MS INTERNATIONAL plc
Annual Report 2018
Company Registration Number 00653735
Contents
The year in brief
Chairman’s Statement
Directors
Advisors
Strategic report
Statement of directors’ responsibilities
Independent report of the auditors
Consolidated income statement
Consolidated and company statement of comprehensive income
Consolidated and company statement of changes in equity
Consolidated and company statements of financial position
Consolidated and company cash flow statements
Notes to the financial statements
Summary of Group results 2014 - 2018
Corporate governance statement
Report of the directors
Directors’ remuneration report
List of subsidiaries
Notice of Annual General Meeting
1
2
3
4
5
6
7
8
15
15
16
17
18
19
49
50
52
57
60
62
The year in brief
Revenue
Profit before taxation
Earnings per share
Dividends payable per share
2018
Total
£000
2017
Total
£000
68,085
53,823
4,039
1,526
20.5p
9.1p
8.25p
8.00p
2
Chairman’s Statement
Results and Review
For the year ending 28th April 2018, profit before taxation increased to £4.04m (2017 - £1.53m) on revenue of
£68.09m (2017 - £53.82m). Earnings per share amounted to 20.5p (2017 - 9.1p). Net cash was stable at £15.87m (2017 -
£15.21m).
In last November’s half year statement, reference was made to our Company’s two fundamental strengths. First,
our long established policy to constantly review our capabilities, and if necessary adjust and adapt. This serves us well
by ensuring we are aligned to changing market conditions and demands. Second, our diversified operating structure can
deliver significant advantages when trading conditions are varied across totally different sectors.
During the year, those two strengths have been clearly demonstrated and indeed amplified. The ‘Defence’
division has made a good start towards a recovery in revenue and certainly in profitably as a result of a buoyant export
market, although the domestic market remains restrained and subdued. ‘Forgings’ increased revenue and is breaking
even at the trading level while losses, incurred as a consequence of developing the new manufacturing facility in the
United States, are again reduced. ‘Petrol Station Superstructures’ and ‘Petrol Station Branding’ divisions both traded in
a significantly changing international market, though they are at quite differing phases within this process of change.
Export sales at ‘Defence’ accounted for the major component of the division’s revenue, primarily in response
to numerous new product offerings, the accumulating benefit of considerable investment in research and development
over recent years and our success in demonstrating continually enhanced customer service and support. The domestic
market, by comparison, has remained constrained by the UK’s tight budget controls which result in inevitable delays to
programmes and, in consequence, a market that lacks any reasonable element of clarity.
‘Forgings’ experienced a significant increase in revenue over the previous year, partly reflecting the first phase of
full production from our new facility in the United States. Our plants in the UK and Brazil continue to hold good market
positions, reflecting a total commitment to enhancing efficient production, product quality and customer service.
‘Petrol Station Superstructures’ experienced a check to its growth pattern owing to a notable change in the market
it principally serves. Until relatively recently, many of the division’s major customers had been global oil companies but
they have accelerated the divestment of their company owned petrol filling station estates, with ownership passing to
both large and small independent dealer/retailers. Accordingly, construction of new sites and the refurbishment and
expansion of existing facilities are passing through a state of limbo as numerous sale and purchase transactions continue
to dominate the attention of the sector’s active participants.
‘Petrol Station Branding’ market, by comparison, is perceived to be further advanced in this process of
transformation. When ownership of stations changes the incumbent fuel supplier may also be changed and that in turn
initiates rebranding of the station. The operational performance of this division is adjusting to the changing market
which was lead initially by Germany, then The Netherlands and is now happening in the UK.
Throughout the period, the Company has preserved its established high level of investment across the
businesses. This is a multi-faceted approach. A key feature is sustaining our creative and innovative product development
programmes across the Group, which also results in us owning, unquestionably, the intellectual property rights of
products we develop, particularly important in the defence sector. We also relentlessly strive to improve customer service
and support and upgrade plant and equipment as appropriate to ensure we remain at the forefront of manufacturing
capability and efficiency. No less important is our investment in personnel, particularly with regard to retaining and
recruiting top quality engineers, commercial staff, plus national and international marketeers, together with focused
training and development to enhance their potential.
Outlook
We perceive that, with a sustained measure of prudence, we are continuing to move the business forward on an
upward trajectory and are well positioned to support and develop opportunities for the Group.
All matters considered the Board recommends the payment of a maintained final dividend of 6.5p per share
making the total for the year of 8.25p (2017-8p). The final dividend is expected to be paid on 24th July 2018 to those
shareholders on the register at the close of business on 22nd June 2018.
Michael Bell
5th June 2018
3
Directors
Directors
Executive
Michael Bell ARICS (Executive Chairman)
Michael O¯Connell FCA (Finance)
Nicholas Bell
Non-executive
Roger Lane-Smith - Age 72
Appointed as a director on 21st January, 1983. He is a non-executive director of Timpson Group plc,
Appointed as a director on 21st January, 1983. He is a non-executive director of Timpson Group plc,
Lomond Capital Partners, Mostyn Estates Limited and a number of other private companies. He is
Lomond Capital Partners, Mostyn Estates Limited and a number of other private companies. He is also a
also a Senior Consultant at DLA Pi er UK LLP.
Senior Consultant at DLA Piper UK LLP.
David Pyle - Age 72
David Pyle - Age 72
Appointed an executived irectoro n9 th July, 1980. Hes tepped downa sa n executived irectoro n 27th
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.
April, 2013 and was appointed a non-executive director.
David Hansell - Age 72
David Hansell - Age 72
Appointed a non executive director on 3rd June, 2014. David has been with MS INTERNATIONAL
Appointed a non executived irectoro n3 rd June, 2014. David has been with MS INTERNATIONAL
plc, working at MSI-Defence Systems Ltd since 1962, becoming managing director in 2002.
plc, working at MSI-Defence Systems Ltd since 1962, becoming managing director in 2002.
Company Secretary
David Kirkup FCA
Registered Office
Balby Carr Bank
Doncaster
DN4 8DH
England
Company Registration Number 00653735
4
Advisors
Advisors
Independent Auditors
Independent Auditors
Ernst & Young LLP
Ernst & Young LLP
Citygate
Citygate
St James' Boulevard
St James' Boulevard
Newcastle
Newcastle
NE1 4JD
NE1 4JD
Registrars and Transfer Office
Registrars and Transfer Office
Capita Registrars
Link Asset Services
Capita Registrars
The Registry
The Registry
34 Beckenham Road
34 Beckenham Road
Beckenham
Beckenham
Kent
Kent
BR3 4TU
BR3 4TU
Solicitors
Solicitors
DLA Piper UK LLP
DLA Piper UK LLP
1 St. Peter's Square
1 St. Peter's Square
Manchester
Manchester
M2 3DE
M2 3DE
Nominated Advisors
Nominated Advisors
Shore Capital & Corporate Limited
Shore Capital & Corporate Limited
Bond Street House
Bond Street House
14 Clifford Street
14 Clifford Street
London
London
W15 4JU
W15 4JU
Brokers
Brokers
Shore Capital & Corporate Limited
Shore Capital & Corporate Limited
Bond Street House
Bond Street House
14 Clifford Street
14 Clifford Street
London
London
W15 4JU
W15 4JU
Bankers
Bankers
Lloyds Bank
Lloyds Bank
First Floor
First Floor
14 Church Street
14 Church Street
Sheffield
Sheffield
S1 1HP
S1 1HP
5
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 28th April, 2018 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.
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.
The referendum on the UK’s membership of the EU increases economic and operational uncertainty.
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.
Key performance indicators
Revenue
Profit before taxation
Earnings per share
2018
£000
68,085
4,039
20.5p
2017
£000
53,823
1,526
9.1p
Change
%
26.5
164.7
125.3
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
5th June, 2018
6
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 AIM rules, the directors are required to prepare Group financial
statements under IFRSs as adopted by the European Union, and the directors’ have elected to prepare 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:
•
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;
• 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. 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 maintenance and integrity of the MS INTERNATIONAL plc website is the responsibily of the directors.
7
Independent auditor’s report to the members of MS INTERNATIONAL plc
Opinion
In our opinion:
• MS INTERNATIONAL plc’s group financial statements and parent company financial statements (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 28 April 2018 and of the group’s profit for the year then ended;
•
the group financial statements have been properly prepared in accordance with IFRSs as adopted by the
European Union;
•
•
Group
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;
and
the financial statements have been prepared in accordance with the requirements of the Companies Act
2006.
We have audited the financial statements of which comprise:
Parent company
Consolidated income statement for the 52 weeks ended
28 April 2018
Consolidated statement of comprehensive income for
the 52 weeks ended 28 April 2018
Statement of comprehensive income for the 52 weeks
ended 28 April 2018
Consolidated statement of changes in equity for the 52
weeks ended 28 April 2018
Statement of changes in equity for the 52 weeks
ended 28 April 2018
Consolidated statement of financial position as at 28
April 2018
Statement of financial position as at 28 April 2018
Consolidated statement of cash flows for the 52 weeks
ended 28 April 2018
Statement of cash flows for the 52 weeks ended 28
April 2018
Related notes 1 to 29 to the financial statements,
including a summary of significant accounting policies
Related notes 1 to 29 to the financial statements
including a summary of significant accounting
policies
The financial reporting framework that has been applied in their preparation is applicable law and
International Financial Reporting Standards (IFRSs) as adopted by the European Union and, as regards to the
parent company financial statements, as applied in accordance with the provisions of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and
applicable law. Our responsibilities under those standards are further described in the Auditor’s responsibilities
for the audit of the financial statements section of our report below. We are independent of the group and parent
company in accordance with the ethical requirements that are relevant to our audit of the financial statements in
the UK, including the FRC’s Ethical Standard as applied to listed entities, and we have fulfilled our other ethical
responsibilities in accordance with these requirements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
opinion.
8
Independent auditor’s report to the members of MS INTERNATIONAL plc
Continued
Conclusions relating to going concern
• We have nothing to report in respect of the following matters in relation to which the ISAs (UK) require
us to report to you where:
the directors’ use of the going concern basis of accounting in the preparation of the financial statements
is not appropriate; or
•
the directors have not disclosed in the financial statements any identified material uncertainties that
may cast significant doubt about the group’s or the parent company’s ability to continue to adopt the
going concern basis of accounting for a period of at least twelve months from the date when the
financial statements are authorised for issue.
Overview of our audit approach
Key audit matters
Audit scope
Materiality
Key audit matters
• Revenue recognition – cut off.
• Revenue recognition – contracts (Defence and Petrol
Station Superstructures divisions).
• We performed an audit of the complete financial
information of 5 components and audit procedures on
specific balances for a further 2 components.
• The components where we performed full or specific
audit procedures accounted for 88% of Gross Margin,
93% of Revenue and 98% of Total Assets.
• Overall group materiality of £378k (2017: £299k)
which represents 2% (2017: 2%) of Gross Margin.
Key audit matters are those matters that, in our professional judgment, were of most significance in
our audit of the financial statements of the current period and include the most significant assessed risks of
material misstatement (whether or not due to fraud) that we identified. These matters included those which had
the greatest effect on: the overall audit strategy, the allocation of resources in the audit; and directing the efforts
of the engagement team. These matters were addressed in the context of our audit of the financial statements as
a whole, and in our opinion thereon, and we do not provide a separate opinion on these matters.
Risk
Our response to the risk
Revenue recognition – cut off
(£68m, PY: £54m)
• We performed walkthroughs to understand the key processes
and identify key controls.
Refer to Accounting
policies; and Note 3 of the
Consolidated Financial
Statements
• We performed procedures using EY bespoke data analytics
tools to test the appropriateness of journal entries recorded
in the general ledger by correlating sales postings with cash
receipts (except Defence and Petrol Station Superstructures,
see contract risk below).
Key observations
communicated to
the Audit Committee
Based on
our audit
procedures we
have concluded
that revenue is
appropriately
recognised, and
that there was
no evidence of
management
bias.
9
Independent auditor’s report to the members of MS INTERNATIONAL plc
Continued
Risk
Our response to the risk
Key observations
communicated to
the Audit Committee
There is potential
for material
misstatement within
revenue, particularly
in relation to revenue
being recorded in the
wrong period, due
to cut off errors or
management bias.
• We tested whether revenue was recorded in the correct period
by testing whether a sample of sales recorded within 2 weeks
either side of the year end had transferred ownership to the
customer.
• We validated any material manual journals to assess for any
evidence of management bias by corroborating to supporting
documentation.
• We tested whether revenue was recorded in the correct period
by testing whether a sample of sales recorded within 2 weeks
either side of the year end had transferred ownership to the
customer.
• We validated any material manual journals to assess for any
evidence of management bias by corroborating to supporting
documentation.
• We assessed the adequacy of the related disclosures in the
Financial Statements.
• We performed full and specific scope audit procedures over
this risk area in 7 locations, which covered 92% of the risk
amount. We also performed review procedures over the
Revenue in 5 locations, which covered 8% of the risk amount.
Revenue recognition
– Contracts (Defence
and Petrol Station
Superstructures
divisions) (£34.1m, PY:
£34.5m)
We have performed the following procedures over this risk area:
• We performed walkthroughs to understand the key processes
and identify key controls.
• We reviewed the accounting policies used in conjunction with
the group policy and International Accounting Standards.
Based on our audit
procedures we have
concluded that
revenue recognition
in relation to
accounting for long
term contracts has
been recognised
appropriately.
Refer to Accounting
policies; and Note 3
of the Consolidated
Financial Statements
• We agreed the key terms of each significant contract to
the agreement and considered the accounting treatment of
progress payments, retentions and point of sale.
• We critically assessed the appropriateness of any key
assumptions or estimates used.
There is potential
for material
misstatement within
revenue, particularly
in relation to
contract margins and
recognition, due to
error or management
bias.
• We performed detailed cut-off testing as described above.
• We validated any material manual journals to assess for any
evidence of management bias by corroborating to supporting
documentation.
• We assessed the adequacy of the related disclosures in the
Financial Statements.
• We performed full and specific scope audit procedures over
this risk area in 2 locations, which covered 100% of the risk
amount.
The above risks are consistent with our approach in the prior year and no changes to our rationale have
been made.
10
Independent auditor’s report to the members of MS INTERNATIONAL plc
Continued
An overview of the scope of our audit
Tailoring the scope
Our assessment of audit risk, our evaluation of materiality and our allocation of performance materiality
determine our audit scope for each entity within the Group. Taken together, this enables us to form an opinion on
the consolidated financial statements. We take into account size, risk profile, the organisation of the group and
effectiveness of group-wide controls, changes in the business environment and other factors such as history of
misstatements identified when assessing the level of work to be performed at each entity.
In assessing the risk of material misstatement to the Group financial statements, and to ensure we had
adequate quantitative coverage of significant accounts in the financial statements, of the 12 reporting components
of the Group, we selected 7 components covering entities within the United Kingdom, USA, Poland and the
Netherlands, which represent the principal business units within the Group.
Of the 7 components selected, we performed an audit of the complete financial information of 5 components
(“full scope components”) which were selected based on their size or risk characteristics. For the remaining 2
components (“specific scope components”), we performed audit procedures on specific accounts within that
component that we considered had the potential for the greatest impact on the significant accounts in the financial
statements either because of the size of these accounts or their risk profile.
The reporting components where we performed audit procedures accounted for 88% (2017: 94%) of the
Group’s Gross Margin, 93% (2017: 95%) of the Group’s Revenue and 98% (2017: 98%) of the Group’s Total Assets.
For the current year, the full scope components contributed 80% (2017: 84%) of the Group’s Gross Margin, 82%
(2017: 82%) of the Group’s Revenue and 86% (2017: 84%) of the Group’s Total Assets. The remaining contribution
relates to the 2 specific scope components. The audit scope of these components may not have included testing of all
significant accounts of the component but will have contributed to the coverage of significant tested for the Group.
We also performed review scope procedures over 5 locations.
Of the remaining 5 components that together represent 12% of the Group’s Gross Margin, none are
individually greater than 5% of the Group’s Gross Margin. For these components, we performed other procedures,
including analytical review, testing of consolidation journals, intercompany eliminations and foreign currency
translation recalculations to respond to any potential risks of material misstatement to the Group financial
statements.
Changes from the prior year
The only change in scoping from prior year is that Petrol Sign Limited is a specific scope component
compared to prior year when this was a review scope component.
Involvement with component teams
All audit work performed for the purposes of the audit was undertaken by the Group audit team.
Our application of materiality
We apply the concept of materiality in planning and performing the audit, in evaluating the effect of
identified misstatements on the audit and in forming our audit opinion.
11
Independent auditor’s report to the members of MS INTERNATIONAL plc
Continued
Materiality
The magnitude of an omission or misstatement that, individually or in the aggregate, could reasonably be
expected to influence the economic decisions of the users of the financial statements. Materiality provides a basis for
determining the nature and extent of our audit procedures.
We determined our initial materiality at the audit planning date, for the Group to be £378k (2017: £299k),
which is based upon 2% (2017: 2%) of Gross Margin. We believe that Gross Margin provides us with a basis for
determining materiality as it is the most relevant performance measure to the stakeholders of the Group.
We determined materiality for the Parent Company to be £189k (2017: £149k), which is 1% (2017: 1%) of
Gross Margin.
During the course of our audit, we reassessed the initial materiality and concluded that it was not necessary
to change the final materiality from our original assessment.
Performance materiality
The application of materiality at the individual account or balance level. It is set at an amount to reduce to
an appropriately low level the probability that the aggregate of uncorrected and undetected misstatements exceeds
materiality.
On the basis of our risk assessments, together with our assessment of the Group’s overall control environment,
our judgement was that performance materiality was 50% (2017: 50%) of our planning materiality, namely £189k
(2017: £149k). We have set performance materiality at this percentage due to prior year misstatements exceeding
25% of materiality which increases the risk of misstatements in the current year.
Audit work at component locations for the purpose of obtaining audit coverage over significant financial
statement accounts is undertaken based on a percentage of total performance materiality. The performance
materiality set for each component is based on the relative scale and risk of the component to the Group as a whole
and our assessment of the risk of misstatement at that component. In the current year, the range of performance
materiality allocated to components was £38k to £189k (2017: £37k to £149k).
Reporting threshold
An amount below which identified misstatements are considered as being clearly trivial.
We agreed with the Audit Committee that we would report to them all uncorrected audit differences in
excess of £19k (2017: £15k), which is set at 5% of planning materiality, as well as differences below that threshold
that, in our view, warranted reporting on qualitative grounds.
We evaluate any uncorrected misstatements against both the quantitative measures of materiality
discussed above and in light of other relevant qualitative considerations in forming our opinion.
Other information
The other information comprises the information included in the annual report, other than the financial
statements and our auditor’s report thereon. The directors are responsible for the other information.
Our opinion on the financial statements does not cover the other information and, except to the extent
otherwise explicitly stated in this report, we do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information
and, in doing so, consider whether the other information is materially inconsistent with the financial statements or
our knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such material
inconsistencies or apparent material misstatements, we are required to determine whether there is a material
misstatement in the financial statements or a material misstatement of the other information. If, based on the
work we have performed, we conclude that there is a material misstatement of the other information, we are
required to report that fact.
We have nothing to report in this regard.
12
Independent auditor’s report to the members of MS INTERNATIONAL plc
Continued
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of the audit:
•
•
the information given in the strategic report and the directors’ report for the financial year for which the
financial statements are prepared is consistent with the financial statements; and
the strategic report and directors’ report have been prepared in accordance with applicable legal
requirements.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the group and the parent company and its environment
obtained in the course of the audit, we have not identified material misstatements in the strategic report or the
directors’ report.
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006
requires us to report to you if, in our opinion:
•
adequate accounting records have not been kept by the parent company, or returns adequate for our
audit have not been received from branches not visited by us; or
•
•
•
the parent company financial statements are not in agreement with the accounting records and returns;
or
certain disclosures of directors’ remuneration specified by law are not made; or
we have not received all the information and explanations we require for our audit
Responsibilities of directors
As explained more fully in the statement of directors’ responsibilities, the directors are responsible for the
preparation of the financial statements and for being satisfied that they give a true and fair view, and for such
internal control as the directors determine is necessary to enable the preparation of financial statements that are
free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the group and parent
company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and
using the going concern basis of accounting unless the directors either intend to liquidate the group or the parent
company or to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are
free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes
our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in
accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise
from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be
expected to influence the economic decisions of users taken on the basis of these financial statements.
A further description of our responsibilities for the audit of the financial statements is located on the
Financial Reporting Council’s website at https://www.frc.org.uk/auditorsresponsibilities. This description forms
part of our auditor’s report.
13
Independent auditor’s report to the members of MS INTERNATIONAL plc
Continued
Use of our report
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of
the Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s members
those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to anyone other than the company and the company’s
members as a body, for our audit work, for this report, or for the opinions we have formed.
Sandra Thompson
(Senior statutory auditor)
for and on behalf of Ernst & Young LLP,
Statutory Auditor
Newcastle
5th June, 2018
Notes:
1.
The maintenance and integrity of the MS INTERNATIONAL plc web site is the responsibility of the
directors; the work carried out by the auditors does not involve consideration of these matters and,
accordingly, the auditors accept no responsibility for any changes that may have occurred to the financial
statements since they were initially presented on the web site.
2.
Legislation in the United Kingdom governing the preparation and dissemination of financial statements
may differ from legislation in other jurisdictions.
14
15
16
Consolidated and company statements of financial position
At 28th April, 2018
17
Consolidated and company cash flow statements
For the 52 weeks ended 28th April, 2018
18
Notes to the financial statements
For the 52 weeks ended 28th April, 2018
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 28th April, 2018 were authorised for issue by the board of the directors on 5th June, 2018 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 AIM market of 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 28th April, 2018 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.
2
Accounting policies
Accounting policies
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 statement of financial position 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 estimates 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 and costs to complete can be measured reliabily.
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.
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.
19
Notes to the financial statements
Continued
Change in accounting policies
There were no changes in accounting policies during the year or in the prior year which impacted the
group.
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.
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 statement of financial position date. All differences are taken to the income statement. 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 Euro, 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 statement of financial
position 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.
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.
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 the income statement. A revaluation deficit is recognised in the income statement, 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 statement of financial position
date, of each asset evenly over its expected useful life as follows:
Property other than freehold land – over 50 years
Plant and equipment – over 3 to 10 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.
20
Notes to the financial statements
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 intangible asset with finite lives are as follows:-
Tradename – over 10 to 20 years
Design database – over 10 years
Customer relationships – over 8 to 10 years
Software costs – over 3 to 5 years
Non- compete agreement – over 3 years
Order backlog – over 1 year
Development costs – over 5 years
The only intangible assets with indefinite useful lives are goodwill and these assets 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.
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 are taken to the income statement,
as hedge accounting is not applied.
21
Notes to the financial statements
Continued
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.
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.
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.
Cash and cash equivalents
Cash and cash equivalents in the statement of finanical position 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.
Pension schemes
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 the income statement 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 statement of financial position 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 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.
22
Notes to the financial statements
Continued
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 the income statement 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.
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 the income statement.
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.
23
Notes to the financial statements
Continued
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.
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.
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.
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 statement of financial position date.
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:
•
•
•
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 statement of financial position date.
24
Notes to the financial statements
Continued
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.
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.
International Accounting Standards (IAS / IFRSs)
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:
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 1 April 2017.
Adoption of these standards did not have any material impact on financial performance or position of the Group.
The Group is currently considering the implication of these new standards with the expected impact upon
the Group as follows:
IFRS 15 Revenue from contracts with customers will be effective and will be applied by the Group from 1
January 2018. Currently the Group recognises revenue on contracts within the Petrol Station Structure Division
based on the stage of completion of site activity. On applying IFRS 15 revenue on these contracts will be recognised
at the end of the contract. This will have an effect on the timing of recognising revenue and profits. There would
be no impact on cash flows.
If IFRS 15 had been applied to the periods ended 28th April, 2018 and 29th April, 2017 then revenue would
have been reduced for 2018 by £259,000 and for 2017 by £229,000 and profit before taxation would have been
reduced for 2018 by £75,000 and for 2017 by £69,000.
Revenue and profits in all other divisions in the Group would not be impacted by IFRS 15.
25
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 28th April, 2018 and 29th April, 2017. 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, manufacture,
construction, branding, maintenance and restyling of petrol station superstructures. The Petrol Station
Branding division is engaged in the design and installation of the complete appearance of petrol stations.
Management monitors the operating results of its business units separately for the purpose of making
decisions about resource allocation and performance assessment. Group financing (including finance costs and
finance revenue) and income taxes are managed on a group basis and are not allocated to operating segments.
26
Notes to the financial statements
Continued
4
Segment Information (continued)
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 28th April, 2018 and 29th April, 2017. 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.
Revenue
External
Non-current assets
Current assets
Liabilities
Capital expenditure
Europe
North America
Total
2018
£000
2017
£000
2018
£000
2017
£000
2018
£000
2017
£000
2018
£000
2017
£000
50,717 45,599
5,919
6,072
11,449
2,152
68,085 53,823
22,525 21,230
41,223 35,911
31,473 29,163
4,164
1,321
4,681
4,351
1,213
4,922
62
846
587
91
766
436
26,751 25,672
43,390 37,890
36,741 34,521
802
992
304
3,149
-
24
1,106
4,165
Information about major customers
Revenue from major customers arising from sales reported in the Defence segment:
Customer 1
Customer 1
Revenue from major customers arising from sales reported in the Petrol Station
Branding segment:
Customer 1
2018
£000
7,137
-
2017
£000
-
9,065
14,761
-
27
Notes to the financial statements
Continued
5
Group operating profit
This is stated after charging:
Audit of the financial statements
Other fees for auditors
Other assurance services
Taxation services
Depreciation - owned assets
Amortisation of intangible assets
Impairment of uncertain indirect tax receivable
Foreign exchange gains
Hire of plant and machinery
Other operating leases - minimum lease payments
Cost of inventories recognised as an expense
Research and development costs
6
Employee Information
The average number of employees, including executive directors,
during the period was:
Production
Technical
Distribution
Administration
(a)
Staff costs
Including executive directors, employment costs were as follows:
Wages and salaries
Social Security costs
Other pension costs
(b)
Directors’ emoluments
Aggregate directors' emoluments (note 27)
Post employment benefits
Director's emoluments are considered further within
the Directors’ remuneration report presented on pages 57 to 59.
7
8
Finance revenue
Bank interest
Finance costs
Bank interest
Other
28
2018
£000
109
23
70
1,266
507
615
147
1,749
44
37,027
1,120
2017
£000
92
21
54
1,105
535
-
240
1,212
44
29,857
1,529
2018
Number
2017
Number
251
69
33
78
431
2018
£000
16,029
1,850
637
18,516
2018
£000
1,431
37
1,468
2018
£000
51
51
2018
£000
82
-
82
234
65
30
80
409
2017
£000
12,764
1,355
398
14,517
2017
£000
1,152
31
1,183
2017
£000
33
33
2017
£000
26
5
31
Notes to the financial statements
Continued
-
29
Notes to the financial statements
Continued
10
Earnings per share
The calculation of basic earnings per share is based on:
(a) Profit for the period attributable to equity holders of the parent of £3,386,000 (2017 - £1,498,000)
.
.
(b)
16,504,691 (2017 - 16,504,691) Ordinary shares, being the weighted average number of Ordinary shares
in issue.
This represents 18,396,073 (2017 - 18,396,073) being the weighted average number of Ordinary shares in
issue less 1,891,382 (2017 - less 1,891,382) being the weighted average number of shares both held within
the ESOT 245,048 (2017 - 245,048) and purchased by the Company 1,646,334 (2017 - 1,646,334).
11
Dividends paid and proposed
Declared and paid during the year
On Ordinary shares
Final dividend for 2017 : 6.50p (2016 - 6.50p)
Interim dividend for 2018 : 1.75p (2017 - 1.50p)
Proposed for approval by shareholders at the AGM
Final dividend for 2018 : 6.50p (2017 - 6.50p)
2018
£000
1,073
289
1,362
2017
£000
1,073
247
1,320
1,073
1,073
30
Notes to the financial statements
Continued
12
(a)
Property, plant and equipment
Group
Cost or valuation
At 30th April, 2016
Additions
Disposals
Exchange differences
At 29th April, 2017
Additions
Disposals
Revaluatio
n
Exchange differences
At 28th April, 2018
Accumulated depreciation
At 30th April, 2016
Depreciation charge for the period
Disposals
Exchange differences
At 29th April, 2017
Depreciation charge for the period
Disposals
Revaluation
Exchange differences
Freehold
property
Plant and
equipment
£000
£000
13,092
2,727
-
191
16,010
-
-
,555
(31)
1
14,519
1 ,438
(404)
198
15,751
,106
1
(1,182)
-
(139)
Total
£000
27,611
4,165
(404)
389
31,761
1,106
(1,182)
1,555
(170)
17,534
15,536
33,070
355
185
-
17
557
287
-
(497)
7
11,301
920
(299)
183
12,105
979
(1,138)
-
4
11,656
1,105
(299)
200
12,662
1,266
(1,138)
(497)
11
At 28th April, 2018
354
11,950
12,304
Net book value at 28th April, 2018
Net book value at 29th April, 2017
Analysis of cost or valuation
At professional valuation 2018
At cost
At 28th April, 2018
Analysis of cost or valuation
At professional valuation 2014
At cost
At 29th April, 2017
17,180
3,586
15,453
3,646
17,534
-
-
15,536
17,534
15,536
12,221
3,789
-
15,751
16,010
15,751
20,766
19,099
17,534
15,536
33,070
12,221
19,540
31,761
31
Notes to the financial statements
Continued
(c)
Depreciation has not been charged on freehold land which is included at a book value of £5,170,652
(2017 - £4,895,000) Company £3,655,652 (2017 - £3,380,000) at 28th April, 2018.
32
Notes to the financial statements
Continued
On 11th November, 2017, 26th July, 2017 and 28th, March, 2018 the Group’s land and buildings, which
(d)
consist of manufacturing and office facilities in the UK, Poland and USA were valued by Dove Haigh Phillips
(UK) KonSolid-Nieruchomosci (Poland) and REAS, Inc-Real Estate & Appraisal Services (USA). 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 £11,121,000
(2017 - £11,121,000) at 28th April, 2018.
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. The USA property was valued on an income and market value basis. For all proper-
ties, there is no difference between current use and highest and best use.
The valuation has given rise to a revaluation surplus of £2,052,000.
-3
33
Notes to the financial statements
Continued
Goodwill acquired through business combinations and licences has been allocated for impairment testing
purposes to the petrol station superstructures division and the petrol station branding division which are operating
segments.
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:
Petrol station superstructure division
Petrol station branding division
Net book value
Group
Goodwill Goodwill
2017
£000
2018
£000
2,064
716
2,064
685
2,780
2,749
The performance of the petrol station superstructure division and the petrol station branding division are
the lowest levels 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 divisions over the next 5 years and was based on the following key assumptions:
•
•
•
A growth in cashflows estimated for 5 years, and a growth rate of 2% assumed thereafter.
Cash flows were discounted at a rate of 17.87%.
Detailed 5 year management forecast.
Based on the above assumptions, the value in use calculated for the petrol station superstructure division
and the petrol station branding division 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 reasonably possible changes in the assumptions used would give rise to an impairment.
34
Notes to the financial statements
Continued
35
Notes to the financial statements
Continued
15
Deferred income tax (continued)
The deferred income tax asset included in the statement of financial position is:
Group
The deferred income tax liability included in the statement of financial position is:
Group
36
Notes to the financial statements
Continued
15
Deferred income tax (continued)
37
Notes to the financial statements
Continued
38
Notes to the financial statements
Continued
17
Trade and other receivables (continued)
39
Notes to the financial statements
Continued
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
(18% to 17%).
Special reserve
The balance classified as special reserve represents the share premium on the issue of the Company’s
equity share capital.
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
Employee Share Ownership Trust
Shares in treasury (see below)
40
2018
£000
100
2,959
3,059
201 7
£00 0
100
2,959
3,059
Notes to the financial statements
Continued
20
Reserves
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 (2017 - 245,048) Ordinary shares, which represents 1.3%
(2017 - 1.3%) of the issued share capital of the Company at an aggregate cost of £100,006. The market value of the
shares at 28th April, 2018 was £453,000 (2017 - £414,000). The Company has made payments of £Nil (2017 - £Nil)
into the ESOT bank accounts during the period. No options over shares (2017 – 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 £7,000 (2017 - £5,000).
During the period no options on shares were exercised (2017 - Nil) and no shares were purchased (2017 – 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
2,959
41
Notes to the financial statements
Continued
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:
• 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, 2017 by a professionally qualified
actuary.
From 6 April 2016 the Company directly pays the expenses of the Scheme. With effect from April 2018
the deficit reduction payments paid into the Scheme by the Company have been increased to
£600,000 per annum. The deficit reduction contributions are paid on a quarterly basis with the
first paid on 3 April 2018 and the last due for payment on or before 5 January 2027. The total deficit
reduction payments made in the year were £389,000 (2017 - £311,000).
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.
Assumptions
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)
2018
2.70%
3.60%
3.00%
1.80%
21.4yrs
22.8yrs
201 7
2.50%
3.70%
3.10%
1.90%
21.3yrs
22.7yrs
A 0.5% reduction in the discount rate would lead to an increase in past service liabilities of around
£1.7m.
Members living around 1 year longer than expected would lead to an increase in past service liabilities of
around £1.2m.
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 years.
Statemen t of financial position
Present value of obligations
Fair value of plan assets
Net liability
2018
£000
29,568
23,147
6,421
201 7
£00 0
30, 790
23, 305
7,485
42
Notes to the financial statements
Continued
21
Pension liability (continued)
43
Notes to the financial statements
Continued
21
Pension liability (continued)
23
Financial instruments
Management of financial risks
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 cash and cash equivalents of £15.87m - Company- overdraft (£0.34m) (2017
Group - £15.21m - Company £13.53m). The Group and Company has available a bank multicurrency
overdraft facility of £4.8m which is renewable on 1st January 2019.
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.
44
Notes to the financial statements
Continued
23
Financial instruments (continued)
45
Notes to the financial statements
Continued
23
Financial instruments (continued)
Foreign currency risk
Exposure to risk is incurred by the Group and Company through overseas sales.
This exposure is minimised by the following:
(1) invoicing in sterling where practicable;
(2) 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.
Fair values
No significant differences exist between the book value and the fair value of the financial assets and
liabilities as at 28th April, 2018 and 29th April, 2017.
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 statement of financial
position 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.
46
Notes to the financial statements
Continued
47
Notes to the financial statements
Continued
48
Summary of group results 2014 - 2018
GROUP INCOME STATEMENT
49
Corporate governance statement
Information not subject to audit
In accordance with the AIM Listing rules, MS INTERNATIONAL plc will adopt a recognised industry
Corporate Governance Code by 28 September 2018. The Board has elected to adopt the QCA Corporate Govenance
Code by 28 September 2018.
In the meantime as an AIM listed company MS INTERNATIONAL plc is not required to comply with the
UK Corporate Governance Code; September, 2016 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 2018 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
50
Corporate governance statement
Continued
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, statement of financial position, 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.
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 16th July, 2018 can be found in the Notice of Meeting on page 62.
On behalf of the Board
David Kirkup
Secretary
5th June, 2018
51
Report of the directors
The directors present their report and the Group financial statements for the 52 weeks ended 28th April,
2018. The directors present their corporate governance statement on pages 50 and 51 of this report.
1
Principal activities and business review
A review of the Group’s trading during the year is contained in the Chairman’s Statement and Strategic
Report.
2
Results and dividends
The profit after taxation for the period attributable to shareholders amounted to £3,386,000 (2017 -
£1,498,000). The directors recommend a final dividend of 6.50 pence per share (2017 - 6.50 pence per share),
making a total of 8.25 pence per share (2017 - 8.00 pence per share).
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.
4
Directors
The names of the directors of the Company at 5th June, 2018 are shown on page 4.
All of the directors served throughout the year.
In accordance with the Articles of Association Michael O’Connell 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 Michael O’Connell,
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.
5
Substantial interests in shares
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
at 28th April, 2018
29.3%
17.0%
10.6%
9.4%
4.9%
% of share capital held
at 5th June, 2018
29.3%
17.2%
10.6%
9.4%
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 5th June 2018.
52
Report of the directors
Continued
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.
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.
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 5th June, 2018 the Company’s issued share capital comprised:
Ordinary shares of 10p each
Number
18,396,073
£’000
1,840
% of total share
100
Ordinary shares of 10p each held in treasury
1,646,334
165
Ordinary shares of 10p each not held in treasury
16,749,739
1,675
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:
• 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.
53
Report of the directors
Continued
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.
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.
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 20th June 2018, 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 16th October, 2019 whichever is the
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 20th June, 2018, 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 £167,496 without having to comply with statutory pre emption rights,
but this power will be limited to allotments or sales.
(a) 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;
54
Report of the directors
Continued
(b) in any other case, up to an aggregate nominal amount of £167,496 (which represents approximately
ten per cent of the issued ordinary share capital of the Company (excluding treasury shares) as at 20th June, 2018
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 16th October, 2019
(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 per cent of the issued ordinary share capital of the Company (excluding
treasury shares) as at 20th June, 2018, 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 16th October, 2019 whichever is the 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.
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 5th June 2018, 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.
10
Auditors
A resolution to reappoint the auditors, Ernst & Young LLP, will be proposed at the Annual General
Meeting.
55
Report of the directors
Continued
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 4. Having made enquiries of fellow directors and of the Company’s auditors, each of the directors confirms
that:
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.
12 We confirm that to the best of our knowledge:
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
5th June, 2018
56
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 2017/2018 amounted in total to 22.5% (2017 - 2.6%) 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. Pension Contributions
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 ceased from 30th
April 2015.
5. Other Benefits
Benefits are provided in the form of company cars, death in service benefit cover and medical and
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.
The dates of appointments are shown below:
Michael Bell - 9th July, 1980
Michael O’Connell - 4th February, 1985
Nicholas Bell - 22nd July, 2013
57
Directors’ remuneration report
Information not subject to audit
Continued
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.
Performance Graph
The performance graph shows the accumulated value, by 28th April, 2018, of £100 invested in MS INTERNATIONAL
plc on 27th April, 2013 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.
Information subject to audit
Emoluments of directors
Following the termination of the employment of the Managing Director of MSI-Defence Systems Ltd, David
Hansell was appointed interim Chief Executive until a new replacement was recruited. His remuneration, during
the period, for this temporary divisional executive appointment is shown above as additional salary.
Other benefits represent the provision of company cars, death in service benefit and medical and disability
insurance.
58
Directors’ remuneration report
Information subject to audit
Continued
Pension contributions
The pension contributions are paid to personal retirement benefit schemes.
Information not subject to audit
Directors’ share options
Details of directors’ options at 5th June, 2018 and 28th April, 2018 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 28th April, 2018 was 185p and the range during the financial year was
157.5p to 219p.
On behalf of the Board
David Kirkup
Secretary
5th June, 2018
59
List of Subsidiaries
(i)
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.
Global-MSI bv
Petrol Sign bv
Petrol Sign GmbH
Petrol Sign Ltd.
NOTES
Salhouse Road
Norwich
NR7 9AY
England
Balby Carr Bank
Doncaster
DN4 8DH
England
1298 Galleria Boulevard
Rock Hill
SC 29730
USA
Design, manufacture and service of defence
equipment.
Manufacture of fork-arms for the fork lift
truck, construction, agricultural and quarrying
equipment industries.
Manufacture of fork-arms for the fork lift
truck, construction, agricultural and quarrying
equipment industries.
Rua Professor Campos
de Oliveira
310
São Paulo
Brazil
Manufacture of fork-arms for the fork lift
truck, construction, agricultural and quarrying
equipment industries.
Balby Carr Bank
Doncaster
DN4 8DH
England
Balby Carr Bank
Doncaster
DN4 8DH
England
Ul. Działowskiego 13
30-339 Krakow
Poland
De Hoef 8
5311 GH Gameren
The Netherlands
Manufacture of open die forgings.
Design, manufacture and construction of petrol
station superstructures.
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.
Owiedenfeldstrasse 1
30559
Hannover-Anderten
Germany
Balby Carr Bank
Doncaster
DN4 8DH
England
Design, restyling, production and installation
of the complete appearance of petrol station
superstructures and forecourt.
Design, restyling, production and installation
of the complete appearance of petrol station
superstructures and forecourt.
1.
100% of the ordinary shares are held in all cases.
2.
All companies are registered in England and Wales with the exception of MSI-Forks Inc. which is registered in USA, MSI-
ForksGarfos Industriais Ltda which is registered in Brazil, Global-MSI Sp. z o.o. which is registered in Poland, Petrol Sign bv and
Global-MSI bv which are registered in The Netherlands and Petrol Sign GmbH which is registered in Germany. 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 bv, Global-MSI bv and
Petrol Sign GmbH (which operate in Western Europe).
60
List of Subsidiaries
Continued
(ii)
Non Operating subsidiaries
Conder Ltd.
Global-MSI (Overseas) Ltd.
MDM Investments Ltd.
Mechforge Ltd.
MS INTERNATIONAL Estates Ltd.
MS INTERNATIONAL Estates LLC
MSI-Petrol Sign Ltd.
Petrol Sign-MSI Ltd.
NOTES
1.
2.
3.
100% of the ordinary share capital of each entity is held in all cases.
All companies are registered in England and Wales except for MS INTERNATIONAL Estates LLC which is
registered in USA.
All companies are dormant and non operating, with the exception of MDM Investments Ltd, which is the
trustee company of the MS INTERNATIONAL plc Retirement and Death Benefits Scheme.
61
Notice of Annual General Meeting
Notice is given that the fifty eighth annual general meeting of MS INTERNATIONAL plc (“Company”) will be held at The Holiday Inn,
Warmsworth, Doncaster on 16th July, 2018 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.
To receive the Company’s annual accounts and directors’ and auditors’ reports for the 52 weeks ended 28th
April, 2018.
2.
3.
4.
5.
6.
7.
8.
9.
To approve the directors’ remuneration report for the 52 weeks ended 28th April, 2018.
To declare a final dividend for the year 52 weeks ended 28th April, 2018 of 6.5p per ordinary share of 10p
each in the capital of the Company, to be paid on 24th July, 2018 to shareholders whose names appear on the
register as at close of business on 22nd June, 2018.
To re-elect as a director of the Company, Michael O’Connell, a director retiring by rotation. Michael O’Connell
is aged 68 years old and joined the Company in 1980, becoming a director in 1985.
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 Timpson Group plc, Lomond Capital Partners,
Mostyn Estates Limited 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.
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 16th October, 2019 (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).
11.
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:
62
Notice of Annual General Meeting
Continued
11.1
in connection with an offer of equity securities (whether by way of a rights issue, open offer or
otherwise):to the allotment of equity securities or sale of treasury shares:
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
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 16th October, 2019
(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) the maximum aggregate number of Shares which may be purchased is 1,674,973
(b) the minimum price (excluding expenses) which may be paid for a Share is £0.10;
(c) the maximum price (excluding expenses) which may be paid for a Share is the higher of:
(i)
an amount equal to 105 per cent 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
(ii)
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 16th October, 2019
(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.
Registered office
Balby Carr Bank
Doncaster
England
DN4 8DH
Registered in England and Wales No. 00653735
63
By order of the Board
David Kirkup
Secretary
20th June, 2018
Notice of Annual General Meeting
Continued
Notes
Entitlement to attend and vote
1.
Proxies
2.
3.
4.
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 close of business on 11th July,
2018 (or, if the meeting is adjourned, no later than close of business 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.
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.
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, Link Asset Services, PXS, 34 Beckenham Road, Kent, BR3 4TU, no later
than 12 noon on 11th July, 2018 (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 Link Asset Services (ID RA10) no later than
12 noon on 11th July, 2018 (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.
64
Notice of Annual General Meeting
Continued
4.
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 20th June, 2018 (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 20th June, 2018 are 16,749,739.
Nominated Persons
7.
(a)
(b)
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”):
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)
(b)
to do so would interfere unduly with the preparation for the meeting or would involve the
disclosure of confidential information; or
it is undesirable in the interests of the Company or the good order of the meeting that the
question be answered.
65
Notice of Annual General Meeting
Continued
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.
Dividend Warrants
11.
Dividend warrants will be posted on 23rd July, 2018 to those members registered on the books of the
Company on 22nd June, 2018.
66