) for fair value of the receivables; the gross contractual amounts receivable; and the best estimate at the acquisition date of the contractual cash flows not expected to be collected. 4. The total amount of goodwill that is expected to be deductible for tax purposes. 222222222222222222222222222222222222222222222222 38 4046 - MSI R+A 003_003 18/06/2015 15:23 Page 39 M S I N T E R N A T I O N A L p l c Summary of group results 2011 – 2015 GROUP INCOME STATEMENT 2015 £000 2014 £000 2013 £000 2012 £000 2011 £000 47,130 Group revenue Group operating profit Finance 54,202 45,503 22222222222222222222 2222 2222 2222 2222 2222 6,401 1,740 283 (199) 22222222222222222222 2222 2222 2222 2222 2222 6,684 1,541 (1,179) (188) 22222222222222222222 2222 2222 2222 2222 2222 5,505 1,353 22222222222222222222 2222 2222 2222 2222 2222 Profit before taxation Taxation Profit for the period 8,388 (2,078) 8,590 (202) 2,928 (354) 3,203 (275) 4,563 (480) 4,780 (217) 55,948 54,494 2,574 6,310 4,083 BALANCE SHEETS Assets employed Intangible assets Tangible fixed assets Other net current (liabilities)/assets Bank balances 5,160 3,818 12,514 14,563 1,249 (446) 9,877 17,148 22222222222222222222 2222 2222 2222 2222 2222 28,800 35,083 22222222222222222222 2222 2222 2222 2222 2222 4,798 13,818 4,424 10,037 4,451 13,755 3,887 13,447 4,135 15,127 1,695 14,286 35,540 33,077 35,243 Financed by Ordinary share capital Reserves 1,840 1,840 23,934 26,459 22222222222222222222 2222 2222 2222 2222 2222 25,774 28,299 3,026 6,784 22222222222222222222 2222 2222 2222 2222 2222 28,800 35,083 22222222222222222222 2222 2222 2222 2222 2222 Shareholders’ funds Net non current liabilities 29,054 6,486 28,405 4,672 29,143 6,100 1,840 27,214 1,840 26,565 1,840 27,303 35,243 35,540 33,077 Note: The results for the years 2011 – 2012 have not been restated to reflect the effects of IAS 19 R “Employee Benefits”. 39 4046 - MSI R+A 003_003 18/06/2015 15:23 Page 40 M S I N T E R N A T I O N A L p l c Corporate governance statement As an AIM listed company MS INTERNATIONAL plc is not required to comply with the UK Corporate Governance Code and has not elected to voluntarily comply. However, the Group is committed to high standards of governance appropriate to its size and structure. The main features of the Group’s corporate governance arrangements are set out below. The Board consists of three executive directors, one of whom, Michael Bell, is the Executive Chairman and three non-executive directors, Roger Lane-Smith, David Pyle and David Hansell. The Chairman has no other significant commitments. Day-to-day control of subsidiary and joint venture operations is vested in individual company managing directors, supported by their respective financial managers. The Board meets at least quarterly throughout the year to direct and control the overall strategy and operating performance of the Group. To enable them to carry out these responsibilities all directors have full and timely access to all relevant information. Executive directors, except for Company business trips and holidays, meet daily and the Chairman periodically meets with the non-executive directors. Additionally subsidiary operations have monthly Board meetings which the main Board chairman chairs and the main Board financial director attends. Procedures are in place for directors to seek independent advice at the expense of the Company and the Company has insurance in respect of legal action against the Directors. The Company Secretary is responsible to the Board for ensuring that Board procedures are complied with and for advising the Board on all governance matters. The Audit Committee consists of two non-executive directors, Roger Lane-Smith and David Pyle. In the opinion of the Board, the non-executive directors have recent and relevant financial experience through their directorships, and extensive experience in dealing with the City. All Board members attend all meetings as appropriate. The external auditors have direct access to the Committee without the executive directors being present. The Audit Committee evaluates the Group’s risk profile and reviews the Group’s half and full year financial statements. The Audit Committee is responsible for recommendations for appointment, reappointment or removal of the external auditors. The auditors provide taxation services to the Group. This arrangement has been reviewed by the Board and the audit committee and is not considered to affect the auditors objectivity and independence. The committee recommended that the Board present a resolution to the shareholders at the 2015 AGM for the reappointment of the external auditors. This followed the assessment of the quality of the service provided, the expertise and resources made available to the Group, auditor independence and effectiveness of the audit process. Arrangements by which staff can, in confidence, raise concerns about possible improprieties in financial and other matters – ‘whistleblowing’ procedures, with any of the Board of directors are in place. The Audit Committee and the Board have considered whether there is a need for an internal audit function and believes that the circumstances and size of the Group make such a function unnecessary. The role and membership of the Remuneration Committee is set out in the Directors’ remuneration report. The Board is responsible for establishing and maintaining the Group’s system of internal control. Internal control systems are designed to meet the particular needs of the Company concerned bearing in mind the resources available and the risks to which it is exposed, and by their nature can provide reasonable but not absolute assurance against material misstatement or loss. The key procedures which the directors have established with a view to providing effective internal control are as follows: The Board has overall responsibility for the Group and there is a formal schedule of matters specifically reserved for decision by the Board which covers the key areas of the Group’s affairs including acquisitions and divestment policy, approval of budgets, capital expenditure, major buying and selling contracts and general treasury and risk management policies. There is a clearly decentralised structure which delegates authority, responsibility and accountability, including responsibility for internal financial control, to management of the operating companies. Responsibility levels and delegation of authority and authorisation levels throughout the Group are set out in the corporate accounting and procedures manual. There is a comprehensive system for reporting financial results. Monthly accounts are prepared on a timely basis. They include income statement, balance sheet, cash flow and capital expenditure reporting with comparisons to budget and forecast. The budget is prepared annually and revised forecasts are produced monthly. There is an investment evaluation process to ensure Board approval for all major capital expenditure commitments. There is a contract evaluation process to ensure executive director approval for all major sales contracts. 40 4046 - MSI R+A 003_003 18/06/2015 15:23 Page 41 M S I N T E R N A T I O N A L p l c Corporate governance statement Continued The Board has reviewed the effectiveness of the system of internal controls and together with operational management, has identified and evaluated the critical business and financial risks of the Group. These risks are reviewed continually. Where appropriate, action is taken to manage the risks. The directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. For this reason, they continue to adopt the going concern basis in preparing the accounts. The Board recognises the importance of communication with all shareholders and is ready, where practicable, to discuss relevant matters with all shareholders. Inter alia, the Board uses the Annual General Meeting to communicate with shareholders and welcomes their constructive participation. Details of the Annual General Meeting to be held on 17th July, 2015 can be found in the Notice of Meeting on page 50. On behalf of the Board David Kirkup Secretary 17th June, 2015 41 4046 - MSI R+A 003_003 18/06/2015 15:23 Page 42 M S I N T E R N A T I O N A L p l c Report of the directors The directors present their report and the Group financial statements for the 52 weeks ended 2nd May, 2015. The directors present their Corporate governance statement on pages 40 and 41 of this report. 222222222222222222222222222222222222222222222222 1 Principal activities of the Group A review of the Group’s trading during the year is contained in the Chairman’s Statement and Strategic report. 222222222222222222222222222222222222222222222222 2 Results and dividends The profit after taxation for the period attributable to shareholders amounted to £1,353,000 (2014 – £2,574,000). The directors recommend a final dividend of 6.50 pence per share (2014 – 6.50 pence per share), making a total of 8.00 pence per share (2014 – 8.00 pence per share). 222222222222222222222222222222222222222222222222 3 Going concern The Group has considerable financial resources together with long term contracts with a number of customers. As a consequence, the directors believe that the Group is well placed to manage its business risk successfully despite the current uncertain economic outlook. After making enquiries the directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the annual report and accounts. 222222222222222222222222222222222222222222222222 4 Directors The names of the directors of the Company at 17th June, 2015 are shown on page 5. All of the directors served throughout the year other. In accordance with the Articles of Association Nicholas Bell retires by rotation and, being eligible, offers himself for re-election. In addition, Roger Lane-Smith, David Pyle and David Hansell retire from the Board at the AGM and, being eligible, offer themselves for re-election. The Chairman confirms that Nicholas Bell, Roger Lane- Smith, David Pyle and David Hansell continue to be effective and to demonstrate commitment to their roles, including the commitment of their time for the Board and Committee meetings and their other duties. 222222222222222222222222222222222222222222222222 5 Substantial interests in shares As at 2nd May and as at 17th June, 2015, the directors had been advised of the following notifiable interests: Michael Bell Cavendish Asset Management Limited David Pyle Michael O’Connell Mrs Patricia Snipe % of share capital held 28.9% 16.2% 11.0% 9.1% 4.9% Apart from these, the directors have not been formally notified of any other notifiable shareholdings in excess of 3% of share capital held on 17th June, 2015. 222222222222222222222222222222222222222222222222 6 Employee involvement The directors have continued their commitment to the development of employee involvement and communication throughout the Group. Regular meetings are held with employees to provide and discuss information of concern to them as employees, including financial and economic factors affecting the performance of the Company in which they are employed. 222222222222222222222222222222222222222222222222 42 4046 - MSI R+A 003_003 18/06/2015 15:23 Page 43 M S I N T E R N A T I O N A L p l c Report of the directors Continued 7 Employment of disabled persons The Company and its subsidiaries have continued the policy regarding the employment of disabled persons. Full and fair consideration is given to applications for employment made by disabled persons having regard to their particular aptitudes and abilities. Appropriate training is arranged for disabled persons, including retraining for alternative work of employees who may become disabled, to promote their career development within the organisation. 222222222222222222222222222222222222222222222222 8 Additional information for shareholders The Company purchased 1,000,000 of its Ordinary shares of 10p each for a total consideration of £1,721,976 on 11th December, 2013 and a further 646,334 Ordinary shares of 10p each for a total consideration of £1,237,251 on 30th January, 2014. The following provides the additional information required for shareholders as a result of the implementation of the Takeover Directive into UK Law. At 17th June, 2015 the Company’s issued share capital comprised: Ordinary shares of 10p each Ordinary shares of 10p each held in treasury Ordinary shares of 10p each not held in treasury Number 18,396,073 1,646,334 16,749,739 £000 1,840 165 1,675 % of total share capital 100.00 8.95 91.05 The above figure (16,749,739 ordinary shares of 10p) is the number of ordinary shares to be used as a denominator for the calculation of a shareholder’s interest for the determination of any notification requirement in respect of their interest(s) or change of interest(s). The Company is not aware of any agreements between shareholders that may result in restrictions on the transfer of securities and for voting rights. Ordinary shares On a show of hands at a general meeting of the Company every holder of ordinary shares present in person and entitled to vote shall have one vote and on a poll, every member present in person or by proxy and entitled to vote shall have one vote for every ordinary share held. The notice of the general meeting specifies deadlines for exercising voting rights either by proxy notice or present in person or by proxy in relation to resolutions to be passed at general meeting. All proxy votes are counted and the numbers for, against or withheld in relation to each resolution are announced at the Annual General Meeting. There are no restrictions on the transfer of ordinary shares in the Company other than: l l Certain restrictions may from time to time be imposed by laws and regulations (for example, insider trading laws and market requirements relating to close periods); and; Pursuant to the Listing Rules of the Financial Services Authority whereby certain employees of the Company require the approval of the Company to deal in the Company’s securities. The Company’s articles of association may only be amended by a special resolution at a general meeting of the shareholders. Directors are reappointed by ordinary resolution at a general meeting of the shareholders. The Board can appoint a director but anyone so appointed must be elected by an ordinary resolution at the next general meeting. Any director, other than the Chairman, who has held office for more than three years since their last appointment must offer themselves up for re-election at the annual general meeting. Company share schemes The Employee Share Ownership Trust holds 1.46% of the issued share capital of the Company (excluding treasury shares) in trust for the benefit of employees of the Group and their dependants. The voting rights in relation to these shares are exercised by the trustee. 43 4046 - MSI R+A 003_003 18/06/2015 15:23 Page 44 M S I N T E R N A T I O N A L p l c Report of the directors Continued 8 Additional information for shareholders (continued) Change of control The Company is not party to any agreements which take effect, alter or terminate upon a change of control of the Company following a takeover bid. There are no agreements between the Company and its directors or employees providing for compensation for loss of office or employment (whether through resignation, purported redundancy or otherwise) that occurs because of a takeover bid. 222222222222222222222222222222222222222222222222 9 Special business at the Annual General Meeting Resolution 10: Authority to allot shares Generally, the directors may only allot shares in the Company (or grant rights to subscribe for, or to convert any security into, shares in the Company) if they have been authorised to do so by shareholders in general meeting. Resolution 10 renews a similar authority given at last year’s AGM and, if passed, will authorise the directors to allot shares in the Company (and to grant such rights) up to an aggregate nominal amount of £558,324 (which represents approximately one third of the issued ordinary share capital of the Company (excluding treasury shares) as at 17th June, 2015, being the last practicable date before the publication of this document). If given, this authority will expire at the conclusion of the Company’s next AGM or on 17th October, 2016 (whichever is earlier). It is the directors’ intention to renew this authority each year. As of the date of this document, 1,646,334 Ordinary shares are held by the Company in treasury representing 8.95% of the issued Ordinary share capital of the Company as at 24th June, 2015, being the last practicable date before the publication of this document. The directors have no current intention to exercise the authority sought under resolution 10. Resolution 11: Disapplication of pre emption rights Generally, if the directors wish to allot new shares or other equity securities (within the meaning of section 560 of the 2006 Act) for cash or sell shares for cash, then under the Act they must first offer such shares or securities to shareholders in proportion to their existing holdings. These statutory pre emption rights may be disapplied by shareholders. Resolution 11, which will be proposed as a special resolution, renews a similar power given at last year’s AGM and, if passed, will enable the directors to allot equity securities for cash, or sell treasury shares for cash, up to a maximum aggregate nominal amount of £83,748 without having to comply with statutory pre emption rights, but this power will be limited to allotments or sales. (a) (b) in connection with a rights issue, open offer or other pre emptive offer to ordinary shareholders and to holders of other equity securities (if required by the rights of those securities or the directors otherwise consider necessary), but (in accordance with normal practice) subject to such exclusions or other arrangements, such as for fractional entitlements and overseas shareholders, as the directors consider necessary; in any other case, up to an aggregate nominal amount of £83,748 (which represents approximately five per cent of the issued ordinary share capital of the Company (excluding treasury shares) as at 24th June, 2015 being the last practicable date before the publication of this document). If given, this power will expire at the conclusion of the Company’s next AGM or on 17th October, 2016 (whichever is the earlier). It is the directors’ intention to renew this power each year. Resolution 12: Purchase by the Company of its own shares Resolution 12, which will be proposed as a special resolution renews a similar authority given at last year’s AGM. If passed, it will allow the Company to purchase up to 1,674,973 ordinary shares in the market (which represents approximately 10% of the issued ordinary share capital of the Company (excluding treasury shares) as at 24th June, 2014, being the last practicable date before the publication of this document). The minimum and maximum prices for such a purchase are set out in the resolution. If given, this authority will expire at the conclusion of the Company’s next AGM or on 17th October, 2016 (whichever is earlier). It is the directors’ intention to renew this authority each year. The directors have no current intention to exercise the authority sought under resolution 12 to make market purchases. 44 4046 - MSI R+A 003_003 18/06/2015 15:23 Page 45 M S I N T E R N A T I O N A L p l c Report of the directors Continued 9 Special business at the Annual General Meeting (continued) The Company is permitted to hold shares in treasury as an alternative to cancelling them. Shares held in treasury may be subsequently cancelled, or sold for cash or used to satisfy options under the Company’s share schemes. While held in treasury, the shares are not entitled to receive any dividends or dividend equivalents (apart form any issue of bonus shares) and have no voting rights. The directors believe it is appropriate for the Company to have the option to hold its own shares in treasury, if, at a future date, the directors exercise this authority in order to provide the Company with additional flexibility in the management of its capital base. The directors will have regard to institutional shareholder guidelines which may be in force at the time of such purchase, holding or re-sale of shares held in treasury. As at 17th June, 2015, the Company holds 1,646,334 Ordinary shares of 10p each in treasury which represents 8.95% of the total number of Ordinary shares of 10p each issued. Resolution 13: Notice period for general meetings Resolution 13 will be proposed as a special resolution to allow the Company to call general meetings (other than an AGM) on 14 clear days’ notice. Changes made to the 2006 Act by the Companies (Shareholders’ Rights) Regulations 2009 increase the notice period required for general meetings of the Company to 21 days unless shareholders approve a shorter notice period, which cannot however be less than 14 clear days. AGMs will continue to be held on at least 21 clear days’ notice. Before the Regulations came into force, the Company was able to call general meetings other than an AGM on 14 clear days’ notice without obtaining shareholder approval. Resolution 11 seeks such approval in order to preserve this flexibility. The shorter notice period would not however be used as a matter of routine for such meetings, but only where it is merited by the business of the meeting and is considered to be in the interests of shareholders as a whole. If given, the approval will be effective until the Company’s next annual general meeting, when it is intended that a similar resolution will be proposed. Note that the changes to the 2006 Act mean that, in order to be able to call a general meeting on less than 21 clear days’ notice, the Company must make a means of electronic voting available to all shareholders for that meeting. 222222222222222222222222222222222222222222222222 10 Auditors A resolution to reappoint the auditors, Ernst & Young LLP, will be proposed at the Annual General Meeting. 222222222222222222222222222222222222222222222222 11 Directors’ statement as to disclosure of information to auditors The directors who were members of the board at the time of approving the directors’ report are listed on page 5. Having made enquiries of fellow directors and of the Company’s auditors, each of the directors confirms that: l l to the best of each director’s knowledge and belief, there is no information relevant to the preparation of their report of which the Company’s auditors are unaware; and each director has taken all the steps a director might reasonably be expected to have taken to be aware of relevant audit information and to establish that the Company’s auditors are aware of that information. 222222222222222222222222222222222222222222222222 12 We confirm that to the best of our knowledge: l l the financial statements, prepared in accordance with International Financial Reporting Standards as adopted by the EU, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole; and the business review, together with the Chairman’s statement, includes a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face By order of the Board, David Kirkup Secretary 17th June, 2015 45 4046 - MSI R+A 003_003 18/06/2015 15:23 Page 46 M S I N T E R N A T I O N A L p l c Directors’ remuneration report Information not subject to audit Policy on remuneration of executive directors The Remuneration Committee which, currently, comprises the non-executive directors, Roger Lane-Smith and David Pyle, aims to ensure that remuneration packages and service contracts are competitive and designed to retain, attract and motivate executive directors of the right calibre. The salary for each director is determined by the Remuneration Committee by reference to a range of factors including experience appropriate to the Group, length of service and salary rates for similar jobs in comparative companies. In view of the size and nature of the Group and the continuing need to optimise subordinate management structures particular emphasis is given to the advantages which flow from the long term continuity of the executive directors. All aspects of the executive directors’ current remuneration packages were established in June 1996 when revised contracts of service, embracing reduced notice periods, were agreed. The contracts of service are reviewed from time to time and consideration given to whether any amendment is appropriate. The Remuneration Committee has not sought any external advice during the year. The main components of the remuneration package for the executive directors are as follows: 1. Basic Salary Salaries for executive directors are reviewed annually by the Remuneration Committee. 2. Performance related annual bonus An annual bonus is paid depending on achievement of profitability targets. Bonus payments achieved for 2014/2015 amounted in total to 2.8% (2014 – 11.5%) of total executive basic salaries. 3. Share Options Directors are eligible to participate in the Employee and the Enterprise Management Incentive share option schemes. The Remuneration Committee is responsible for granting options. Options have only been granted at an exercise price of not less than the price paid by the scheme to acquire the shares. Share options are issued without performance criteria and have no vesting period. 4. Until 27th April 2013, pension contributions were calculated as a percentage of total emoluments. From 28th April, 2013, pension contributions will be calculated as a percentage of basic pay and bonus only. The executive directors have full discretion as to how they choose to invest their Pension Contributions. All pension contributions for executive directors over the age of 65 will cease from 30th April, 2015. Other benefits are provided in the form of company cars, death in service benefit cover and medical and 5. disability insurance. Service Contracts As from 28th April, 2013 Michael Bell and Michael O’Connell have one year rolling contracts. As from 22nd July, 2013, Nicholas Bell has a one year rolling contract. The contracts are terminable by the directors at one year’s notice and by the Company at one year’s notice. Directors are entitled to termination payments equivalent to the unexpired portion of the contract based on basic salary and benefits including bonus payments. Prior to 28th April, 2013 Michael Bell had a three-year rolling contract and Michael O’Connell a two year rolling contract. These notice periods were reduced without compensation in April, 2013. Prior to June 1996 each of the executive directors had a four-year rolling contract. These notice periods were reduced without compensation in June 1996. The dates of appointments are shown below: Michael Bell – 9th July, 1980 Michael O’Connell – 4th February, 1985 Nicholas Bell – 22nd July, 2013 Non-executive directors The level of the non-executive directors’ remuneration has been determined by the Board as an annual fee and is paid monthly. There are no formal service contracts between the Company and any of the non-executive directors. 46 4046 - MSI R+A 003_003 18/06/2015 15:23 Page 47 M S I N T E R N A T I O N A L p l c Directors’ remuneration report Continued Information not subject to audit Performance Graph The performance graph shows the accumulated value, by 2nd May, 2015, of £100 invested in MS INTERNATIONAL plc on 28th April, 2010 compared to the accumulated value of £100 invested in the FTSE Small Cap Index, over the same period. The other points plotted are the accumulated values at intervening year ends. The FTSE Small Cap Index is considered by the Board to be the most relevant index for comparison. MS INTERNATIONAL plc versus FTSE Small Cap Index MS INTERNATIONAL plc total shareholder return compared against total return of the FTSE Small Cap Index 250 200 150 100 50 0 02 May 2010 30 April 2011 28 April 2012 27 April 2013 03 May 2014 02 May 2015 MS INTERNATIONAL plc FTSE Small Cap ) % ( n r u t e R r e d o h e r a h S l l a t o T Information subject to audit Emoluments of directors Directors’ remuneration in respect of the period to 2nd May, 2015 2015 2014 2015 2014 2015 2014 Basic salary Basic salary and fees £ 2015 Other benefits £ 2014 Other benefits £ 400,000 400,000 Bonus £ Bonus £ and fees £ Total £ 222222222222222222222222222222222222222222222222 Michael Bell 527,121 73,175 222222222222222222222222222222222222222222222222 Michael O'Connell 284,169 39,493 222222222222222222222222222222222222222222222222 Nicholas Bell 142,753 18,693 222222222222222222222222222222222222222222222222 David Pyle 117,246 21,173 222222222222222222222222222222222222222222222222 – David Hansell 222222222222222222222222222222222222222222222222 Roger Lane-Smith 40,000 222222222222222222222222222222222222222222222222 Total £ 484,811 224,511 270,311 225,000 200,000 225,000 100,000 117,115 40,000 71,173 50,000 40,000 50,000 50,000 11,636 82,293 44,828 36,755 17,379 22,414 17,246 40,000 5,818 5,818 8,259 – – – – – – – – – – – Other benefits represent the provision of company cars, death in service benefit and medical and disability insurance Pension contributions 2015 Total £ 2014 Total £ Michael Bell 133,448 222222222222222222222222222222222222222222222222 Michael O’Connell 74,224 222222222222222222222222222222222222222222222222 Nicholas Bell 20,174 222222222222222222222222222222222222222222222222 David Pyle – 222222222222222222222222222222222222222222222222 Roger Lane-Smith – 222222222222222222222222222222222222222222222222 David Hansell – 222222222222222222222222222222222222222222222222 30,873 34,623 61,745 – – – The pension contributions are paid to personal retirement benefit schemes. 47 4046 - MSI R+A 003_003 18/06/2015 15:23 Page 48 M S I N T E R N A T I O N A L p l c Directors’ remuneration report Continued Information not subject to audit Directors’ share options Details of directors' options at 17th June, 2015 and 2nd May, 2015 granted under the Enterprise Management Incentive scheme are set out below. The directors' options were all granted at market price. The market price of the Company's shares at 2nd May, 2015 was 141p and the range during the financial year was 119p to 211.5p. Date Exercise Michael Nicholas Bell price O’Connell David Pyle David Hansell Issued Total 222222222222222222222222222222222222222222222222 Share options at 17th June, 2015 and 2nd May, 2015 exercisable between: 1st October, 2008 to 30th September, 2017 214,000 222222222222222222222222222222222222222222222222 1st October, 2007 194.0p 75,000 32,000 32,000 75,000 By order of the Board, David Kirkup Secretary 17th June, 2015 48 4046 - MSI R+A 003_003 18/06/2015 15:23 Page 49 M S I N T E R N A T I O N A L p l c Principal operating subsidiaries MSI-Defence Systems Ltd. MSI-Forks Ltd. MSI-Forks Inc. MSI-Forks Garfos Industriais Ltda. MSI-Quality Forgings Ltd. Global-MSI plc Global-MSI Sp. z o.o. Petrol Sign B.V. Salhouse Road, Norwich, NR7 9AY England Balby Carr Bank, Doncaster, DN4 8DH England Design, manufacture and service of defence equipment. Manufacture of fork-arms for the fork lift truck, construction, agricultural and quarrying equipment industries. 280 Mount Gallant Road, Manufacture of fork-arms for the fork lift truck, Rock Hill SC 29730 USA construction, agricultural and quarrying equipment industries. Rua Professor Campos de Oliveira, 310 São Paulo Brazil Balby Carr Bank, Doncaster, DN4 8DH England Balby Carr Bank, Doncaster, DN4 8DH England Ul. Działowskiego 13, 30-339 Krakow Poland Manufacture of fork-arms for the fork lift truck, construction, agricultural and quarrying equipment industries. Manufacture of open die forgings. Design, manufacture and construction of petrol station superstructures. Design, manufacture and construction of petrol station superstructures. De Hoef 8 5311 GH Gameren The Netherlands Design, restyling, production and installation of the complete appearance of petrol station superstructures and forecourt. NOTES 1. 2. 100% of the equity is held in all cases. All companies are registered in England and Wales with the exception of MSI-Forks Inc. which is registered in America, MSI-Forks Garfos Industriais Ltda which is registered in Brazil, Global-MSI Sp. z o.o. which is registered in Poland and Petrol Sign B.V. which is registered in The Netherlands. All companies operate principally in the United Kingdom except for MSI-Forks Inc., MSI-Forks Garfos Industriais Ltda (which operate principally in the Americas), Global-MSI Sp. z o.o. (which operates in Poland and Eastern Europe) and Petrol Sign B.V. (which operates in The Netherlands and Western Europe). All companies, apart from Petrol Sign B.V., (see note 31) have been included in the Group consolidated accounts. 49 4046 - MSI R+A 003_003 18/06/2015 15:23 Page 50 M S I N T E R N A T I O N A L p l c Notice of Annual General Meeting Notice is given that the fifty fifth annual general meeting of MS INTERNATIONAL plc (“Company”) will be held at The Holiday Inn, Warmsworth, Doncaster on 17th July, 2015 at 12 noon to consider and, if thought fit, to pass the following resolutions. Resolutions 1 to 10 will be proposed as ordinary resolutions and resolutions 11 to 13 will be proposed as special resolutions: As ordinary business: 1. 2. 3. 4. 5. 6. 7. 8. 9. To receive the Company’s annual accounts and directors’ and auditors’ reports for the 52 weeks ended 2nd May, 2015. To approve the directors’ remuneration report for the 52 weeks ended 2nd May, 2015. To declare a final dividend for the year 52 weeks ended 2nd May, 2015 of 6.5p per ordinary share of 10p each in the capital of the Company, to be paid on 24th July, 2015 to shareholders whose names appear on the registered as at close of business on 26th June, 2015. To re-elect as a director of the Company, Nicholas Bell, a director retiring by rotation. Nicholas Bell is aged 41 years old and joined the Company in 1999, becoming a director in 2013. To reappoint as a non-executive director of the Company, Roger Lane-Smith who was appointed as a director on 21st January, 1983. He is a non-executive director of Dolphin Capital Investors, Timpson Group plc, Lomond Capital Partners and a number of other private companies. He is also a Senior Consultant at DLA Piper UK LLP. To reappoint as a non-executive director of the Company David Pyle, who was appointed as an executive director in 1980, David joined the Company in 1968 and stepped down as company secretary and executive director on 27th April, 2013. To reappoint as a non-executive director of the Company, David Hansell, who was appointed to the Board as a director on 3rd June, 2014. David joined the Company in 1962 becoming a director in 2014. To reappoint Ernst & Young LLP as auditors of the Company. To authorise the directors to determine the remuneration of the auditors. As special business: 10. 11. That, pursuant to section 551 of the Companies Act 2006 (“2006 Act”), the directors be and are generally and unconditionally authorised to exercise all powers of the Company to allot shares in the Company or to grant rights to subscribe for or to convert any security into shares in the Company up to an aggregate nominal amount of £558,324 provided that (unless previously revoked, varied or renewed) this authority shall expire at the conclusion of the next annual general meeting of the Company after the passing of this resolution or on 17th October, 2016 (whichever is the earlier), save that the Company may make an offer or agreement before this authority expires which would or might require shares to be allotted or rights to subscribe for or to convert any security into shares to be granted after this authority expires and the directors may allot shares or grant such rights pursuant to any such offer or agreement as if this authority had not expired. This authority is in substitution for all existing authorities under section 551 of the Companies Act 2006 (which, to the extent unused at the date of this resolution, are revoked with immediate effect). That, subject to the passing of resolution 11 and pursuant to sections 570 and 573 of the Companies Act 2006 (“2006 Act”), the directors be and are generally empowered to allot equity securities (within the meaning of section 560 of the 2006 Act) for cash pursuant to the authority granted by resolution 11 and to sell Ordinary shares held by the Company as treasury shares for cash as if section 561(1) of the 2006 Act did not apply to any such allotment or sale, provided that this power shall be limited to the allotment of equity securities or sale of treasury shares: 11.1 in connection with an offer of equity securities (whether by way of a rights issue, open offer or otherwise): 11.1.1 to holders of Ordinary shares in the capital of the Company in proportion (as nearly as practicable) to the respective numbers of Ordinary shares held by them; and 11.1.2 to holders of other equity securities in the capital of the Company, as required by the rights of those securities or, subject to such rights, as the directors otherwise consider necessary; but subject to such exclusions or other arrangements as the directors may deem necessary or expedient in relation to treasury shares, fractional entitlements, record dates or any legal or 50 4046 - MSI R+A 003_003 18/06/2015 15:23 Page 51 M S I N T E R N A T I O N A L p l c Notice of Annual General Meeting Continued practical problems under the laws of any territory or the requirements of any regulatory body or stock exchange; and 11.2 otherwise than pursuant to paragraph 12.1 of this resolution, up to an aggregate nominal amount of £167,496; and (unless previously revoked, varied or renewed) this power shall expire at the conclusion of the next annual general meeting of the Company after the passing of this resolution or on 17th October, 2016 (whichever is the earlier), save that the Company may make an offer or agreement before this power expires which would or might require equity securities to be allotted or treasury shares to be sold for cash after this power expires and the directors may allot equity securities or sell treasury shares for cash pursuant to any such offer or agreement as if this power had not expired. This power is in substitution for all existing powers under section 570 and 573 of the Companies Act 2006 (which, to the extent unused at the date of this resolution, are revoked with immediate effect). 12. That, pursuant to section 701 of the Companies Act 2006 (“2006 Act”), the Company be and is generally and unconditionally authorised to make market purchases (within the meaning of section 693(4) of the 2006 Act) of Ordinary shares of £0.10 each in the capital of the Company (“Shares”), provided that: (a) (b) (c) the maximum aggregate number of Shares which may be purchased is 1,674,973; the minimum price (excluding expenses) which may be paid for a Share is £0.10; the maximum price (excluding expenses) which may be paid for a Share is the higher of: (i) (ii) an amount equal to 105% of the average of the middle market quotations for a Share as derived from the Daily Official List of the London Stock Exchange plc for the five business days immediately preceding the day on which the purchase is made; and an amount equal to the higher of the price of the last independent trade of a Share and the highest current independent bid for a Share on the trading venue where the purchase is carried out, and (unless previously revoked, varied or renewed) this authority shall expire at the conclusion of the next annual general meeting of the Company after the passing of this resolution or on 17th October, 2016 (whichever is the earlier), save that the Company may enter into a contract to purchase Shares before this authority expires under which such purchase will or may be completed or executed wholly or partly after this authority expires and may make a purchase of Shares pursuant to any such contract as if this authority had not expired. 13. That a general meeting of the Company (other than an annual general meeting) may be called on not less than 14 clear days’ notice. By Order of the Board ……………………………………… David Kirkup Secretary 17th June, 2015 Registered office: Balby Carr Bank Doncaster DN4 8DH Registered in England and Wales No. 653735 51 4046 - MSI R+A 003_003 18/06/2015 15:23 Page 52 M S I N T E R N A T I O N A L p l c Notice of Annual General Meeting Continued Notes Entitlement to attend and vote 1. The right to vote at the meeting is determined by reference to the register of members. Only those shareholders registered in the register of members of the Company as at 6 p.m. on 15th July, 2015 (or, if the meeting is adjourned, no later than two days prior to any adjourned meeting) shall be entitled to attend and vote at the meeting in respect of the number of shares registered in their name at that time. Changes to entries in the register of members after that time shall be disregarded in determining the rights of any person to attend or vote (and the number of votes they may cast) at the meeting. Proxies 2. A shareholder is entitled to appoint another person as his or her proxy to exercise all or any of his or her rights to attend and to speak and vote at the meeting. A proxy need not be a member of the Company. 3. 4. A shareholder may appoint more than one proxy in relation to the meeting, provided that each proxy is appointed to exercise the rights attached to a different share or shares held by that shareholder. Failure to specify the number of shares each proxy appointment relates to or specifying a number which when taken together with the numbers of shares set out in the other proxy appointments is in excess of the number of shares held by the shareholder may result in the proxy appointment being invalid. A proxy may only be appointed in accordance with the procedures set out in notes 3 to 4 and the notes to the proxy form. The appointment of a proxy will not preclude a shareholder from attending and voting in person at the meeting. A form of proxy is enclosed. When appointing more than one proxy, the proxy form may be photocopied. Please indicate the proxy holder’s name and the number of shares in relation to which they are authorised to act as your proxy (which, in aggregate, should not exceed the number of shares held by you). Please also indicate if the proxy instruction is one of multiple instructions being given. All forms must be signed and should be returned together in the same envelope. To be valid, a proxy form must be received by post or (during normal business hours only) by hand at the offices of the Company’s registrar, Capita Asset Services, PXS, 34 Beckenham Road, Kent, BR3 4TU, no later than 12 noon on 15th July, 2015 (or, if the meeting is adjourned, no later than 48 hours before the time of any adjourned meeting). CREST members who wish to appoint a proxy or proxies for the meeting (or any adjournment of it) through the CREST electronic proxy appointment service may do so by using the procedures described in the CREST Manual. 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 or instruction made using the CREST service to be valid, the appropriate CREST message (a “CREST Proxy Instruction”) must be properly authenticated in accordance with Euroclear UK & Ireland Limited’s specifications and must contain the information required for such instructions, as described in the CREST Manual. The message, regardless of whether it constitutes the appointment of a proxy or is an amendment to the instruction given to a previously appointed proxy, must, in order to be valid, be transmitted so as to be received by Capita Asset Services (ID RA10) no later than 12 noon on 15th July, 2015 (or, if the meeting is adjourned, no later than 48 hours before the time of any adjourned meeting). For this purpose, the time of receipt will be taken to be the time (as determined by the timestamp applied to the message by the CREST Applications Host) from which Capita Registrars is able to retrieve the message by enquiry to CREST in the manner prescribed by CREST. After this time, any change of instructions to proxies appointed through CREST should be communicated to the appointee through other means. 52 4046 - MSI R+A 003_003 18/06/2015 15:23 Page 53 M S I N T E R N A T I O N A L p l c Notice of Annual General Meeting Continued CREST members and, where applicable, their CREST sponsors or voting service providers should note that Euroclear UK & Ireland Limited 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 the CREST member is a CREST personal member or sponsored member or has appointed a voting service provider(s), to procure that his or her 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 a CREST Proxy Instruction as invalid in the circumstances set out in Regulation 35(5)(a) of the Uncertificated Securities Regulations 2001. Corporate representatives 5. A shareholder which is a corporation may authorise one or more persons to act as its representative(s) at the meeting. Each such representative may exercise (on behalf of the corporation) the same powers as the corporation could exercise if it were an individual shareholder, provided that (where there is more than one representative and the vote is otherwise than on a show of hands) they do not do so in relation to the same shares. Total voting rights 6. As at 24th June, 2015 (being the last practicable date before the publication of this notice), the Company’s issued share capital consists of 18,396,073 Ordinary shares of 10p each, carrying one vote each. The Company holds 1,646,334 Ordinary shares in treasury. Therefore, the total voting rights in the Company as at 24th June, 2015 are 16,749,739. Nominated Persons 7. Where a copy of this notice is being received by a person who has been nominated to enjoy information rights under section 146 of the Companies Act 2006 (“2006 Act”) (“Nominated Person”): (a) (b) the Nominated Person may have a right under an agreement between him/her and the shareholder by whom he/she was nominated, to be appointed, or to have someone else appointed, as a proxy for the meeting; or if the Nominated Person has no such right or does not wish to exercise such right, he/she may have a right under such an agreement to give instructions to the shareholder as to the exercise of voting rights. The statement of the rights of shareholders in relation to the appointment of proxies in notes 2 to 4 does not apply to a Nominated Person. The rights described in such notes can only be exercised by shareholders of the Company. Questions at the meeting 8. Shareholders have the right to ask questions at the meeting relating to the business being dealt with at the meeting in accordance with section 319A of the 2006 Act. The Company must answer any such question unless: (a) disclosure of confidential information; or to do so would interfere unduly with the preparation for the meeting or would involve the (b) be answered. it is undesirable in the interests of the Company or the good order of the meeting that the question 53 4046 - MSI R+A 003_003 18/06/2015 15:23 Page 54 M S I N T E R N A T I O N A L p l c Documents available for inspection 9. The following documents will be available for inspection during normal business hours at the registered office of the Company from the date of this notice until the time of the meeting. They will also be available for inspection at the place of the meeting from at least 15 minutes before the meeting until it ends. (a) (b) Copies of the service contracts of the executive directors; and Particulars of transactions of directors in the shares of the Company. Biographical details of directors 10. Biographical details of all those directors who are offering themselves for reappointment at the meeting are set out in the Notice. 11. Dividend Warrants Dividend warrants will be posted on 23th July, 2015 to those members registered on the books of the Company on 26th June, 2015. 54 4046 - MSI R+A 003_003 18/06/2015 15:23 Page 55 M S I N T E R N A T I O N A L p l c 55 4046 - MSI R+A 003_003 18/06/2015 15:23 Page 56 M S I N T E R N A T I O N A L p l c 56 

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