MS INTERNATIONAL plc Annual Report 2022 Company Registration Number 00653735 M S I N T E R N A T I O N A L p l c Contents The year in brief Chairman’s statement Directors Advisors Strategic report Statement of directors’ responsibilities Independent auditor’s report Consolidated income statement Consolidated 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 2018 – 2022 Corporate governance statement Audit Committee report Remuneration Committee report Report of the directors Directors’ remuneration report List of subsidiaries 1 2 3 5 6 7 10 11 20 20 21 22 23 24 59 60 63 64 65 70 73 M S I N T E R N A T I O N A L p l c The year in brief 2022 Total 2021 Total £’000 222222222222222222222222222222222222222222222222 £’000 Revenue 61,539 222222222222222222222222222222222222222222222222 74,524 1,592 Profit before taxation 222222222222222222222222222222222222222222222222 5,967 Earnings per share: basic 30.9p 7.2p 7.0p Earnings per share: diluted 222222222222222222222222222222222222222222222222 29.6p Dividends payable per share 8.25p 222222222222222222222222222222222222222222222222 9.25p Financial calendar key dates Annual results announced Annual general meeting Final dividend payable Half-year results announced Interim dividend payable June July August December January 2 M S I N T E R N A T I O N A L p l c Chairman’s statement Results and Review It is a pleasure to report that, for the year ended 30th April 2022, the Company attained considerable progress across the Group’s divisions, resulting in a significantly improved pre-tax profit of £5.97m (2021 – £1.59m) on increased revenue of £74.52m (2021 – £61.54m). Basic earnings per share amounted to 30.9p (2021 – 7.2p). The balance sheet was further strengthened with cash and cash equivalents rising to £18.1m (2021 – £17.4m). The Group has made a strong recovery post the many constraints imposed by Covid. This, I believe, demonstrates the tangible benefits of operating an optimistic, long-term investment and support strategy, that we practice daily, to support and encourage the respective management teams that directly oversee the operations of our diverse businesses. During the period under review, two common themes continued to feature across all divisions, namely the prolonged negative effects of the global pandemic and extended periods of limited availability of materials and components. Such issues required close and constant monitoring by our management teams to ensure sustained high-quality sales output. A job well done by everyone. ‘Defence’ – This was a remarkable year of great achievements for this division, highlighted by the phased manufacture and delivery of the first 7 of 8 No MSI-DS30mm naval weapon systems to the United States Navy. This was achieved in a timely manner to facilitate our customer’s comprehensive test and certification programme of the MSI product. The anticipated successful prototype testing of the MSI weapon system, is the precursor to a highly prized sole source ‘Follow-on Production Contract’. Presently, all trials are going to plan and positive progress is being made. In the UK, our new ‘state of the art’ Norwich manufacturing facility is in the final phase of completion, whilst, in the United States of America, we are in the early stages of our programme to establish an appropriate product support resource for our weapon systems, along-side our contemporary forging facilities, in South Carolina. These projects are essential to support our perceived growing defence opportunities in the United States. We also firmly believe that our ‘state of the art’ weapon system will significantly enhance the capability and protection of the Royal Navy, once a forward-looking decision is made to upgrade their existing historic, small calibre weapons systems. We stand ready, with our modern manufacturing facilities and proven international capabilities, to work with the UK MOD to meet such requirements. ‘Forgings’ – This division also performed extremely well, successfully navigating the disrupted, and constantly changing, international business environment. There is little doubt that having established contemporary automated ‘local’ production facilities – in the UK and both North and South America, – successfully enabled MSI to welcome and secure many customers that had previously procured product from China. ‘Petrol Station Superstructures’ mobility hubs – Operations in both the UK and the Poland performed resiliently against a prevailing uncertain backdrop. Despite the challenges, the division continued to make great progress, pleasingly exceeding management’s revenue forecasts. Many forecourt operators have continued to develop their sites to incorporate a substantial grocery store and catering facility and Global-MSI designed, manufactured and erected many such structures during the period. As with all construction orientated businesses, the negative impact of the lack of readily available materials and their associated fluctuating costs, became a major factor in terms of managing day to day operations. Such disruptive circumstances necessitated some contracts to be re-negotiated to the mutual satisfaction of all parties. 3 M S I N T E R N A T I O N A L p l c Chairman’s statement Results and Review (continued) ‘Corporate Branding’ – This division traded at similar levels to the prior year, as commercial activity remained seriously constrained across mainland Europe’s national borders. We took action to restructure the division’s operations in both The Netherlands and Germany and much has been achieved as a result, leaving it better geared to the current needs of the market. Pleasingly, the UK based business has continued to prosper, gaining market share and expanding operational capabilities and facilities. Outlook ‘Defence’ – Foremost, we look forward with confidence to a favourable report on our 30mm naval weapon system, presently on approval test by the US Navy. Furthermore, recent events have served to focus attention on the need for appropriate national security to combat potential lethal land-based threats. We believe that, as our additional ‘in- house’ product developments come to fruition, there will be numerous opportunities across international markets to supply our, tested and proven, land-based defence equipment. ‘Forgings’ – Demand for our high quality, forged products is increasing, as customers seek assured and dependable security of supply. To that end, we will continue to invest in further automating our manufacturing facilities in the UK, the United States and South America. ‘Petrol Station Superstructures’ – The markets we serve are vigorously embracing change, not only in the development of providing and dispensing alternative fuel types but also in broadening their provision of services to include groceries and catering facilities. The development expertise and scale of the buildings required to dispense such services are most appropriate to the designs, manufacturing and erection skills of Global-MSI. We expect further growth opportunities for both our UK and Polish operations. ‘Corporate Branding’ – We have completed restructuring in The Netherlands and Germany and expanded our UK operations. So, now that inter-country business activity across mainland Europe has been restored, we are cautiously optimistic that we will achieve a more profitable division this year. Pleasingly, we have already received instructions from a number of major customers to speedily recommence projects, that they had put ‘on hold’, owing to the scale and duration of the pandemic. Summary We believe that we have placed each of our businesses in a strong and exciting position within the markets which we serve. Close monitoring of performance and further support in the development of new products and services will, no doubt, bring further rewards. All matters considered the Board recommends the payment of a final dividend of 7.5p per share (2021 – 6.5p) making a total for the year of 9.25p (2021 – 8.25p). The final dividend is expected to be paid on the 12th August 2022, to those shareholders on the register at the close of business on the 15th July 2022. Michael Bell 27th June 2022 4 M S I N T E R N A T I O N A L p l c Directors Directors Executive Michael Bell ARICS (Executive Chairman) Michael O’Connell FCA (Finance) Nicholas Bell Non-executive Roger Lane-Smith – Age 76 Appointed as a director on 21st January, 1983. He is a non-executive director of Mostyn Estates Limited and a number of other private companies. David Hansell – Age 77 Appointed as a non-executive director on 3rd June, 2014. David has been with MS INTERNATIONAL plc, working at MSI-Defence Systems Ltd since 1962, becoming managing director in 2002. 222222222222222222222222222222222222222222222222 Company Secretary Shelley Ashcroft ACMA 222222222222222222222222222222222222222222222222 Registered Office Balby Carr Bank Doncaster DN4 8DH England 222222222222222222222222222222222222222222222222 Company Registration Number 00653735 222222222222222222222222222222222222222222222222 5 M S I N T E R N A T I O N A L p l c Advisors Independent Auditor Grant Thornton UK LLP 1 Holly Street Sheffield S1 2GT 222222222222222222222222222222222222222222222222 Registrars and Transfer Office Link Group 10th Floor Central Square 29 Wellington Street Leeds LS1 4DL 222222222222222222222222222222222222222222222222 Solicitors DLA Piper UK LLP 1 St. Peter’s Square Manchester M2 3DE 222222222222222222222222222222222222222222222222 Nominated Advisors Shore Capital & Corporate Limited Cassini House 57 St James’s Street London SW1A 1LD 222222222222222222222222222222222222222222222222 Brokers Shore Capital & Corporate Limited Cassini House 57 St James’s Street London SW1A 1LD 222222222222222222222222222222222222222222222222 Bankers Lloyds Bank First Floor 14 Church Street Sheffield S1 1HP 222222222222222222222222222222222222222222222222 6 M S I N T E R N A T I O N A L p l c Strategic report This report should be read in conjunction with the Chairman’s statement and the Corporate governance statement. Strategy The Group is engaged in the design and manufacture of specialist engineering products and the provision of related services. The Group’s long-term strategy is to invest in people, products and processes to seek continuous improvement in its four diverse operating divisions: ‘Defence’, ‘Forgings’, ‘Petrol Station Superstructures’ and ‘Corporate Branding’, each holding a leading position in its specialist market. 222222222222222222222222222222222222222222222222 Business review The Group registered a profit before taxation of £5.97m (2021 – £1.59m) after an impairment of intangible assets of £0.35m (2021: £0.35m) as detailed in note 14. During the year, the Group settled a contractual dispute, the terms of which are confidential. The amount received has been recognised in other income. The Group has incurred £0.6m of legal costs in the current year in relation to this matter. These costs are included in administrative expenses. A review of the operations of the Company and subsidiaries and their position at 30th April, 2022 are provided in the Chairman’s Statement. Segment information for the year under review is provided in note 4 of the Group financial statements. 222222222222222222222222222222222222222222222222 Key performance indicators Revenue Profit before taxation Basic earnings per share 2022 £’000 74,524 5,967 30.9p 2021 £’000 61,539 1,592 7.2p A review of the changes in the key performance indicators is provided in the Chairman’s Statement. 222222222222222222222222222222222222222222222222 Cash flow Cash generated from operating activities before taxation and interest was £0.39m (2021 – £9.38m). This was before capital expenditure of £2.70m (2021 – £0.78m) and a cash inflow from a decrease in restricted cash held in Escrow of £5.01m (2021 – an increase of £6.17m). Research and initial development costs of £1.4m (2021 – £1.0m) were expensed during the year, primarily on the continuing development of the portfolio of small to medium calibre naval, land-based, and other stabilised weapon systems that the ‘Defence’ division offers to its worldwide customer base. Closing cash and cash equivalents were £18.09m (2021 – £17.39m) and customer progress payments on account were £18.33m (2021 – £21.19m). The Group also had a further £1.16m (2021 – £6.17m) of restricted cash held within an Escrow account maturing after 90 days. 7 M S I N T E R N A T I O N A L p l c Strategic report Continued Principal risks and uncertainties The principal risks and uncertainties facing the Group have been identified as follows: 222222222222222222222222222222222222222222222222 Risk and impact 222222222222222222222222222222222222222222222222 Foreign exchange How the risk is mitigated A proportion of the Group’s revenue, profits, and net assets are denominated in currencies other than Sterling, such as the US Dollar and Euro, and to a lesser extent the Brazilian Real and Polish Zloty. Fluctuations in exchange rates may impact the Group’s financial position and results due to translation into sterling, as well as having implications on the pricing of materials sourced in foreign currencies. The largest currency exposures are in USD and Euro. Receipts and payments are offset against each other where possible and any surpluses are sold at spot rate when necessary. Given the increase of activity in USD, management are monitoring cash flows weekly to ensure currency requirements are satisfied. Cashflows in other currencies, including Brazilian Real and Polish Zloty, are not hedged, however, as volumes are so low management does not deem this necessary. A central treasury function monitors foreign currency cashflows, ensuring that balances are transferred around the group when required, and engaging in foreign currency trading when appropriate. Although the Group currently has no forward exchange contracts, the need for such is monitored on an ongoing basis. More information on the Group’s exposure to foreign exchange can be found in note 27 “Financial instruments” 222222222222222222222222222222222222222222222222 Covid-19 The current economic environment brought about by the Covid-19 pandemic, along with the impact of lockdowns and travel related restrictions, has created uncertainty for the Group in terms of timing of revenue recognition and the phasing of demand from customers. There is also a risk to both the health and safety of our staff, and the global supply chain in terms of the flow of goods and raw materials. At the start of the pandemic in March 2020, the Group took swift action to protect the health, safety, and wellbeing of its employees. Working practices were adapted to meet government guidelines and to ensure social distancing. As Covid-19 restrictions are eased and the world reopens, the Board remains alert and ready to respond to potential future variants which could see the reintroduction of certain restrictions. The Board monitors cash balances on a daily basis and reviews three month cash forecasts on a weekly basis to ensure that any potential issues can be identified promptly. 222222222222222222222222222222222222222222222222 Inflationary pressures There is a risk to the Group of increasing inflation in the countries in which it operates. Both raw materials prices and energy prices have increased significantly over the past year. As the Group has a number of long- term contracts, rapid increases in prices could impact the profitability of the contract. The impact of raw materials prices is monitored regularly at a divisional level and reported to the Board. Where possible increases are passed to the customer. (cid:1) With regards to customers under long-term contracts, such contracts include a clause to allow for raw materials price increases. There are a number of projects and energy saving initiatives across the Group to reduce energy consumption as outlined in section 11 of the Report of the directors. 8 (cid:1) (cid:1) (cid:1) (cid:1) (cid:1) (cid:1) (cid:1) (cid:1) (cid:1) M S I N T E R N A T I O N A L p l c Strategic report Continued General duties of directors With effect from 1st January, 2019, specific references are required as to how the Board undertakes its duties in respect of the requirements under Section 172 of the 2006 Companies Act to promote the success of the Company for the benefit of its shareholders as a whole. In doing so, the Board is required to have regard for the following: the likely long-term consequences of any decision; the interests of the Group’s employees; the need to foster and maintain good business relationships with customers, suppliers and others; the impact of the Group’s operations on the community and environment; the Group’s reputation for high standards of business conduct and the need to act fairly between members of the Company. As an AIM quoted company, the Company has adopted as far as practical for a group of its size, the April 2018 QCA Corporate Governance Code. The Company describes how it complies with the code and provides details of where it does not comply on pages 61 to 62. The Chairman’s statement and this Strategic report describe the Group’s activities, strategy, and future prospects. The Board considers its employees, customers, suppliers, and shareholders to be its major stakeholders. When taking decisions for the long-term future of the Group, the Board informally takes into consideration the interests of all these stakeholders in its deliberations. The Group operates on a decentralised structure with employee, customer, and supplier relationships delegated to the management of the operating companies. It is the responsibility of divisional management teams to ensure that good relationships are maintained with employees, customers, and suppliers and to report regularly to the executive directors regarding these relationships. The Board considers the remuneration, incentive schemes, and employment procedures in place across the Group’s operating companies to be appropriate. Employees are fairly rewarded in relation to their local communities and the Group identifies opportunities for employee development where possible. The Group’s divisions maintain good long-term supplier relationships by contracting on standard terms and conditions, and ensuring payment is made on a prompt basis. These relationships with key suppliers ensure the quality and continuity in the supply chain. The executive directors receive regular updates from the management of operating companies on both existing and new potential customer relationships. This ensures that the Board’s decision making takes into account the commercial and service requirements of the customer base. The Board believes that due to the relatively small size of its operating units throughout the world, the Group does not have any significant impact on the local communities and environments. However, the Board recognises that the Group has to maintain the highest standards of integrity in the conduct of each of the Group’s operations. Consequently, the Board aims to ensure all of its operations minimise harm and contribute as far as practical to local communities. The Board recognises the importance of maintaining high standards of business conduct and has appropriate policies in place, such as, employee Whistleblowing and Anti-Bribery and Corruption, to assist in setting a culture of ethical behaviour throughout the Group. The composition of the Company’s shareholders is predominantly directors, private investors, and one long- standing institutional investor. The AGM is the primary mechanism for the Board to engage with the shareholders, together with the publication of unaudited half year results, the publication of the full year audited Report and Accounts, and the inclusion of other regulatory announcements on the Company’s website. By order of the Board, Shelley Ashcroft Company Secretary 27th June, 2022 9 (cid:1) (cid:1) (cid:1) (cid:1) (cid:1) M S I N T E R N A T I O N A L p l c Statement of directors’ responsibilities The directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable United Kingdom law and regulations. Company law requires the directors to prepare such financial statements for each financial year. Under that law, the directors have prepared Group financial statements under UK adopted International Accounting Standards. The directors have elected to prepare Parent Company financial statements under UK adopted International Accounting Standards. Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and Parent Company and of the profit or loss of the Group and Parent Company for that period. In preparing those financial statements, the directors are required to: select suitable accounting policies and then apply them consistently; make judgements and accounting estimates that are reasonable and prudent; state whether UK adopted International Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements; prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Parent Company will continue in business. 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 directors are responsible for the maintenance and integrity of the corporate and financial information included on the company's website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from the legislation in other jurisdictions. The directors confirm that: so far as each director is aware, there is no relevant audit information of which the company’s auditor is unaware; the directors have taken all the steps that they as directors in order to make themselves aware of any relevant audit information and to establish that the company’s auditor is aware of that information. To the best of the directors knowledge: the Group financial statements, prepared in accordance with UK adopted International Accounting Standards 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 Strategic report and Directors’ report include 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. 10 (cid:1) (cid:1) (cid:1) (cid:1) (cid:1) (cid:1) (cid:1) (cid:1) M S I N T E R N A T I O N A L p l c Independent auditor’s report to the members of MS INTERNATIONAL plc Opinion Our opinion on the financial statements is unmodified We have audited the financial statements of MS INTERNATIONAL plc (the ‘parent company’) and its subsidiaries (the ‘group’) for the year ended 30 April 2022 which comprise the Consolidated income statement, the Consolidated statement of comprehensive income, the Consolidated and company statement of changes in equity, the Consolidated and company statements of financial position, the Consolidated and company cash flow statements and notes to the financial statements, including a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and UK adopted international accounting standards and, as regards the parent company financial statements, as applied in accordance with the provisions of the Companies Act 2006. In our opinion: the financial statements give a true and fair view of the state of the group’s and of the parent company’s affairs as at 30 April 2022 and of the group’s profit for the year then ended; the group financial statements have been properly prepared in accordance with UK adopted international accounting standards; the parent company financial statements have been properly prepared in accordance with UK adopted international accounting standards and as applied in accordance with the provisions of the Companies Act 2006; and the financial statements have been prepared in accordance with the requirements of the Companies Act 2006. Basis for opinion We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the ‘Auditor’s responsibilities for the audit of the financial statements’ section of our report. We are independent of the group and the 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. Conclusions relating to going concern We are responsible for concluding on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the group’s and the parent company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify the auditor’s opinion. Our conclusions are based on the audit evidence obtained up to the date of our report. However, future events or conditions may cause the group or the parent company to cease to continue as a going concern. Our evaluation of the directors’ assessment of the group’s and the parent company’s ability to continue to adopt the going concern basis of accounting included challenging the underlying data and key assumptions used to make the assessment, evaluating the directors’ plan for future actions in relation to their going concern assessment and reviewing the position of the business to assess their ability to meet obligations in a worst case scenario. The worst case scenario analysis supported our assessment that there is no material uncertainty in relation to going concern. This risk has been addressed by performing the following procedures: Obtaining management’s base case cash flow forecasts covering the period to October 2023, assessing how these cash flows forecasts were compiled and assessing their appropriateness by applying relevant sensitivities to the underlying assumptions and challenging those assumptions; Assessing the accuracy of management’s past forecasting by comparing management’s forecasts for last year to the actual results for last year and considering the impact on the base case cash flow forecast; Applying additional worst-case scenario sensitivities to assess the potential impact of possible changes in the assumptions to the business performance and position. We evaluated the assumptions regarding the impact of no new business and a reduction in recurring revenue and the impact that this would have on the overall performance and position of the business. We considered whether the assumptions are consistent with our understanding of the business derived from other detailed audit work undertaken; Assessing the impact of the mitigating factors available to management in respect of the ability to restrict cash impact, including the level of available facilities; and Assessing the adequacy of related disclosures within the annual report. 11 (cid:1) (cid:1) (cid:1) (cid:1) (cid:1) (cid:1) (cid:1) (cid:1) (cid:1) (cid:1) (cid:1) (cid:1) (cid:1) (cid:1) (cid:1) M S I N T E R N A T I O N A L p l c Independent auditor’s report to the members of MS INTERNATIONAL plc Continued Conclusions relating to going concern (continued) In our evaluation of the directors’ conclusions, we considered the inherent risks associated with the group’s and the parent company’s business model including effects arising from macro-economic uncertainties such as Brexit and Covid-19, we assessed and challenged the reasonableness of estimates made by the directors and the related disclosures and analysed how those risks might affect the group’s and the parent company’s financial resources or ability to continue operations over the going concern period. Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the group’s and the parent company’s ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue. (cid:1) (cid:1) (cid:1) (cid:1) In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of accounting in the preparation of the financial statements is appropriate. The responsibilities of the directors with respect to going concern are described in the ‘Responsibilities of directors for the financial statements’ section of this report. Our approach to the audit Overview of our audit approach (cid:1) Overall materiality: Group: £476,000, which represents 0.6% of the group’s revenues. Parent company: £300,000, which represents 0.6% of the parent company’s total assets. Key audit matters were identified as: Forging and Corporate Branding revenue has a potential for misstatement. Same as previous year; and Defence and Petrol Station Superstructures revenue has a potential for misstatement. Same as previous year. (cid:18)(cid:20)(cid:9)(cid:3)(cid:6)(cid:7)(cid:20)(cid:15)(cid:7)(cid:9)(cid:19) (cid:18)(cid:20)(cid:9)(cid:3)(cid:6)(cid:7)(cid:20)(cid:15)(cid:7)(cid:9)(cid:19) (cid:17)(cid:3)(cid:19)(cid:1)(cid:20)(cid:13)(cid:14)(cid:7)(cid:9)(cid:1) (cid:17)(cid:3)(cid:19)(cid:1)(cid:20)(cid:13)(cid:14)(cid:7)(cid:9)(cid:1) (cid:21)(cid:20)(cid:9)(cid:9)(cid:3)(cid:6)(cid:4) (cid:21)(cid:20)(cid:9)(cid:9)(cid:3)(cid:6)(cid:4) Our auditor’s report for the year ended 30 April 2021 included no key audit matter that have not been reported as a key audit matter in our current year’s report. (cid:22)(cid:5)(cid:10)(cid:8)(cid:7)(cid:11)(cid:23) (cid:22)(cid:5)(cid:10)(cid:8)(cid:7)(cid:11)(cid:23) An audit of the financial information of the component using component materiality (full scope audit) was performed on the financial statements of the company and all components determined to be significant. A specified audit procedure approach was adopted for components not considered to be significant but included balances or transactions which were material to the Group opinion. The components where we performed full or specified audit procedures accounted for 92% of revenue and 91% of gross profit. Key audit matters Key audit matters are those matters that, in our professional judgement, 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 that had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. 12 (cid:1) (cid:1) (cid:1) (cid:1) (cid:1) (cid:2)(cid:3)(cid:4)(cid:5)(cid:6)(cid:7)(cid:8)(cid:9)(cid:7)(cid:10)(cid:11) (cid:1) (cid:12)(cid:13)(cid:14)(cid:7)(cid:9)(cid:1) (cid:6)(cid:3)(cid:4)(cid:8)(cid:10)(cid:11)(cid:4)(cid:3) (cid:17)(cid:12)(cid:18) (cid:2)(cid:7)(cid:4)(cid:5)(cid:15)(cid:10)(cid:4)(cid:13)(cid:6)(cid:3)(cid:4) (cid:16)(cid:13)(cid:6)(cid:1)(cid:6)(cid:3)(cid:4)(cid:13)(cid:15)(cid:9)(cid:4) (cid:1) (cid:1) (cid:1) (cid:1) M S I N T E R N A T I O N A L p l c Independent auditor’s report to the members of MS INTERNATIONAL plc Continued Key audit matters (continued) In the graph below, we have presented the key audit matters, significant risks and other risks relevant to the audit. Key Audit Matter - Group and parent How the matter was addressed in the audit - Group and parent 222222222222222222222222222222222222222222222222 In responding to the key audit matter, we performed the following audit procedures: Risk 1: Forging and Corporate Branding revenue has a potential for misstatement We identified Forging and Corporate Branding revenue recognition as one of the most of material significant assessed misstatement due to fraud and error. risks ISA (UK) 240 Revenue is a major driver of the business and under ‘The Auditor’s Responsibilities Relating to Fraud in an Audit of Financial Statements’, there is a presumed risk of fraud in revenue recognition that could result in material misstatements. Non-contract revenue is a major driver of the business and there is a potential for material misstatement particularly in relation to revenue being recorded in the wrong period. There is a significant risk that management may record revenue fictitiously or in advance of the criteria for revenue recognition being satisfied. Revenue management bias which heightens this risk. recognition susceptible is to Relevant disclosures in the Annual Report and Accounts 2022 The group’s accounting policy on recognition of revenue from contracts is shown in note 2 to the related disclosures are included in note 3. statements and financial walking through the process and controls around the recording of revenue to understand the design and implementation of controls; assessing whether the revenue recognition policy is in accordance with IFRS 15, by comparing policies to IFRS 15 requirements, assessing the disclosures made and agreeing a sample of the revenue recorded in the period to supporting documentation and assessing adherence to the policy adopted; using automated data analytics on the revenue populations to identify and assess any unusual transactions which are not in line with our knowledge or expectation of a revenue transaction; selecting a sample of revenue transactions and agreeing to supporting documentation to verify the occurrence of the revenue including shipping documentation, sales invoices and cash receipts; and assessing revenue around the year end to determine whether it has been included in the correct period using trend analysis and agreeing a sample of transactions around the year end to shipping documents. Our results Based on the work we have undertaken we have not found any material misstatements in non-contract revenue recognition. 13 (cid:1) (cid:1) (cid:1) (cid:1) (cid:1) M S I N T E R N A T I O N A L p l c Independent auditor’s report to the members of MS INTERNATIONAL plc Continued Key audit matters (continued) Key Audit Matter - Group and parent How the matter was addressed in the audit - Group and parent 222222222222222222222222222222222222222222222222 In responding to the key audit matter, we performed the following audit procedures: Risk 2: Defence and Petrol Station Superstructures revenue has a potential for misstatement defence We identified contract revenue accounting, including station superstructures streams, as one of the most significant assessed of material misstatement due to fraud or error. petrol risks and and Petrol (group) Contract revenue is a major driver of the business and there is potential for material misstatement particularly within the Defence Station division Superstructures division (group and parent company) in relation to the timing of recognition of revenue due to fraud or error. This is based on the opportunity for revenue to be recognised in the incorrect period which is increased around the year end based on the period of the contracts or the opportunity to record revenue before control is transferred. Contract revenue accounting is susceptible to management bias which heightens this risk. walking through the process and controls around the recording of revenue to understand the design and implementation of controls; assessing whether the revenue recognition policy is in accordance with IFRS 15, by comparing policies to IFRS 15 requirements, assessing the disclosures made and agreeing a sample of the revenue recorded in the period to supporting documentation and assessing for adherence to the policy adopted; using automated data analytics on the revenue populations to identify and assess any unusual transactions which are not in line with our knowledge or expectation of a revenue transaction; selecting a sample of revenue transactions to customer contracts and orders to assess that the revenue has been recognised in line with the contractual terms; performing an assessment of the contracts open at the year end to assess the progress and revenue recognised on these; and selecting a sample of contract asset/liability balances and agreeing these to supporting documentation to assess if revenue has been recognised appropriately in line with the progress on the contract. Relevant disclosures in the Annual Report and Accounts 2022 The group’s accounting policy on recognition of revenue from contracts is shown in note 2 to the financial statements and related disclosures are included in note 3. Our results Based on the work we have undertaken we have not found any material misstatements in contract revenue recognition. 14 (cid:1) (cid:1) (cid:1) (cid:1) (cid:1) (cid:1) M S I N T E R N A T I O N A L p l c Independent auditor’s report to the members of MS INTERNATIONAL plc Continued Our application of materiality We apply the concept of materiality both in planning and performing the audit, and in evaluating the effect of identified misstatements on the audit and of uncorrected misstatements, if any, on the financial statements and in forming the opinion in the auditor’s report. Materiality was determined as follows: Group Materiality measure 222222222222222222222222222222222222222222222222 Materiality for financial statements as a whole We define materiality as the magnitude of misstatement in the financial statements that, individually or in the aggregate, could reasonably be expected to influence the economic decisions of the users of these financial statements. We use materiality in determining the nature, timing and extent of our audit work. Parent 222222222222222222222222222222222222222222222222 Materiality threshold £476,000 which is 0.6% of revenue. £300,000 which is 0.6% of total assets. Significant judgements made by auditor the materiality in determining In determining materiality, we made the following significant judgements: In determining materiality, we made the following significant judgements: The selection of an appropriate benchmark; and The selection of an appropriate benchmark; and The selection of an appropriate percentage to apply to that benchmark. The selection of an appropriate percentage to apply to that benchmark. This benchmark is considered the most appropriate because this is the most relevant performance measure to the stakeholders of the Group, as this is identified as a KPI within the Strategic report. We deemed a percentage of 0.6% to be appropriate based on the Group being listed in AIM and the increased risk brought about by the impact of Covid-19. Materiality for the current year is higher than the level that we determined for the year ended 30 April 2021 the to performance in the year and change economic in environment. reflect the This benchmark is considered the most appropriate because this is the most relevant performance measure to the stakeholders of the parent company, based on there being no Statement of comprehensive income in the financial statements. The percentage applied was selected based on the risk profile of the entity as a component within a listed group. Materiality for the current year is higher than the level that we determined for the year ended 30 April 2021 to reflect the change in the position of the Company year on year and change in the economic environment. 15 (cid:1) (cid:1) (cid:1) (cid:1) M S I N T E R N A T I O N A L p l c Independent auditor’s report to the members of MS INTERNATIONAL plc Continued Our application of materiality (continued) Materiality measure 222222222222222222222222222222222222222222222222 Parent Group Performance materiality used to drive the extent of our testing We set performance materiality at an amount less than materiality for the financial statements as a whole to reduce to an appropriately low level the probability that the aggregate of uncorrected and undetected misstatements exceeds materiality for the financial statements as a whole. 222222222222222222222222222222222222222222222222 Performance materiality threshold £357,000 is 75% of financial statement materiality. £225,000 which is 75% of financial statement materiality. Significant judgements made by the auditor performance materiality in determining In determining performance the materiality, we made following significant judgements: the strength of the control environment and our experience auditing the financial statements of the Group, including the effect of misstatements identified in previous audits. Therefore, we consider the same performance materiality percentage to be appropriate. In determining performance the materiality, we made following significant judgements: the strength of the control environment and our experience auditing the financial statements of the Company, including the effect of misstatements identified in previous audits. Therefore, we consider the same performance materiality percentage to be appropriate. 222222222222222222222222222222222222222222222222 Specific materiality We determine specific materiality for one or more particular classes of transactions, account balances or disclosures for which misstatements of lesser amounts than materiality for the financial statements as a whole could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements. 222222222222222222222222222222222222222222222222 Specific materiality threshold We determined a lower level of specific materiality the following areas: for We determined a lower level of specific materiality the following areas: for Directors’ remuneration Directors’ remuneration Related party transactions Related party transactions 222222222222222222222222222222222222222222222222 We determine a threshold for reporting unadjusted differences to the audit committee. Communication of misstatements to the audit committee 222222222222222222222222222222222222222222222222 Threshold for communication £15,000 and misstatements below £23,800 and misstatements below that threshold that, in our view, that threshold that, in our view, warrant reporting on qualitative warrant reporting on qualitative grounds. grounds. 222222222222222222222222222222222222222222222222 The graph below illustrates how performance materiality interacts with our overall materiality and the tolerance for potential uncorrected misstatements. Overall materiality – Group Overall materiality – Parent company FSM: Financial statements materiality, PM: Performance materiality, TFPUM: Tolerance for potential uncorrected misstatements 16 M S I N T E R N A T I O N A L p l c Independent auditor’s report to the members of MS INTERNATIONAL plc Continued An overview of the scope of our audit We performed a risk-based audit that requires an understanding of the group’s and the parent company’s business and in particular matters related to: Understanding the group, its components, and their environments, including group-wide controls the engagement team obtained an understanding of the group and its environment, including group-wide controls, and assessed the risks of material misstatement at the group level; the engagement team obtained an understanding of the individual components, including component specific controls, and assessed the risks of material misstatement at the group level; planning discussions were held between the engagement team and the group’s management team walkthroughs were performed on key areas of focus to understand the controls and assess the design effectiveness of these. Identifying significant components we identified 2 significant components, based on their significance to key performance and position measures within the financial information of the group, which we performed a full-scope audit on the financial information, including the parent company, and specified audit procedures on 5 components within the group which included significant risks or material balances. The remaining components were subject to analytical procedures. We did not identify any significant components based on qualitative factors, such as specific uses or concerns over specific components. Type of work to be performed on financial information of parent and other components (including how it addressed the key audit matters) the engagement team performed a full-scope audit of the financial statements of the parent company, and of the financial information of the subsidiary undertakings which are subject to a statutory audit. This provided us with 70% coverage on the revenue balance. We selected a further 5 components to give us coverage over an additional 22% of the revenue balance. Communications with component auditors all audit work was performed by Grant Thornton UK LLP. Performance of our audit We performed a full-scope audit of the financial statements of the parent company. The operations that were subject to full-scope audit procedures made up 70% per cent of consolidated revenues and 106% per cent of total profit before tax. We attended the parent company’s primary location in Doncaster to perform audit procedures (including a year end inventory count) as well as observing inventory in Norwich and the Netherlands which relate to other components within the Group. Audit approach Full-scope audit Specified audit procedures Analytical procedures Other information No of % coverage of total assets components % coverage revenue % coverage PBT 2 5 6 61% 37% 2% 70% 22% 8% 106% -3% -3% The directors are responsible for the other information. The other information comprises the information included in the annual report, other than the financial statements and our auditor’s report thereon. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the financial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. 17 (cid:1) (cid:1) (cid:1) (cid:1) (cid:1) (cid:1) (cid:1) (cid:1) M S I N T E R N A T I O N A L p l c Independent auditor’s report to the members of MS INTERNATIONAL plc Continued Our opinion on other matters prescribed by the Companies Act 2006 is unmodified In our opinion, based on the work undertaken in the course of the audit: the information given in the strategic report and the directors’ report for the financial year for which the financial statements are prepared is consistent with the financial statements; and the strategic report and the directors’ report have been prepared in accordance with applicable legal requirements. Matter on which we are required to report under the Companies Act 2006 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. Matters on which we are required to report by exception 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 for the financial statements As explained more fully in the directors’ responsibilities statement, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the directors are responsible for assessing the group’s and the parent company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the group or the parent company or to cease operations, or have no realistic alternative but to do so. Auditor’s responsibilities for the audit of the financial statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report. Explanation as to what extent the audit was considered capable of detecting irregularities, including fraud Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. Owing to the inherent limitations of an audit, there is an unavoidable risk that material misstatements in the financial statements may not be detected, even though the audit is properly planned and performed in accordance with the ISAs (UK). The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below: The Group is subject to many laws and regulations where the consequences of non-compliance could have a material effect on amounts or disclosures in the financial statements. We identified the following laws and regulations as the most likely to have a material effect if non-compliance were to occur; financial reporting legislation, tax legislation, anti-bribery legislation and employment law. 18 (cid:1) (cid:1) (cid:1) (cid:1) (cid:1) (cid:1) (cid:1) M S I N T E R N A T I O N A L p l c Independent auditor’s report to the members of MS INTERNATIONAL plc Continued Explanation as to what extent the audit was considered capable of detecting irregularities, including fraud (continued) We identified areas of laws and regulations that could reasonably be expected to have a material effect on the financial statements from our general commercial and sector experience, through discussion with the directors and the Audit Committee, and from inspection of the group’s board minutes and legal and regulatory correspondence. We discussed the policies and procedures regarding compliance with laws and regulations across the Group with the directors and the Audit Committee; We assessed the susceptibility of MS INTERNATIONAL plc’s consolidated financial statements to material misstatement, including how fraud might occur by meeting with management from relevant parts of the business to understand where management considered there was a susceptibility to fraud. We also considered performance targets and their influence on efforts made by management to manage earnings or influence the perceptions of analysts. The engagement partner’s assessment of the appropriateness of the collective competence and capabilities of the engagement team included consideration of the engagement team’s: – understanding of, and practical experience with, audit engagements of a similar nature and complexity, through appropriate training and participation; – knowledge of the industry in which the Group and parent company operate; and – understanding of the legal and regulatory frameworks applicable to the Group and the parent company. Audit procedures performed by the engagement team included: – evaluation of the programmes and controls established to address the risks related to irregularities and fraud; – testing manual journal entries, in particular journal entries relating to management estimates and entries determined – to be large or relating to unusual transactions; – identifying and testing related party transactions by agreeing to underlying records and obtaining confirmation for directors’ emoluments. These audit procedures were designed to provide reasonable assurance that the financial statements were free from fraud or error. The risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error and detecting irregularities that result from fraud is inherently more difficult than detecting those that result from error, as fraud may involve collusion, deliberate concealment, forgery or intentional misrepresentations. Also, the further removed non-compliance with laws and regulations is from events and transactions reflected in the financial statements, the less likely we would become aware of it. 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. Donna Steel Senior Statutory Auditor for and on behalf of Grant Thornton UK LLP Statutory Auditor, Chartered Accountants Sheffield 27 June 2022 19 (cid:1) (cid:1) (cid:1) (cid:1) M S I N T E R N A T I O N A L p l c Consolidated income statement For the year ended 30th April, 2022 Continuing operations 2021 Total £’000 61,539 Revenue Cost of sales (44,218) 2222222222222222222222222222222222222 2222 2222 17,321 Gross profit 2022 Total £’000 74,524 (54,121) Notes 3/4 20,403 (2,581) Distribution costs Administrative expenses (12,954) – Other operating income 2222222222222222222222222222222222222 2222 2222 (15,535) 2222222222222222222222222222222222222 2222 2222 1,786 Group operating profit (3,304) (12,097) 1,185 (14,216) 4/5 6 6,187 Share of net profit of joint venture Interest received Interest paid Other finance costs-pensions 28 10 (92) (140) (222) 2222222222222222222222222222222222222 2222 2222 1,592 Profit before taxation Taxation (415) 2222222222222222222222222222222222222 2222 2222 Profit for the year attributable to equity holders of the parent 1,177 2222222222222222222222222222222222222 2222 2222 Basic earnings per share 7.2p 7.0p Diluted earnings per share 2222222222222222222222222222222222222 2222 2222 – 1 (95) (126) (220) 5,967 (1,035) 30.9p 29.6p 16 8 8 8 4,932 10 10 9 Consolidated statement of comprehensive income For the year ended 30th April, 2022 Notes 2022 Total £’000 2021 Total £’000 4,932 1,177 Profit for the year attributable to equity holders of the parent 2222222222222222222222222222222222222 2222 2222 Exchange differences on retranslation of foreign operations (38) 2222222222222222222222222222222222222 2222 2222 (38) Net other comprehensive loss to be reclassified to profit or loss in subsequent years 2222222222222222222222222222222222222 2222 2222 1,213 Remeasurement gains on defined benefit pension scheme (230) Deferred tax on remeasurement on defined benefit scheme – Revaluation of land and buildings – Deferred tax on revaluation surplus on land and buildings 2222222222222222222222222222222222222 2222 2222 Net other comprehensive income not being reclassified to profit or loss 983 in subsequent years 2222222222222222222222222222222222222 2222 2222 2,122 Total comprehensive income for the year attributable to equity holders of the parent 2222222222222222222222222222222222222 2222 2222 1,601 (145) 3,868 (798) 24 9 12 9 4,526 8,855 (603) (603) 20 M S I N T E R N A T I O N A L p l c Consolidated and company statement of changes in equity For the year ended 30th April, 2022 Capital Share redemption reserve capital £’000 £’000 Other Revaluation reserve £’000 reserves £’000 Currrency Special translation reserve reserve £’000 £’000 Treasury shares £’000 Total Retained shareholders’ earnings funds £’000 £’000 – – – – – – – (38) 901 – 224 – 1,840 – 2,815 – 6,055 – 1,629 – 30,128 1,177 (3,059) 19,723 1,177 (a) Group At 30th April, 2020 Profit for the year Other comprehensive (loss)/income Total comprehensive – (loss)/income 2,122 – Dividends paid (note 11) (578) – Purchase of own shares (note 23) (636) Cancellation of shares – – 222222222222 222 222 222 222 222 222 222 222 222 At 30th April, 2021 31,036 Profit for the year 4,932 Other comprehensive income/(loss) Total comprehensive – income/(loss) 8,855 – Dividends paid (note 11) (1,316) 222222222222 222 222 222 222 222 222 222 222 222 At 30th April, 2022 38,575 222222222222 222 222 222 222 222 222 222 222 222 (2,789) 20,399 4,932 2,160 (578) – (906) – – (636) 906 (38) – – – – – – (56) (2,789) 24,673 5,590 (1,316) – – – 56 1,629 – 6,055 – 2,815 – 1,784 – 3,868 – (603) – 186 – 957 – 1,784 1,629 9,923 2,815 – – – – – – – – 3,868 3,923 (417) (603) 957 658 983 945 – – – – – – – – – – – – – – 901 – – – – – 56 1,840 – – – – – (56) (b) Company 7,620 At 30th April, 2020 24,549 – Profit for the year 1,548 – Other comprehensive income 899 – Total comprehensive income 2,447 – Dividends paid (note 11) (578) – Purchase of own shares (note 23) (636) Cancellation of shares – – 222222222222 222 222 222 222 222 222 222 222 222 At 30th April, 2021 7,620 25,782 Profit for the year – 3,362 Other comprehensive income – 1,232 Total comprehensive income – 4,594 – Dividends paid (note 11) (1,316) 222222222222 222 222 222 222 222 222 222 222 222 At 30th April, 2022 29,060 222222222222 222 222 222 222 222 222 222 222 222 (3,059) 15,618 1,548 899 2,447 (578) – (906) (2,789) 16,581 3,362 1,232 4,594 (1,316) 1,629 – – – – – – – – – – (636) 906 1,629 – – – – 1,784 – – – – 957 – – – – (2,789) 19,859 – – – – – – – – – – – – – – – – – – – – – – – – 1,784 7,620 1,629 – – – – 957 – – 21 M S I N T E R N A T I O N A L p l c Consolidated and company statements of financial position At 30th April, 2022 Group Company 2022 £’000 2021 £’000 2022 £’000 2021 £’000 Notes 21 13 14 15 16 17 19,113 530 3,558 – 36 1,606 24,537 1,479 3,002 – 34 1,435 1,017 5,029 – 18,126 – 1,374 ASSETS Non-current assets 935 Property, plant and equipment 5,486 Right-of-use assets Intangible assets – 17,313 Investments in subsidiaries Investment in joint venture – 1,600 Deferred income tax asset 22222222222222222222222222 2222 2222 2222 2222 25,334 22222222222222222222222222 2222 2222 2222 2222 Current assets 1,498 Inventories Trade and other receivables 16,135 – Contract assets Income tax receivable 141 Prepayments 543 Cash and cash equivalents 943 – Restricted cash held in Escrow 22222222222222222222222222 2222 2222 2222 2222 19,260 22222222222222222222222222 2222 2222 2222 2222 44,594 TOTAL ASSETS 22222222222222222222222222 2222 2222 2222 2222 12,423 9,369 1,998 194 2,010 17,390 6,165 2,592 15,394 – – 218 3,258 – 16,327 11,396 1,773 6 1,352 18,092 1,158 18 19 26 25,546 21,462 47,008 50,104 80,591 30,487 49,549 74,392 24,843 20 20 22 23 23 23 23 23 23 1,784 957 7,620 – 1,629 – (2,789) 19,859 1,784 957 2,815 9,923 1,629 (417) (2,789) 24,673 1,784 957 2,815 6,055 1,629 186 (2,789) 20,399 EQUITY AND LIABILITIES Equity 1,784 Share capital Capital redemption reserve 957 Other reserves 7,620 Revaluation reserve – Special reserve 1,629 Currency translation reserve – Treasury shares (2,789) Retained earnings 16,581 22222222222222222222222222 2222 2222 2222 2222 25,782 TOTAL EQUITY SHAREHOLDERS’ FUNDS 22222222222222222222222222 2222 2222 2222 2222 Non-current liabilities 7,095 Defined benefit pension liability Deferred income tax liability – Lease liabilities 5,214 22222222222222222222222222 2222 2222 2222 2222 12,309 22222222222222222222222222 2222 2222 2222 2222 Current liabilities 5,234 Trade and other payables Contract liabilities 874 Income tax payable – Lease liabilities 395 22222222222222222222222222 2222 2222 2222 2222 6,503 22222222222222222222222222 2222 2222 2222 2222 44,594 TOTAL EQUITY AND LIABILITIES 22222222222222222222222222 2222 2222 2222 2222 12,410 21,192 561 165 14,176 18,329 702 353 7,068 622 324 407 4,720 – 4,807 4,720 2,578 1,158 7,095 1,553 380 24 17 13 80,591 38,575 29,060 33,560 47,008 34,328 31,036 74,392 9,527 8,456 8,421 9,028 25 26 13 No profit and loss account is presented for the Company, as permitted by section 408 of the Companies Act 2006. The Company's profit for the financial year amounted to £3,362,000 (2021 – £1,548,000). The financial statements on page 20 to 58 of MS INTERNATIONAL plc, registered number 00653735, were approved by the Board of Directors on 27th June, 2022 and signed on its behalf by: Michael Bell, Executive Chairman Michael O’Connell, Finance Director 22 M S I N T E R N A T I O N A L p l c Consolidated and company cash flow statements For the year ended 30th April, 2022 Profit before taxation Note Group Company 2022 £’000 5,967 2021 £’000 1,592 2022 £’000 2,509 2021 £’000 92 – – 205 205 12/13 14 14 14 Adjustments to reconcile profit before taxation to cash generated from operating activities: Past service pension costs Depreciation charge of owned assets and right-of-use assets 895 Amortisation charge – Impairment of goodwill – Write off of acquired goodwill – Profit on sale of fixed assets (61) Share of net profit of joint venture – Termination of lease – Finance costs 366 Foreign exchange (losses)/gains – (Increase)/decrease in inventories 44 37 (Increase)/decrease in receivables Decrease/(increase) in prepayments (246) Increase in payables 1,296 (Decrease)/increase in progress payments (163) 24 Pension fund payments (600) 22222222222222222222222222 2222 2222 2222 2222 1,865 Cash generated from operating activities Net interest paid (49) Taxation (paid)/received – 22222222222222222222222222 2222 2222 2222 2222 1,816 1,666 237 348 8 (74) (28) (7) 222 516 3,377 (6,834) (237) 1,162 7,824 (600) 931 – – – (163) – – 292 – (1,094) 19 325 1,518 (252) (900) 1,746 227 349 – (169) – – 220 (142) (3,657) (1,541) 611 1,340 (3,660) (900) Net cash (outflow)/inflow from operating activities 3,185 (1) 151 9,377 (52) 460 391 (43) (447) 9,785 3,335 (99) 16 8 Investing activities Payments for acquisitions, net of cash acquired Dividends received from subsidiaries Purchase of property, plant and equipment Purchase of intangible assets Proceeds on disposal of property, plant and equipment Decrease/(increase) in cash held in the Escrow account maturing in more than 90 days 20 – 22222222222222222222222222 2222 2222 2222 2222 1,292 Net cash inflow/(outflow) from investing activities 22222222222222222222222222 2222 2222 2222 2222 – – (2,703) (54) 227 – 1,249 (578) – 185 (89) – (781) – 97 – 1,498 (268) – 62 (6,938) (6,165) 5,007 2,477 12 14 856 – 23 Financing activities (636) Purchase of own shares Lease payments (560) 11 Dividends paid (578) 22222222222222222222222222 2222 2222 2222 2222 (1,774) Net cash outflow from financing activities 22222222222222222222222222 2222 2222 2222 2222 1,334 Increase in cash and cash equivalents Opening cash and cash equivalents/(bank overdraft) (391) Exchange differences on cash and cash equivalents – 22222222222222222222222222 2222 2222 2222 2222 943 20 Closing cash and cash equivalents 22222222222222222222222222 2222 2222 2222 2222 1,306 16,125 (41) – (560) (1,316) – (405) (1,316) 657 17,390 45 2,315 943 – (636) (327) (578) 17,390 (1,721) (1,876) 18,092 (1,541) 3,258 23 M S I N T E R N A T I O N A L p l c Notes to the financial statements For the period ended 30th April, 2022 1 Authorisation of financial statements and statement of compliance with UK adopted International Accounting Standards MS INTERNATIONAL plc (the ‘Company’) is a public limited company incorporated and domiciled in England and Wales. The Company’s ordinary shares are traded on the Alternative Investment Market (AIM) market of the London Stock Exchange. The financial statements of the Company and its subsidiaries (together referred to as the ‘Group’) for the year ended 30th April, 2022 were authorised for issue by the Board of Directors on 27th June, 2022 and the statements of financial position were signed on the Board’s behalf by Michael Bell and Michael O’Connell. The Group’s and Company’s financial statements for the year ended 30th April, 2022 have been prepared in accordance with UK adopted International Accounting Standards. 222222222222222222222222222222222222222222222222 2 Accounting policies Basis of preparation The consolidated financial statements are presented in pounds sterling and all values are rounded to the nearest thousand (£’000) except where otherwise indicated. The principal accounting policies have been applied consistently to all years presented in these Group financial statements, unless otherwise stated. The consolidated financial statements have been prepared on a going concern basis. Going concern The financial statements have been prepared on a going concern basis. The Group’s business activities, together with factors likely to affect its future development, performance, and position are set out in the Chairman’s statement and Strategic report on pages 3 to 4 and 7 to 9 respectively. At 30th April, 2022, the Group held cash and cash equivalents of £18.09m with a further £1.12m of restricted cash held in an Escrow account maturing in greater than 90 days. The Group also has a number of large long-term contracts and a healthy orderbook. As such, the directors are satisfied that the Group has sufficient liquidity to meet its current liabilities and working capital requirements. The performance of the Group is dependent on a number of external factors and the wider economic environment. Despite the easing of Covid-19 restrictions, the Group still faces challenges and uncertainties. The increase in inflation, the cost and supply of raw materials, and soaring energy prices are all challenges for the Group. However, management remain vigilant and are regularly monitoring the impact of these external factors in order to mitigate any impact upon the business. Forecasts have been prepared for the 18 months following the reporting date, which the directors believe reflect a reasonable expectation, based on the information available at the date of signing these financial statements. The forecasts have been assessed for the potential impact of possible sensitivities, including a 10% fall in the forecasted revenue across the Group and a 10% increase in material prices. In all scenarios the Group has sufficient headroom to be able to continue to meet its liabilities as they fall due. As a result, the directors consider there to be no material uncertainties that could cast significant doubt on the Group’s ability to continue to operate as a going concern. They believe that the Group has sufficient financial resources to continue operating for the foreseeable future, being at least 18 months from the reporting date. As a result, the directors continue to adopt the going concern basis of accounting in preparation of these financial statements. Critical accounting estimates and assumptions In preparation of the financial statements, the Group’s management are required to make judgements, estimates, and assumptions that affect the reported amounts of amount of assets, liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and any other factors considered to be relevant. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis and any revisions are recognised in the period in which they are revised. The following estimates and judgements have a risk of causing material adjustments to the amounts recognised in these financial statements: 24 M S I N T E R N A T I O N A L p l c Notes to the financial statements Continued 2 (a) Accounting policies (continued) Contract revenue Judgement is required in determining the recognition of revenue either at a point in time or over time. Where contracts contain multiple performance obligations, revenue is measured over time only if the group’s performance does not create an asset with an alternative use to the Group. The majority of contracts within the Group do not meet this criteria and therefore revenue recognition is judged to be at a point in time. This assessment is detailed further in the accounting policy for revenue. (b) Pension 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. (c) Impairment of non-financial assets The Group’s impairment test for intangible assets with indefinite useful lives and goodwill 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 (see note 14). (d) Inventory provisions The level of inventory provisions carried within the financial statements is reviewed annually. The recoverability of the cost of the inventory is assessed by considering the nature and condition of the inventory, as well as applying assumptions about the future saleability or usage of items. The level of inventory provisions is disclosed in note 18 to the financial statements. (e) Valuation of land and buildings Land and buildings are held at fair value less depreciation and impairment. Fair value is an area of judgement as it is based on periodic valuations by external independent valuers, which are determined from market- based evidence. (f) Leased assets Leased assets and liabilities are measured at the present value of total lease payments, discounted using the interest rate implicit in the lease, or if that cannot be determined, the Group’s incremental borrowing rate. Management is therefore required to make a judgement to determine the discount rate for each individual lease. 222222222222222222222222222222222222222222222222 Basis of consolidation The Group financial statements incorporate the results of MS INTERNATIONAL plc, the results of its subsidiary undertakings, and the Group’s share of the results of the joint venture. Subsidiaries are those entities that are controlled by the Group by virtue of shareholdings. The Company holds, directly or indirectly, 100% of the share capital and 100% of the voting rights of all subsidiaries. All subsidiaries have a reporting date of 30th April. 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 on consolidation. Subsidiaries are fully consolidated from the effective date of acquisition, being the date on which the Group obtains control, and continue to be consolidated until the date that such control ceases. 222222222222222222222222222222222222222222222222 The Company’s investments in subsidiaries In its separate financial statements the Company’s investments in subsidiaries are carried at cost less provision for impairment. 222222222222222222222222222222222222222222222222 Investment in joint venture Joint ventures are entities over which the Group has joint control. Investments in joint ventures are accounted for using the equity method. Under the equity method of accounting, interest in joint ventures is initially recognised at cost, and the carrying amount is increased or decreased to recognise the Group’s share of the profit or loss of the joint venture after the date of acquisition. 222222222222222222222222222222222222222222222222 25 M S I N T E R N A T I O N A L p l c Notes to the financial statements Continued 2 Accounting policies (continued) Foreign currency translation The consolidated financial statements are presented in pounds sterling which is the Company’s functional and presentational currency. Each entity in the Group determines its own functional currency and the 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 functional currencies of the Group’s overseas subsidiaries are the US Dollar, the Euro, the Polish Zloty, the Brazilian Real and the Argentinean Peso. The assets and liabilities of the overseas subsidiaries are translated into the presentational 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 translation are taken directly to a separate component of equity. On disposal of a foreign entity, the deferred cumulative amount recognised in equity relating to that particular foreign operation is recognised in the income statement. 222222222222222222222222222222222222222222222222 Property, plant, and equipment Plant and equipment is stated at cost less accumulated depreciation and accumulated impairment losses. Such cost includes costs directly attributable to making the asset capable of operating as intended. 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 the 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. 222222222222222222222222222222222222222222222222 Business combinations Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of the consideration transferred, measured at acquisition date fair value and the amount of any non-controlling interest in the acquiree. The choice of measurement of non-controlling interest, either at fair value or at the proportionate share of the acquiree’s identifiable net assets is determined on a transaction by transaction basis. Acquisition costs incurred are expensed and included in administrative expenses. When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic circumstances, and pertinent conditions as at the acquisition date. 26 M S I N T E R N A T I O N A L p l c Notes to the financial statements Continued 2 Accounting policies (continued) Business combinations (continued) Goodwill is initially measured at cost being the excess of the aggregate of the acquisition-date fair value of the consideration transferred and the amount recognised for the non-controlling interest (and where the business combination is achieved in stages, the acquisition-date fair value of the acquirer’s previously held equity interest in the acquiree) over the net identifiable amounts of the assets acquired and the liabilities assumed in exchange for the business combination. Assets acquired and liabilities assumed in transactions separate to the business combinations, such as the settlement of pre-existing relationships or post-acquisition remuneration arrangements are accounted for separately from the business combination in accordance with their nature and applicable IFRSs. Identifiable intangible assets, meeting either the contractual-legal or separability criterion are recognised separately from goodwill. Contingent liabilities representing a present obligation are recognised if the acquisition-date fair value can be measured reliably. If the aggregate of the acquisition-date fair value of the consideration transferred and the amount recognised for the non-controlling interest (and where the business combination is achieved in stages, the acquisition-date fair value of the acquirer’s previously held equity interest in the acquiree) is lower than the fair value of the assets, liabilities and contingent liabilities and the fair value of any pre-existing interest held in the business acquired, the difference is recognised in 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. 222222222222222222222222222222222222222222222222 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 events or changes in circumstances indicate that the carrying amount may not be recoverable. The amortisation period and the amortisation method are reviewed 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 Non-compete agreement – over 3 years Customer relationships – over 8 to 10 years Order backlog – over 1 year Development costs – over 5 years Software costs – over 3 to 5 years Goodwill arising on acquisition of subsidiaries is the only intangible asset with an indefinite useful life. For impairment assessment purposes, intangible assets are grouped at the lowest levels for which there are largely independent cash inflows (cash-generating units). As a result, some assets are tested individually for impairment and others are tested at cash-generating unit level. Goodwill is allocated to those cash-generating units that are expected to benefit from synergies of a related business combination and represent the lowest level within the Group at which management monitors goodwill. 27 M S I N T E R N A T I O N A L p l c Notes to the financial statements Continued 2 Accounting policies (continued) Intangible assets (continued) Impairment losses are recognised at the amount by which the asset or cash-generating unit’s carrying amount exceeds its recoverable amount, which is the higher of fair value less costs of disposal and value-in-use. Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the income statement when the asset is derecognised. 222222222222222222222222222222222222222222222222 Leased assets For any new contracts entered into, the Group considers whether a contract is, or contains, a lease. A lease is defined as a contract, or part of a contract, that conveys the right to use an asset (the underlying asset) for a period of time in exchange for consideration. New leases are then recognised in the Consolidated statement of financial position as a right-of-use asset and a corresponding lease liability at the date at which the leased asset is available for use by the Group. Lease liabilities are measured at the present value of the lease payments unpaid at the recognition date, discounted using the interest rate implicit in the lease, or, if that rate cannot be determined, the Group’s incremental borrowing rate. Lease payments include fixed payments, variable lease payments that are based on an index or rate, less any lease incentives receivable. Following initial measurement, the liability will be reduced for payments made and increased for interest. Interest will be charged to profit or loss as an interest expense. The liability will be remeasured to reflect any reassessment of or modification to the lease contract when applicable. When the lease liability if remeasured, the corresponding adjustment is also reflected in the right-of-use asset, or profit and loss if the right-of-use asset is already reduced to zero. Right-of-use assets are measured at cost, which comprises the following: the amount of the initial measurement of lease liability, any lease payments (net of any incentives received) made in advance of the lease commencement date, any initial direct costs incurred, an estimate of any costs to dismantle or remove the asset at the end of the lease. The Group depreciates the right-of-use asset on a straight-line basis from the lease commencement date to the earlier of the useful economic life or the end of the lease term. Payments associated with short-term leases, defined as a lease with a term of 12 months or less, and leases of low-value assets are recognised on a straight-line basis as an expense in profit or loss. 222222222222222222222222222222222222222222222222 Research and development Costs relating to research are charged to the income statement as incurred. Costs that are directly attributable to a project’s development phase are recognised as intangible assets, provided they meet the following recognition requirements: the development costs can be measured reliably. the project is technically and commercially feasible. the Group intends to and has sufficient resources to complete the project. the Group has the ability to use or sell the asset. the asset will generate probable future economic benefits. Development costs not meeting these criteria for capitalisation are expensed as incurred. 222222222222222222222222222222222222222222222222 28 (cid:0) (cid:0) (cid:0) (cid:0) (cid:0) (cid:0) (cid:0) (cid:0) (cid:0) M S I N T E R N A T I O N A L p l c Notes to the financial statements Continued 2 Accounting policies (continued) Inventories Inventories are valued at the lower of 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. Contract costs relating to non-prototype research and development expenditure are capitalised within work in progress when the costs are expected to be recovered. 222222222222222222222222222222222222222222222222 Trade and other receivables Trade receivables, which generally have 30 day terms, are recognised and carried at original invoice amount less an allowance for any uncollectable amounts based on expected credit losses. These are the expected shortfalls in contractual cash flows, considering the potential for default at any point during the lifetime of the receivable. The Group uses its historical experience, external indicators and forward looking information to make this assessment. Trade receivables are classified as financial assets measured as amortised cost. 222222222222222222222222222222222222222222222222 Treasury shares Own shares held by the Company and Group are classified in equity and are recognised at cost. No gain or loss is recognised on the purchase, sale, issue, or cancellation of the Group’s own equity instruments. 222222222222222222222222222222222222222222222222 Cash and cash equivalents Cash and cash equivalents in the statement of financial 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, net of outstanding overdrafts which are repayable on demand. 222222222222222222222222222222222222222222222222 Restricted cash held in Escrow Cash held in Escrow provides security to Lloyds Bank plc in respect of any guarantees, indemnities, and performance bonds given by the Group in the ordinary course of business. In the statement of financial position amounts not maturing within 90 days of the deposit date are separately disclosed in restricted cash held in Escrow. 222222222222222222222222222222222222222222222222 Trade and other payables Trade and other payables are initially regarded at their fair value and thereafter at amortised cost using the effective interest rate method. Trade payables are classified as financial liabilities at amortised cost. 222222222222222222222222222222222222222222222222 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 Consolidated income statement and expensed in the period in which they occur. Actual gains/losses less amount included in net interest costs are included in other comprehensive income. 29 (cid:0) (cid:0) M S I N T E R N A T I O N A L p l c Notes to the financial statements Continued 2 Accounting policies (continued) Pension schemes (continued) 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. The value of a net pension liability is restricted to the sum of the present value of contracted deficit reduction contributions. Where the present value of contracted deficit reduction contributions exceeds the net pension liability, the surplus is recognised as a further liability within the financial statements in accordance with IFRIC 14. Contributions to defined contribution schemes are recognised in the income statement in the year in which they become payable. 222222222222222222222222222222222222222222222222 Revenue Revenue arises from the following services provided to customers and sale of products: The design and manufacture of defence equipment (‘Defence’). The manufacture of fork-arms and open die forgings (‘Forgings’). The design, manufacture, construction, and maintenance of petrol station superstructures (‘Petrol Station Superstructures’). The design, manufacture, installation, and service of corporate branding, including media facades, way-finding signage, public illumination, creative lighting solutions, and the complete appearance of petrol station superstructures and forecourts (‘Corporate Branding’). To determine whether to recognise revenue, the Group follows the five steps required when applying IFRS 15: 1. 2. 3. 4. 5. Identify the contract with the customer. Identify the separate performance obligations specified within each contract. Determine the transaction price specified within each contract. Allocate the transaction price to the performance obligation identified. Recognise revenue once the performance obligation have been satisfied. Revenue is recognised either at a point in time or over time, when the performance obligations are satisfied. The Group recognises contract liabilities (progress payments) for consideration received in respect of unsatisfied performance obligations and reports these within current liabilities in the Statement of financial position. ‘Defence’ The ‘Defence’ division enters into contracts with its customers to provide defence equipment. Most contracts contain multiple performance obligations for the delivery of a number of products. Each product is identifiable and separable from the other products included in the contract. The division recognises revenue for these at a point in time, when the goods have been delivered and the control of the goods has transferred to the customer. Occasionally revenue is recognised in accordance with a bill-and-hold arrangement when requested by the customer. Under these instances revenue is recognised before delivery of the goods when the following criteria are met: the buyer requests a bill-and-hold arrangement the goods must be ready for physical transfer to the customer and must be separately identified as belonging to the customer ownership risks are passed to the customer The division also provides support contracts to customers in which invoices are billed monthly and revenue is recognised over time. As part of the contracts entered into, customers may make payments to the division in advance of the goods being delivered. These are classified as contract liabilities, which are only recognised as revenue once the performance obligation has been satisfied. 30 (cid:0) (cid:0) (cid:0) (cid:0) (cid:0) (cid:0) (cid:0) M S I N T E R N A T I O N A L p l c Notes to the financial statements Continued 2 Accounting policies (continued) Revenue (continued) ‘Forgings’ Revenue from the sale of fork-arms and open die forgings is recognised at a point in time upon delivery of the products, either when or as the ‘Forgings’ division transfers control of the products to the customer. Customers are invoiced once control of the product has transferred to the customer. ‘Petrol Station Superstructures’ The ‘Petrol Station Superstructures’ division enters into contracts with its customers to provide petrol station superstructures. The contracts contain a single performance obligation for the delivery of the product. The division assesses each contract to determine whether revenue should be recognised at a point in time, when the product is delivered to the customer, or recognised over time, when the contracts stipulate that the division is entitled to reward for performance to date. In order to establish the entitlement for performance to date, the division considers if it has an enforceable right to payment for performance completed to date and the division’s performance to date does not create an asset with an alternative use to the Group. The majority of contracts have revenue which is measured at a point in time. As part of the contracts entered into, customers may make payments to the division in advance of the delivery of the product. These are classified as contract liabilities, which are only recognised as revenue once the performance obligation has been satisfied. ‘Corporate Branding’ The ‘Corporate Branding’ division enters into contracts with its customers to perform the re-imaging of corporate branding and signage for various industries. Additional engagements include the repair and maintenance of images on petrol station forecourts. Control of the goods does not pass to the customer until either the goods are delivered to site for material only projects, or upon completion of the installation for materials and installation projects. Accordingly, revenue is recognised at the point in time when this occurs. As part of some of the contracts entered into, customers may make payments to the division in advance of the goods being delivered. These are classified as contract liabilities and are only recognised as revenue once the performance obligation has been satisfied. 222222222222222222222222222222222222222222222222 Government grants Government grants are recognised where there is reasonable assurance that the grant will be received and all attaching conditions will be complied with. When the grant relates to an expense item, it is recognised as income over the period necessary to match the grant on a systematic basis to the costs that it is intended to compensate. Where the grant relates to an asset, the fair value is credited to a deferred income account and is released to the income statement over the expected useful life of the relevant asset by equal annual instalments. During the years ended 30th April, 2022 and 30th April, 2021 the Group has received Covid-19 related government grants in the UK, the Netherlands, USA and Poland. These have been recognised as income within staff costs to match the labour costs the grant has compensated. Details of Covid-19 related government grants can be found in note 7. 222222222222222222222222222222222222222222222222 Taxes Income tax is charged or credited directly to other comprehensive income or equity if it relates to items that are credited or charged to, respectively, other comprehensive income or equity. Otherwise income tax is recognised in the income statement. 222222222222222222222222222222222222222222222222 Current tax Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the statement of financial position date. 222222222222222222222222222222222222222222222222 31 M S I N T E R N A T I O N A L p l c Notes to the financial statements Continued 2 Accounting policies (continued) Deferred income 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. Increases/decreases in deferred income tax assets and liabilities arising from changes to tax rates enacted or substantively enacted at the statement of financial position date are recognised immediately in the Consolidated income statement or the Consolidated statement of comprehensive income. 222222222222222222222222222222222222222222222222 Dividends payable Dividends are recognised when they become legally payable. In the case of interim dividends this is when paid. In the case of final dividends this is when approved by the shareholders at the AGM. 222222222222222222222222222222222222222222222222 Share-based payments The Group measures the cost of equity-settled transactions with employees by reference to the fair value of the equity instruments at the date at which they are granted and is recognised as an expense over the vesting period, which ends on the date on which the relevant employees become fully entitled to the award. Judgement is required in determining the most appropriate valuation model for a grant of equity instruments, depending on the terms and conditions of the grant. Management are also required to use judgement in determining the most appropriate inputs to the valuation model including expected life of the option, volatility and dividend yield. 222222222222222222222222222222222222222222222222 Standards, amendments and Interpretations to existing Standards that are not yet effective and have not been adopted early by the Group At the date of authorisation of these financial statements, there are no new, but not yet effective, standards, amendments to existing standards, or interpretations that have been published by the IASB that will have a material impact on these financial statements. 222222222222222222222222222222222222222222222222 3 Revenue The Group’s revenue disaggregated by pattern of revenue recognition and category is as follows: 2021 £’000 61,373 – 166 2222222222222222222222222222222222222 2222 2222 61,539 2222222222222222222222222222222222222 2222 2222 Revenue recognised at a point in time Revenue recognised over time Rendering of services 2022 £’000 72,438 1,795 291 Total revenue 74,524 During the year the Group recognised £11,306,000 (2021 – £6,341,000) of revenue that was included in the contract liability balance at 30th April, 2021 (note 26). 222222222222222222222222222222222222222222222222 32 (cid:0) (cid:0) (cid:0) M S I N T E R N A T I O N A L p l c Notes to the financial statements Continued 4 Segment information The following table presents revenue and profit and certain assets and liability information regarding the Group’s divisions for the years ended 30th April, 2022 and 30th April, 2021. 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 ‘Corporate Branding’ division is engaged in the design, manufacture, installation, and service of corporate brandings. 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 therefore not allocated to operating segments. ‘Petrol Station ‘Defence’ ‘Forgings’ Superstructures’ 2022 £’000 2021 £’000 2022 £’000 2021 £’000 2022 £’000 2021 £’000 ‘Corporate Branding’ 2021 £’000 2022 £’000 Total 2022 £’000 2021 £’000 Segmental revenue 9,970 15,143 11,774 13,009 12,972 74,853 61,794 30,219 27,078 16,482 Total revenue Revenue from other segments (255) – 22222222222 222 222 222 222 222 222 222 222 222 222 Revenue from external customers 30,219 27,078 16,482 9,970 14,898 11,629 12,925 12,862 74,524 61,539 22222222222 222 222 222 222 222 222 222 222 222 222 (245) (329) (145) (110) (84) – – – Segment result Operating profit Share of net profit of joint venture Net finance costs 22222222222 Profit before taxation Taxation 22222222222 Profit for the year 22222222222 Segmental assets Assets attributable to segments Unallocated assets* 22222222222 Total assets 22222222222 Segmental liabilities Liabilities attributable to segments Unallocated liabilities* 22222222222 Total liabilities 22222222222 4,123 2,570 2,245 425 1,074 448 (1,255) (1,657) 6,187 – (220) 1,786 28 (222) 222 222 1,592 5,967 (415) (1,035) 222 222 1,177 222 222 4,932 33,393 35,414 7,883 4,066 9,380 8,492 8,050 23,643 24,795 3,547 2,445 3,109 2,970 3,591 8,468 58,706 56,440 21,885 17,952 222 222 80,591 74,392 222 222 3,510 33,890 33,720 9,636 8,126 222 222 42,016 43,356 222 222 Other segmental information 781 Capital expenditure 389 1,361 Depreciation 561 Amortisation 237 – Impairment 348 – 22222222222 222 222 222 222 222 222 222 222 222 222 186 2,703 263 1,746 182 227 348 349 1,933 210 10 – 24 545 – – 131 377 55 – 440 176 – – 195 714 43 – 186 261 174 349 * Unallocated assets include certain fixed assets (including all UK properties), current assets and deferred income tax assets. Unallocated liabilities include the defined pension benefit scheme liability, the deferred income tax liability, and certain current liabilities. Assets and liabilities attributable to segments comprise the assets and liabilities of each segment adjusted to reflect the elimination of the cost of investment in subsidiaries and the provision of financing loans provided by MS INTERNATIONAL plc. Revenue between segments is determined on an arm’s length basis. Segment results, assets, and liabilities include items directly attributable to the segment as well as those that can be allocated on a reasonable basis. 33 M S I N T E R N A T I O N A L p l c Notes to the financial statements Continued 4 Segment information (continued) Geographical analysis The following table presents revenue and expenditure and certain assets and liabilities information by geographical segment for the years ended 30th April, 2022 and 30th April, 2021. The Group’s geographical segments are based on the location of the Group’s assets. United Kingdom Europe USA South America Total 2021 £’000 2022 £’000 2022 £’000 1,427 74,524 61,539 13 30,487 24,843 20,160 17,373 4,327 887 50,104 49,549 37,235 39,457 6,147 30 42,016 43,356 28,380 32,516 4,112 781 – 133 2,377 22222222222 222 222 222 222 222 222 222 222 222 222 2022 £’000 External revenue by origin 41,665 41,191 11,599 12,987 18,917 Non-current assets 3,706 5,913 6,899 6,024 Current assets 3,729 9,223 Liabilities Capital expenditure 193 2022 £’000 5,934 2,343 3,751 87 2,306 698 7,081 301 – – 2022 £’000 2,703 137 644 2021 £’000 2021 £’000 2021 £’000 2021 £’000 Revenue disaggregated by destination is shown as follows: 2022 £’000 % £’000 United Kingdom Europe USA South America Rest of World 222222222222222222222222 Total revenue 222222222222222222222222 31,287 17,103 19,406 2,421 4,307 22,259 26,574 5,934 1,427 5,345 2222 2222 2222 61,539 2222 2222 2222 42% 23% 26% 3% 6% 74,524 100% 2021 % 36% 43% 10% 2% 9% 222 100% 222 The Group’s largest customer, which is reported in the ‘Defence’ division, contributed 14.2% to the Group’s revenue (2021 – 14.9% in the ‘Defence’ division from a different customer). Only one other customer, also in the ‘Defence’ division, contributed more than 10% to the Group’s revenue with a contribution of 11.4% (2021 – 11.3% in the ‘Defence’ division). 222222222222222222222222222222222222222222222222 5 Group operating profit Profit before taxation is stated after charging/(crediting): Depreciation of tangible assets – owned assets Depreciation of right-of-use assets Amortisation of intangible assets Impairment of intangible assets Profit on sale of tangible assets Short-term and low value leases Government grant: Covid-19 job retention income Foreign exchange (gains)/losses Cost of inventories recognised as an expense Research and development costs Defined contribution pension expense Share options expense Past service pension costs: guaranteed minimum pension equalisation adjustment (note 24) Fees payable to the Group’s auditor and associates: For the audit of the Group’s financial statements For the audit of the Group’s subsidiary companies’ financial statements For audit related services 2022 £’000 1,375 371 227 349 (169) 91 (1,636) (1,028) 40,560 1,416 237 29 2021 £’000 1,361 305 237 348 (74) 135 (1,690) 209 29,880 1,064 217 29 – 205 101 61 15 86 60 15 Total administrative expenses are included within Group operating profit. 222222222222222222222222222222222222222222222222 34 M S I N T E R N A T I O N A L p l c Notes to the financial statements Continued 6 Other operating income 2021 £’000 – 2222222222222222222222222222222222222 2222 2222 – 2222222222222222222222222222222222222 2222 2222 Settlement of contractual dispute 2022 £’000 1,185 1,185 During the year, the Group settled a contractual dispute, the terms of which are confidential. The amount received has been recognised in other income. The Group has incurred £0.6m of legal costs in the current year in relation to this matter. These costs are included in administrative expenses. 222222222222222222222222222222222222222222222222 7 Employee Information The average number of employees, including executive directors, during the period was as follows: Production Technical Distribution Administration 222222222222222222222222 222222222222222222222222 (a) Staff costs Group 2022 Number 252 71 26 98 2021 Number 243 72 32 96 2022 Number 74 23 2 39 2222 2222 2222 138 2222 2222 2222 443 447 Including executive directors, employment costs were as follows: Wages and salaries Covid-19 job retention scheme income Social security costs Pension costs Share options expense 222222222222222222222222 222222222222222222222222 Group 2021 £’000 17,420 (1,690) 3,263 557 29 2022 £’000 18,942 (1,636) 3,233 570 29 2022 £’000 7,139 – 722 352 29 2222 2222 2222 8,242 2222 2222 2222 19,579 21,138 Company 2021 Number 73 24 5 32 222 134 222 Company 2021 £’000 6,123 (313) 647 344 29 222 6,830 222 The Covid-19 job retention scheme income has been received in the following countries: 2021 £’000 313 1,113 254 10 2222222222222222222222222222222222222 2222 2222 1,690 2222222222222222222222222222222222222 2222 2222 UK The Netherlands USA Poland 2022 £’000 – 1,310 251 75 1,636 (b) Directors’ emoluments 2022 £’000 2021 £’000 Aggregate directors’ emoluments (note 30) Pension contributions 1,570 42 2222222222222222222222222222222222222 2222 2222 1,612 2222222222222222222222222222222222222 2222 2222 1,810 52 1,862 Directors’ emoluments are considered further within the Directors’ remuneration report presented on pages 71 and 72. 222222222222222222222222222222222222222222222222 35 M S I N T E R N A T I O N A L p l c Notes to the financial statements Continued 8 Finance income and expense 2022 £’000 2021 £’000 1 Finance income Bank interest income Bank overdraft interest Interest on leases Other interest 10 2222222222222222222222222222222222222 2222 2222 10 2222222222222222222222222222222222222 2222 2222 (60) (30) (2) 2222222222222222222222222222222222222 2222 2222 (92) (140) 2222222222222222222222222222222222222 2222 2222 (232) 2222222222222222222222222222222222222 2222 2222 (222) 2222222222222222222222222222222222222 2222 2222 Interest paid Pension scheme interest Net finance expense Finance expense (44) (51) – (95) (126) (221) (220) 1 9 (a) Taxation The charge for taxation comprises: 2022 £’000 2021 £’000 Current tax United Kingdom corporation tax Adjustments in respect of previous years Foreign corporation tax 410 25 30 2222222222222222222222222222222222222 2222 2222 465 2222222222222222222222222222222222222 2222 2222 Group current tax expense 667 (10) 120 777 Deferred tax (note 17) Origination and reversal of temporary differences Adjustments in respect of previous years Adjustments in respect of difference in applicable tax rate (40) (10) – 2222222222222222222222222222222222222 2222 2222 (50) 2222222222222222222222222222222222222 2222 2222 415 2222222222222222222222222222222222222 2222 2222 Group deferred tax expense/(credit) Total tax expense on profit 261 (5) 2 1,035 258 Tax relating to items charged to other comprehensive income: 2022 £’000 2021 £’000 Deferred tax charged through other comprehensive income Deferred tax on measurement gains on pension scheme current year Deferred tax on revaluation surplus on land and buildings (230) – 2222222222222222222222222222222222222 2222 2222 (230) 2222222222222222222222222222222222222 2222 2222 Deferred tax in the Consolidated statement of comprehensive income (145) (798) (943) 36 2022 £’000 5,967 1,134 (247) 161 (10) (5) 2 2021 £’000 (164) 262 25 (10) M S I N T E R N A T I O N A L p l c Notes to the financial statements Continued 9 (b) Factors affecting the tax charge for the year The tax charge assessed for the year is lower than (2021: higher than) the standard rate of corporation tax in the UK of 19% (2021 – 19%). The differences are explained below: Profit before tax 1,592 2222222222222222222222222222222222222 2222 2222 302 Profit multiplied by standard rate of corporation tax of 19% (2021 – 19%) Effects of: Expenses not deductible for tax purposes Adjustments in respect of overseas tax rates Current tax adjustment in respect of previous years Deferred tax adjustment in respect of previous years Deferred tax adjustment in respect of different applicable rates – 2222222222222222222222222222222222222 2222 2222 415 2222222222222222222222222222222222222 2222 2222 Total taxation expense for the year 1,035 9 (c) Factors affecting future tax charge The rate of corporation tax in the UK will remain at 19% until April 2023 when it will increase to 25%. As the changes have been enacted as at 30th April, 2022, deferred income tax has been provided at 25% or a blended rate depending upon when the underlying temporary timing differences are expected to unwind. Deferred tax in relation to intangibles recognised on the acquisition of ‘MSI-Sign Group B.V.’ has been provided at 25.8%, being the main corporation tax rate in The Netherlands. 222222222222222222222222222222222222222222222222 10 Earnings per share The calculation of basic earnings per share of 30.9p (2021 – 7.2p) is based on the profit for the year attributable to equity holders of the parent of £4,932,000 (2021 – £1,177,000) and on a weighted average number of ordinary shares in issue of 15,949,691 (2021 – 16,342,816). At 30th April, 2022 there were 1,055,000 (2021 – 380,000) dilutive shares on option with a weighted average effect of 716,575 (2021 – 391,667) giving a diluted earnings per share of 29.6p (2021 – 7.0p). Number of ordinary shares in issue at start of the year Cancellation of ordinary shares during the year (555,000) 2222222222222222222222222222222222222 2222 2222 17,841,073 2222222222222222222222222222222222222 2222 2222 Number of ordinary shares in issue at the end of the year 17,841,073 2022 £’000 17,841,073 – 2021 £’000 18,396,073 Weighted average number of shares in issue Less weighted average number of shared held in the ESOT Less weighted average number of shares purchased by the Company (1,646,334) 2222222222222222222222222222222222222 2222 2222 16,342,816 Weighted average number of shares to be used in basic EPS calculation Weighted average number of the 1,055,000 (2021 – 380,000) dilutive shares 391,667 2222222222222222222222222222222222222 2222 2222 16,734,483 2222222222222222222222222222222222222 2222 2222 Weighted average diluted shares 16,666,266 Profit for the year attributable to equity holders of the parent in £ Basic earnings per share 7.0p 2222222222222222222222222222222222222 2222 2222 Diluted earnings per share 18,234,198 (245,048) 17,841,073 (245,048) (1,646,334) 15,949,691 716,575 4,932,000 30.9p 29.6p 1,177,000 7.2p 37 M S I N T E R N A T I O N A L p l c Notes to the financial statements Continued 11 Dividends paid and proposed Declared and paid during the year: 2022 £’000 2021 £’000 Final dividend for 2021: 6.5p (2020 – 1.75p) Interim dividend for 2022: 1.75p (2021 – 1.75p) 289 289 222222222222222222222222222222222222222222222222 578 222222222222222222222222222222222222222222222222 1,037 279 1,316 Proposed for approval by shareholders at the AGM: 1,037 222222222222222222222222222222222222222222222222 Final dividend for 2022: 7.5p (2021 – 6.5p) 1,196 12 (a) Property, plant and equipment Group Freehold property £’000 Plant and equipment £’000 Total £’000 Cost or valuation At 30th April, 2020 Additions Disposals Acquisition Exchange differences At 30th April, 2021 33,604 781 (756) 30 (562) 2222222222222222222222222222222 2222 2222 2222 33,097 2222222222222222222222222222222 2222 2222 2222 2,703 (978) 2,296 356 2222222222222222222222222222222 2222 2222 2222 37,474 2222222222222222222222222222222 2222 2222 2222 Additions Disposals Revaluation Exchange differences 15,858 547 (756) 30 (173) 17,746 234 – – (389) 1,498 (978) – 80 1,205 – 2,296 276 At 30th April, 2022 21,368 16,106 15,506 17,591 At 30th April, 2021 970 311 – (39) Accumulated depreciation At 30th April, 2020 Depreciation charge for the year Disposals Exchange differences 13,493 1,361 (733) (137) 2222222222222222222222222222222 2222 2222 2222 13,984 2222222222222222222222222222222 2222 2222 2222 1,375 (920) (1,572) 70 2222222222222222222222222222222 2222 2222 2222 12,937 2222222222222222222222222222222 2222 2222 2222 24,537 2222222222222222222222222222222 2222 2222 2222 19,113 2222222222222222222222222222222 2222 2222 2222 Depreciation charge for the year Disposals Revaluation Exchange differences 12,523 1,050 (733) (98) 303 – (1,572) 27 Net book value at 30th April, 2021 Net book value at 30th April, 2022 1,072 (920) – 43 At 30th April, 2022 12,937 21,368 12,742 16,349 3,169 1,242 2,764 – Analysis of cost or valuation At professional valuation At cost 21,368 16,106 2222222222222222222222222222222 2222 2222 2222 37,474 2222222222222222222222222222222 2222 2222 2222 At 30th April, 2022 – 16,106 21,368 – 21,368 16,106 Analysis of cost or valuation At professional valuation At cost 12,300 20,797 2222222222222222222222222222222 2222 2222 2222 33,097 2222222222222222222222222222222 2222 2222 2222 At 30th April, 2021 – 15,506 12,300 5,291 17,591 15,506 38 M S I N T E R N A T I O N A L p l c Notes to the financial statements Continued 12 (b) Property, plant, and equipment (continued) Company Plant and equipment £’000 Total £’000 Cost or valuation At 30th April, 2020 Additions Disposals At 30th April, 2021 9,030 252 (620) 2222222222222222222222222222222222222 2222 2222 8,662 2222222222222222222222222222222222222 2222 2222 578 (796) 2222222222222222222222222222222222222 2222 2222 8,444 2222222222222222222222222222222222222 2222 2222 Additions Disposals At 30th April, 2022 578 (796) 9,030 252 (620) 8,444 8,662 Accumulated depreciation At 30th April, 2020 Depreciation charge for the year Disposals At 30th April, 2021 7,909 438 (620) 2222222222222222222222222222222222222 2222 2222 7,727 2222222222222222222222222222222222222 2222 2222 474 (774) 2222222222222222222222222222222222222 2222 2222 7,427 2222222222222222222222222222222222222 2222 2222 1,017 2222222222222222222222222222222222222 2222 2222 935 2222222222222222222222222222222222222 2222 2222 Depreciation charge for the year Disposals Net book value at 30th April, 2021 Net book value at 30th April, 2022 At 30th April, 2022 474 (774) 7,909 438 (620) 7,427 1,017 7,727 935 Analysis of cost or valuation At professional valuation At cost – 8,444 2222222222222222222222222222222222222 2222 2222 8,444 2222222222222222222222222222222222222 2222 2222 At 30th April, 2022 – 8,444 8,444 Analysis of cost or valuation At professional valuation At cost – 8,662 2222222222222222222222222222222222222 2222 2222 8,662 2222222222222222222222222222222222222 2222 2222 At 30th April, 2021 – 8,662 8,662 (c) (d) Within the Group depreciation has not been charged on freehold land which is included at a book value of £5,828,000 (2021 - £4,326,000) at 30th April, 2022. The Company does not hold any freehold land. At 30th April, 2022 the Group’s land and buildings, which consist of manufacturing and office facilities in the USA, Poland, and UK were valued by Real Estate & Appraisal Services Inc (USA), KonSolid-Nieruchomosci (Poland) and Dove Haigh Phillips (UK). 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 £13,772,000 (2021 – £12,364,000) at 30th April, 2022. The properties in the UK 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 Polish property was valued based on the income approach, converting anticipated future benefits in the form of rental income into present value. The US property was valued on an income and market value basis. For all properties, there is no difference between current use and highest and best use. 39 M S I N T E R N A T I O N A L p l c Notes to the financial statements Continued 13 (a) Leases Right-of-use assets Group Freehold property £’000 Plant and equipment £’000 Cost or valuation At 30th April, 2020 Disposals Exchange differences At 30th April, 2021 50 (29) – 2222222222222222222222222222222 2222 2222 21 2222222222222222222222222222222 2222 2222 – (11) – 2222222222222222222222222222222 2222 2222 10 2222222222222222222222222222222 2222 2222 Additions Disposals Exchange differences 1,403 (517) 9 1,327 – (4) At 30th April, 2022 2,218 895 At 30th April, 2021 219 288 (127) (7) Accumulated depreciation At 30th April, 2020 Depreciation charge for the year Disposals Exchange differences 20 17 (24) – 2222222222222222222222222222222 2222 2222 13 2222222222222222222222222222222 2222 2222 6 (11) – 2222222222222222222222222222222 2222 2222 8 2222222222222222222222222222222 2222 2222 2 2222222222222222222222222222222 2222 2222 8 2222222222222222222222222222222 2222 2222 Depreciation charge for the year Disposals Exchange differences Net book value at 30th April, 2021 Net book value at 30th April, 2022 At 30th April, 2022 365 – 3 1,477 741 522 373 Total £’000 1,453 (546) 9 222 916 222 1,327 (11) (4) 222 2,228 222 239 305 (151) (7) 222 386 222 371 (11) 3 222 749 222 1,479 222 530 222 40 M S I N T E R N A T I O N A L p l c Notes to the financial statements Continued 13 (a) Leases (continued) Right-of-use assets (continued) Company Freehold property £’000 Plant and equipment £’000 Cost or valuation At 30th April, 2020 Additions At 30th April, 2021 – – 2222222222222222222222222222222 2222 2222 – 2222222222222222222222222222222 2222 2222 – 2222222222222222222222222222222 2222 2222 – 2222222222222222222222222222222 2222 2222 At 30th April, 2022 6,400 – Additions 6,400 6,400 – Accumulated depreciation At 30th April, 2020 Depreciation charge for the year At 30th April, 2021 Depreciation charge for the year – – 2222222222222222222222222222222 2222 2222 – 2222222222222222222222222222222 2222 2222 – 2222222222222222222222222222222 2222 2222 – 2222222222222222222222222222222 2222 2222 – 2222222222222222222222222222222 2222 2222 – 2222222222222222222222222222222 2222 2222 Net book value at 30th April, 2021 Net book value at 30th April, 2022 At 30th April, 2022 457 457 5,029 1,371 5,486 457 914 Total £’000 6,400 – 222 6,400 222 – 222 6,400 222 457 457 222 914 222 457 222 1,371 222 5,029 222 5,486 222 (b) Lease liabilities Group The Group has entered into commercial leases on certain properties and motor vehicles. The remaining duration of these leases are from 1 year up to 5 years from the Statement of financial position date. The future minimum lease payments are as follows: At 30th April, 2022 Lease payments Finance charges 222222222222222222222222 Net present values 222222222222222222222222 At 30th April, 2021 Lease payments Finance charges 222222222222222222222222 Net present values 222222222222222222222222 Within one year £’000 One to five years £’000 After five years £’000 402 (49) 1,227 (69) – – 2222 2222 2222 – 2222 2222 2222 1,158 353 178 (13) 402 (22) – – 2222 2222 2222 – 2222 2222 2222 380 165 Total £’000 1,629 (118) 222 1,511 222 580 (35) 222 545 222 The Group has elected not to recognise a lease liability for short-term or low value leases. Payments for such leases are expensed to profit or loss on a straight-line basis. 41 M S I N T E R N A T I O N A L p l c Notes to the financial statements Continued 13 (b) Leases (continued) Lease liabilities (continued) Group Lease expenses have been charged to the Consolidated income statement as follows: 2022 £’000 2021 £’000 Expenses relating to lease payments not classified as a lease liability: Short-term leases Leases of low value assets 110 25 2222222222222222222222222222222222222 2222 2222 135 2222222222222222222222222222222222222 2222 2222 66 25 Total 91 Expenses relating to lease payments classified a lease liability: Depreciation on right-of-use assets Lease interest 305 30 2222222222222222222222222222222222222 2222 2222 335 2222222222222222222222222222222222222 2222 2222 371 51 Total 422 Company The Company has entered into three property leases with ‘MS INTERNATIONAL Estates Ltd’. The remaining duration of these leases is 11 years. The future minimum lease payments are as follows: Within one year £’000 One to five years £’000 After five years £’000 560 (153) 2,240 (487) 3,360 (306) 2222 2222 2222 3,054 2222 2222 2222 1,753 407 560 (165) 2,240 (538) 3,920 (408) 2222 2222 2222 3,512 2222 2222 2222 1,702 395 Total £’000 6,160 (946) 222 5,214 222 6,720 (1,111) 222 5,609 222 At 30th April, 2022 Lease payments Finance charges 222222222222222222222222 Net present values 222222222222222222222222 At 30th April, 2021 Lease payments Finance charges 222222222222222222222222 Net present values 222222222222222222222222 42 M S I N T E R N A T I O N A L p l c Notes to the financial statements Continued 14 Intangible assets Goodwill £’000 Trade name £’000 Design Non- Customer complete database agreement relationships £’000 £’000 £’000 Order Development costs £’000 backlog £’000 Software costs £’000 Group £’000 Group Cost At 30th April, 2020 Acquisition Exchange differences 1,042 – – 3,043 8 (1) 1,370 – – 222222222222 222 222 222 222 222 222 222 222 222 9,070 54 (96) 1,370 – – 222222222222 222 222 222 222 222 222 222 222 222 9,028 222222222222 222 222 222 222 222 222 222 222 222 At 30th April, 2021 Additions Exchange differences 9,065 8 (3) 2,625 – (2) 2,623 – (56) 1,042 – (6) 3,050 – (25) At 30th April, 2022 325 – (7) 279 – – 279 – – 330 – – 330 54 – 325 – – 51 – (2) 51 – – 1,036 3,025 1,370 2,567 384 279 318 49 514 62 – – (1) Amortisation At 30th April, 2020 271 Amortisation during the year – 8 Written off during year 348 Impairment – Exchange differences 1,359 11 – – – 222222222222 222 222 222 222 222 222 222 222 222 5,512 227 349 (62) 1,370 – – – 222222222222 222 222 222 222 222 222 222 222 222 6,026 222222222222 222 222 222 222 222 222 222 222 222 At 30th April, 2021 627 Amortisation during the year – 349 Impairment (15) Exchange differences 1,796 164 – – (5) 1,955 156 – (34) 4,925 237 8 348 330 – – – – 279 – – – – 325 – – – – 325 – – (7) 575 61 – (4) At 30th April, 2022 330 10 – – 279 – – – 51 – – (2) 51 – – – – 2,077 1,370 (6) 632 340 279 318 961 49 Net book value at 30th April, 2022 3,002 – 222222222222 222 222 222 222 222 222 222 222 222 2,064 404 490 44 – – – Net book value at 30th April, 2021 3,558 – 222222222222 222 222 222 222 222 222 222 222 222 2,423 668 467 – – – – Goodwill acquired through business combinations and licences has been allocated for impairment testing purposes to the ‘Petrol Station Superstructures’ division and the ‘Corporate Branding’ division, which are both 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: Goodwill 2021 £’000 2,064 359 2222222222222222222222222222222222222 2222 2222 2,423 2222222222222222222222222222222222222 2222 2222 The performance of the ‘Petrol Station Superstructures’ division and the ‘Corporate Branding’ division are the ‘Petrol Station Superstructures’ division ‘Corporate Branding’ division Goodwill 2022 £’000 2,064 – 2,064 lowest levels at which goodwill is monitored for internal management purposes. During the year management have conducted two value-in-use calculations to assess for impairment. At 31st October, 2021 the value-in-use calculation for the ‘Corporate Branding’ division indicated an impairment of £349,000, which was expensed to the Consolidated income statement. The Board believed this was appropriate given that the business had suffered losses in the previous two years, partly as a result of Covid-19 travel restrictions. 43 M S I N T E R N A T I O N A L p l c Notes to the financial statements Continued 14 Intangible assets (continued) Impairment testing (continued) At the reporting date, 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, which are consistent with the prior year: Detailed 2 year management forecast. A growth in cashflows estimated for 2 years, and a growth rate of 2% assumed from year 3. Cash flows were discounted at a rate of 12.2%. 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. Based on the above assumptions, the value-in-use calculated at the reporting date for the ‘Petrol Station Superstructures’ division and the ‘Corporate Branding’ division did not indicate the need for impairment and no reasonably possible changes in any of the key assumptions used would cause the carrying value of the unit to exceed its recoverable amount. Sensitivities to reasonably possible changes in assumptions have been considered for the ‘Corporate Branding’ division and are summarised below: a 1 percentage point reduction in the growth rate from year 3 would not indicate a need for impairment a 1 percentage point increase in the discount factor would not indicate a need for impairment a 1 percentage point reduction in the growth rate from year 3 combined with a 1 percentage point increase in the discount factor would not indicate a need for impairment. a 5% reduction in management’s forecasted profit before tax would not indicate a need for impairment. 222222222222222222222222222222222222222222222222 15 Investment in subsidiary undertakings Principal subsidiary undertakings are set out on pages 73 and 74. Company At 30th April, 2020 Transfer of investment in ‘MSI-Forks LLC’ to ‘MS INTERNATIONAL Inc’ 222222222222222222222222222222 At 30th April, 2021 Investment in ‘MS INTERNATIONAL Inc’ 222222222222222222222222222222 At 30th April, 2022 222222222222222222222222222222 16 Investment in joint venture Cost Impairment Net book value 19,998 (1,962) 18,036 – (723) 19,275 813 (723) 2222 2222 2222 17,313 813 2222 2222 2222 18,126 2222 2222 2222 (1,962) – (1,962) 20,088 The investment in joint venture is held by MSI-Sign Group B.V. in Consorzio Archigia-Petrolsign, a company registered in Italy. The Group holds a 50% shareholding with 50% of the voting rights in Consorzio Archigia- Petrolsign. At 30th April, 2020 Investment in share capital Equity accounted share of net profits Exchange differences 222222222222222222222222222222222222222222 At 30th April, 2021 Equity accounted share of net profits Exchange differences 222222222222222222222222222222222222222222 At 30th April, 2022 222222222222222222222222222222222222222222 Group £’000 – 9 28 (1) 2222 36 – (2) 2222 34 2222 During the year the Group made sales of £683,000 (2021 – £1,260,000) to Consorzio Archigia-Petrolsign. 44 (cid:0) (cid:0) (cid:0) (cid:0) (cid:0) (cid:0) (cid:0) M S I N T E R N A T I O N A L p l c Notes to the financial statements Continued 17 Deferred income tax The deferred income tax included in the Consolidated income statement is: 2021 £’000 (24) (13) (51) 48 (10) – 2222222222222222222222222222222222222 2222 2222 (50) 2222222222222222222222222222222222222 2222 2222 Taxation deferred by capital allowances Taxation on other temporary differences Taxation on intangibles Taxation on defined benefits pension Adjustments in respect of prior year Adjustment in respect of change in rate 2022 £’000 190 (43) (33) 147 (5) 2 Deferred income tax expense/(credit) 258 The deferred income tax assets included in the Consolidated and Company statements of financial position are: Group Company 2022 £’000 2021 £’000 2022 £’000 216 42 1,348 183 119 1,133 183 58 1,133 2222 2222 2222 1,374 2222 2222 2222 1,435 1,606 Taxation Taxation on deferred by capital allowances £’000 226 (10) other Taxation on pension liability £’000 1,627 (49) temporary differences £’000 22 20 – – (230) 2222 2222 2222 1,348 (70) 216 (33) 42 77 – (145) 2222 2222 2222 1,133 2222 2222 2222 119 183 – 2021 £’000 216 36 1,348 222 1,600 222 Total £’000 1,875 (39) (230) 222 1,606 (26) (145) 222 1,435 222 Taxation deferred by capital allowances Taxation on other temporary differences Taxation on pension liability 222222222222222222222222 Deferred tax asset 222222222222222222222222 The movements on the deferred income tax asset are: Group At 30th April, 2020 Included in the Consolidated income statement Included in the Consolidated statement of comprehensive income 222222222222222222222222 At 30th April, 2021 Included in the Consolidated income statement Included in the Consolidated statement of comprehensive income 222222222222222222222222 At 30th April, 2022 222222222222222222222222 45 M S I N T E R N A T I O N A L p l c Notes to the financial statements Continued 17 Deferred income tax (continued) Company Company At 30th April, 2020 Deferred tax included in the Consolidated income statement Deferred tax included in the Consolidated statement of comprehensive income 222222222222222222222222 At 30th April, 2021 Deferred tax included in the Consolidated income statement Deferred tax included in the Consolidated statement of comprehensive income 222222222222222222222222 At 30th April, 2022 222222222222222222222222 Taxation Taxation on deferred by capital allowances £’000 226 other Taxation on pension liability £’000 1,627 temporary differences £’000 22 (10 ) 14 (49) – (230 ) 2222 2222 2222 1,348 216 36 – (33) 22 (70) – (145) 2222 2222 2222 1,133 2222 2222 2222 183 58 – Total £’000 1,875 (45) (230) 222 1,600 (81) (145) 222 1,374 222 The deferred tax liabilities included in the Consolidated statement of financial position are: Group 2022 £’000 2021 £’000 Taxation deferred by capital allowances Taxation on intangible assets Taxation on buildings revaluation 302 204 1,047 2222222222222222222222222222222222222 2222 2222 1,553 2222222222222222222222222222222222222 2222 2222 Deferred tax liability 549 184 1,845 2,578 There were no tax liabilities (2021 – nil) included in the Company statement of financial position. The movements on the deferred income tax liability are: Taxation deferred by capital allowances £’000 333 Taxation on other temporary differences £’000 7 Taxation on intangible assets £’000 254 Taxation on buildings revaluation £’000 1,047 (31) (7) (51) – Total £’000 1,641 (89) Group At 30th April, 2020 Deferred tax included in the Consolidated income statement Exchange differences on retranslation included in the Consolidated statement of comprehensive income At 30th April, 2021 Deferred tax included in the Consolidated income statement Deferred tax included in the Consolidated statement of comprehensive income Exchange differences on retranslation included in the Consolidated statement of comprehensive income 1 22222222222222222222 222 222 222 222 222 1,553 1,047 204 302 – 1 – – – 247 – – – (15) – – 798 232 798 (5) 22222222222222222222 222 222 222 222 222 2,578 22222222222222222222 222 222 222 222 222 Deferred income taxation has been provided at the rate enacted at the reporting date of 25% or a blended rate At 30th April, 2022 1,845 549 184 – (5) – – – depending upon when the underlying temporary timing differences are expected to unwind. 222222222222222222222222222222222222222222222222 46 M S I N T E R N A T I O N A L p l c Notes to the financial statements Continued 18 Inventories Raw materials Work in progress Finished goods 222222222222222222222222 222222222222222222222222 Group Company 2022 £’000 2021 £’000 2022 £’000 5,892 6,258 273 7,211 8,562 554 1,765 679 148 2222 2222 2222 2,592 2222 2222 2222 16,327 12,423 2021 £’000 453 992 53 222 1,498 222 Details of the Group and Company’s inventory provisions are as follows: Group £’000 Company £’000 At 30th April, 2020 Inventory provision released during the year Exchange differences 29 (20) – 2222222222222222222222222222222222222 2222 2222 9 (5) – 2222222222222222222222222222222222222 2222 2222 4 2222222222222222222222222222222222222 2222 2222 At 30th April, 2021 Inventory provision expensed/(released) during the year Exchange differences At 30th April, 2022 451 (32) (2) 417 147 (2) 562 19 Trade and other receivables Group Company Trade receivables (net of allowance for expected credit losses) Amounts owed by subsidiary undertakings Amounts owed by joint venture Other receivables 222222222222222222222222 222222222222222222222222 (a) Trade receivables 2022 £’000 2021 £’000 2022 £’000 8,764 – 130 475 10,167 – 228 1,001 2,366 13,024 – 4 2222 2222 2222 15,394 2222 2222 2222 11,396 9,369 2021 £’000 2,184 13,872 – 79 222 16,135 222 Trade receivables are denominated in the following currencies. Group Company 2022 £’000 2021 £’000 2022 £’000 6,112 1,692 695 265 5,554 1,786 2,406 421 1,576 790 – – 2222 2222 2222 2,366 2222 2222 2222 10,167 8,764 2021 £’000 1,675 509 – – 222 2,184 222 Sterling Euro US dollar Other currencies 222222222222222222222222 222222222222222222222222 47 M S I N T E R N A T I O N A L p l c Notes to the financial statements Continued 19 (a) Trade and other receivables (continued) Trade receivables (continued) Trade receivables are non-interest bearing, generally have 30 day terms, and are shown net of provision for expected credit losses. The aged analysis of trade receivables after provision for expected credit losses is as follows: Group Company Not past due < 30 days 30-60 days 60-90 days > 90 days 222222222222222222222222 Total 222222222222222222222222 2022 £’000 2021 £’000 2022 £’000 7,234 2,062 64 11 796 7,268 1,381 102 28 (15) 2,316 24 19 8 (1) 2222 2222 2222 2,366 2222 2222 2222 10,167 8,764 2021 £’000 2,033 122 28 – 1 222 2,184 222 In the Group, trade receivables with a nominal value of £52,000 (2021 – £43,000) were impaired and fully provided as at 30th April, 2022. During the year, bad debts of £20,000 (2021 – £81,000) were recovered and bad debts of £29,000 (2021 – £16,000) were incurred. In the Company, trade receivables with a nominal value of £33,000 (2021 – £11,000) were impaired and fully provided as at 30th April, 2022. During the year, bad debts of £7,000 (2021 – £69,000) were recovered and bad debts of £29,000 (2021 – £7,000) were incurred. (b) Amounts owed by joint venture Amounts owed by joint venture are non-interest bearing and have 30 day terms. The aged analysis of amounts owed by joint venture net of provision for expected credit losses as follows: Group 2022 £’000 2021 £’000 Not past due < 30 days 30-60 days 60-90 days 50 33 41 6 2222222222222222222222222222222222222 2222 2222 130 2222222222222222222222222222222222222 2222 2222 135 47 34 12 Total 228 At 30th April, 2022 there was no provision for expected credit losses relating to amounts owed by joint venture (2021 – nil). (c) Intercompany receivables All amounts due from Group companies are repayable on demand and are not charged interest. The majority of intercompany balances are to group entities with liquid assets and are capable of being repaid on demand. There has been no impairment recognised on intercompany receivables (2021 – nil). There are loans to ‘MS INTERNATIONAL Estates Limited’, which although repayable on demand, are supported by properties, which will not be immediately realisable. The directors have assessed the likelihood of default and the loss in the event of default as well as the balance at the reporting date and conclude that there is no material impairment of the receivable. The amounts receivable at the reporting date can be categorised as: 2022 £’000 2021 £’000 Amounts due from companies backed by liquid assets Amounts due from ‘MS INTERNATIONAL Estates Limited’ 7,587 6,285 2222222222222222222222222222222222222 2222 2222 13,872 2222222222222222222222222222222222222 2222 2222 7,099 5,925 13,024 48 M S I N T E R N A T I O N A L p l c Notes to the financial statements Continued 20 Cash and cash equivalents Cash and cash equivalents Restricted cash held in Escrow – maturing in more than 90 days 222222222222222222222222 Total cash 222222222222222222222222 Group Company 2022 £’000 18,092 2021 £’000 17,390 2022 £’000 3,258 – 2222 2222 2222 1,158 6,165 19,250 3,258 2222 2222 2222 23,555 2021 £’000 943 – 222 943 222 The balance held in Escrow provides security to Lloyds Bank plc in respect of any guarantees, indemnities, and performance bonds given by the Group in the ordinary course of business. 222222222222222222222222222222222222222222222222 21 Net funds Analysis of net funds Group Company Cash and cash equivalents (note 20) Restricted cash held in Escrow Lease liabilities (note 13) 222222222222222222222222 222222222222222222222222 Group movement in net funds At 30th April, 2020 Cash flows Foreign exchange adjustments Leases on acquisition Other changes 222222222222222222222222 At 30th April, 2021 Cash flows Foreign exchange adjustments New leases Other changes 222222222222222222222222 At 30th April, 2022 222222222222222222222222 Company movement in net funds 2021 £’000 2022 £’000 18,092 1,158 (1,511) 2022 £’000 3,258 – (5,214) 2222 2222 2222 17,390 6,165 (545) 17,739 (1,956) 2222 2222 2222 23,010 Cash and cash equivalents (note 20) Restricted cash held in escrow (note 20) Lease liabilities (note 13) 2021 £’000 943 – (5,609) 222 (4,666) 222 Total – 6,165 – – – (1,229) 327 (16) 402 (29) 16,125 1,306 (41) – – 14,896 7,798 (57) 402 (29) 2222 2222 2222 2222 23,010 (3,945) 52 (1,327) (51) 2222 2222 2222 2222 17,739 2222 2222 2222 2222 6,165 (5,007) – – – (545) 405 7 (1,327) (51) 17,390 657 45 – – (1,511) 18,092 1,158 At 30th April, 2020 Cash flows Other changes 22222222222222222222222222222 At 30th April, 2021 Cash flows Other changes 22222222222222222222222222222 At 30th April, 2022 22222222222222222222222222222 49 Cash and cash equivalents (note 20) (391) 1,334 – Lease liabilities (note 13) (5,992) 560 (177) Total (6,383) 1,894 (177) 2222 2222 2222 (4,666) 2,875 (165) 2222 2222 2222 (1,956) 2222 2222 2222 (5,609) 560 (165) 943 2,315 – (5,214) 3,258 M S I N T E R N A T I O N A L p l c Notes to the financial statements Continued 22 Issued capital Group Company 2022 £’000 3,500 2021 £’000 3,500 2022 £’000 3,500 2021 £’000 3,500 Ordinary shares at 10p each Authorised – 35,000,000 (2021 – 35,000,000) Allotted, issued and fully paid – 17,841,073 (2021 – 17,841,073) 1,784 222222222222222222222222222222222222222222222222 1,784 1,784 1,784 23 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 reserves Following the transfer of assets held at valuation by the Company to a subsidiary company, a reserve has been created which is non-distributable. This is equal to the revaluation reserve previously arising. Additionally, it includes the non-distributable retained reserve for the revaluation reserve previously showing in the Company for properties now transferred to other members of the Group. 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. Special reserve The special reserve is a distributable reserve created following the cancellation of a share premium account by way of court order in March 1993. 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 The treasury shares reserve is detailed as follows: 2021 £’000 100 2,689 2222222222222222222222222222222222222 2222 2222 2,789 2222222222222222222222222222222222222 2222 2222 Employee Share Ownership Trust Shares in treasury (see below) 2022 £’000 100 2,689 2,789 The Employee Share Ownership Trust (“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 trustee of the ESOT is Appleby Trust (Jersey) Ltd, an independent company registered in Jersey. The trust has purchased an aggregate 245,048 (2021 – 245,048) ordinary shares, which represents 1.5% (2021 – 1.5%) of the issued share capital of the Company at an aggregate cost of £100,006. The market value of the shares at 30th April, 2022 was £728,000 (2021 – £380,000). The Company has not made any payments (2021 – nil) into the ESOT bank accounts during the year. 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 year amounts to £1,000 (2021 – £3,000). During the year, no options have been granted over shares (2021 – nil), no options on shares were exercised (2021 – nil) and no shares were purchased (2021 – nil) (note 31). 50 M S I N T E R N A T I O N A L p l c Notes to the financial statements Continued 23 Reserves (continued) The Company made the following purchases and cancellations of its own 10p ordinary shares to be held in Treasury: Number £’000 Purchase of 1,000,000 shares from the Group’s pension scheme on 11th December, 2013 Purchase of 646,334 shares on 30th January, 2014 Purchase of 555,000 shares on 15th January, 2021 1,722 1,237 636 2222222222222222222222222222222222222 2222 2222 3,595 (906) 2222222222222222222222222222222222222 2222 2222 2,689 2222222222222222222222222222222222222 2222 2222 Consideration paid for purchase of own shares Cancellation of 555,000 shares at weighted average rate 1,000,000 646,334 555,000 Net value of treasury shares 2,201,334 (555,000) 1,646,334 24 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. From 1st June, 2007 the Company has operated a defined contributions scheme for its UK employees which is administered by a UK pension provider. The last formal valuation of the Scheme was performed at 7th May, 2021 by a professionally qualified actuary. The Company directly pays the expenses of the Scheme. The total pension scheme expenses incurred by the Company during the year were £237,000 (2021: £217,000). Deficit reduction contributions paid into the Scheme by the Company are £900,000 per annum. The deficit reduction contributions are paid on a quarterly basis with the first having been paid on or after 1st July, 2021 and the last being due for payment on or before 1st April, 2028. The total deficit reduction payments made in the year were £900,000 (2021 – £600,000). At 30th April, 2022 the present value of the contracted future deficit reduction contributions was £4,720,000, which was greater than the net scheme liability of £3,594,000. As the Company does not have an unconditional right to the economic benefits arising from this surplus, a liability of £1,126,000 has been recognised within the financial statements in accordance with IFRIC 14. 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 2022 2021 1.90% 3.80% 3.30% 2.40% 21.2 yrs 23.6 yrs 222222222222222222222222222222222222222222222222 Discount rate at year–end Future salary increases Pension increases – RPI inflation Pension increases – CPI inflation Life expectancy of current male pensioners (from age 65) Life expectancy of current female pensioners (from age 65) 3.10% 4.30% 3.80% 2.90% 21.2 yrs 23.6 yrs A 0.5% reduction in the discount rate would lead to an increase in past service liabilities of around £1.49m. Members living around 1 year longer than expected would lead to an increase in past service liabilities of around £1.07m. A 0.5% decrease in the inflation assumptions would lead to a decrease in past service liabilities of around £0.49m. 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 11.5 years. 51 (cid:0) (cid:0) (cid:0) (cid:0) (cid:0) (cid:0) M S I N T E R N A T I O N A L p l c Notes to the financial statements Continued 24 Pension liability (continued) GMP Equalisation The defined benefits scheme was contracted out of the State Earnings Related Pension Scheme (SERPS) between 1990 and 1997 under the condition that the scheme provided a Guaranteed Minimum Pension (GMP) to its members. In broad terms, this replicated the pension which the members would have earned under SERPS. In October 2018, the High Court ruled that schemes were required to equalise GMPs between men and women. As a result, in the period ended 27th April, 2019 an expense of £1.198m was recognised in the Consolidated income statement for unrecognised past service costs arising on GMP equalisation, In November 2020 a court ruling confirmed that historic statutory transfer values paid out of schemes before 2018 also need to be equalised. As a result of this ruling, a further £205,000 of previously unrecognised past service cost has been calculated and recognised in the Consolidated income statement for the year ended 30th April, 2021. Statement of financial position 2021 £’000 (30,336) 23,241 – 2222222222222222222222222222222222222 2222 2222 (7,095) 2222222222222222222222222222222222222 2222 2222 Present value of obligations Fair value of plan assets Liability arising from IFRIC 14 2022 £’000 (26,164) 22,570 (1,126) Net liability (4,720) Income statement 2021 £’000 140 – 2222222222222222222222222222222222222 2222 2222 140 2222222222222222222222222222222222222 2222 2222 Interest on net liabilities Administration expenses 2022 £’000 126 – Total income statement cost 126 Change in defined benefit obligation 2020 £’000 (30,816) (509) 22 (298) (116) 1,586 (205) 2222222222222222222222222222222222222 2222 2222 (30,336) 2222222222222222222222222222222222222 2222 2222 Opening defined benefit obligation Interest cost Experience (losses)/gains arising on scheme liabilities Changes in financial assumptions underlying the present value of scheme liabilities Actuarial gains/(losses) on scheme liabilities Net benefits paid Past service costs 2022 £’000 (30,336) (561) (67) 26 3,344 1,430 – Defined benefit obligation (26,164) Change in fair value of plan assets 2021 £’000 22,253 369 1,605 600 (1,586) 2222222222222222222222222222222222222 2222 2222 23,241 2222222222222222222222222222222222222 2222 2222 Opening fair value of plan assets Interest income on assets Remeasurement (losses)/gains on scheme assets Deficit reduction contributions by employer Net benefits paid 2022 £’000 23,241 435 (576) 900 (1,430) Fair value of plan assets 22,570 52 M S I N T E R N A T I O N A L p l c Notes to the financial statements Continued 24 Pension liability (continued) Statement of comprehensive income 2021 £’000 1,605 (392) – 2222222222222222222222222222222222222 2222 2222 1,213 2222222222222222222222222222222222222 2222 2222 Return on plan assets (below)/in excess of that recognised in net interest Remeasurement gains/(losses) Remeasurement loss arising from IFRIC 14 liability Total remeasurement gains credited to Statement of comprehensive income 2022 £’000 (576) 3,303 (1,126) 1,601 2022 £’000 2021 £’000 Expected deficit reduction contributions into the Scheme during next accounting year: 900 2222222222222222222222222222222222222 2222 2222 900 Breakdown of plan assets Breakdown of assets at 30th April, 2022 Equities – UK market Growth Fund Bond fund Credit Investment Fund LDI Cash/other 4% 45% 24% 17% 9% 1% 2222222222222222222222222222222222222 2222 2222 100% 2222222222222222222222222222222222222 2222 2222 22,570 Breakdown of assets at 30th April 2021 Equities – UK market Growth Fund Bond fund Gilts – fixed interest Gilts – index linked Cash/other 2% 65% 8% 13% 11% 1% 2222222222222222222222222222222222222 2222 2222 100% 2222222222222222222222222222222222222 2222 2222 23,241 Asset allocation Asset allocation Plan assets £’000 841 10,226 5,434 3,822 1,961 286 Plan assets £’000 450 15,150 1,876 2,890 2,609 266 53 M S I N T E R N A T I O N A L p l c Notes to the financial statements Continued 25 Trade and other payables Trade payables Amounts owed to subsidiary undertakings Amounts owed to joint ventures Other payables Accruals 222222222222222222222222 222222222222222222222222 26 Contracts with customers Group Company 2022 £’000 2021 £’000 2022 £’000 5,495 – 9 1,090 5,816 6,997 – 8 1,120 6,051 3,200 1,970 – 437 1,461 2222 2222 2222 7,068 2222 2222 2222 14,176 12,410 2021 £’000 2,487 1,098 – 429 1,220 222 5,234 222 The Group and Company have recognised the following assets and liabilities relating to contracts with customers: Group Company Current contract assets Current contract liabilities 222222222222222222222222 Net contract liabilities 222222222222222222222222 2022 £’000 2021 £’000 2022 £’000 1,998 (21,192) 1,773 (18,329) – (622) 2222 2222 2222 (622) 2222 2222 2222 (16,556) (19,194) 2021 £’000 – (874) 222 (874) 222 At 30th April, 2022 there was no provision for expected credit losses relating to contract assets (2021 – nil). A reconciliation of the movements in contract liabilities during the year is shown below: Contract liabilities as at 30th April, 2021 New contract liabilities Revenue recognised in the year: – that was included in the contract liability balance as at 30th April, 2021 – relating to new contract liabilities in the year Other movements Exchange differences (874) (4,440) – – 2222222222222222222222222222222222222 2222 2222 622 2222222222222222222222222222222222222 2222 2222 (11,306) (23,413) (259) 790 Contract liabilities as at 30th April, 2022 18,329 Group £’000 21,192 31,325 Company £’000 874 5,062 Of the existing contracts that were unsatisfied or partially unsatisfied at 30th April, 2022, revenue is expected to be recognised as follows: Company £’000 622 – 2222222222222222222222222222222222222 2222 2222 622 2222222222222222222222222222222222222 2222 2222 Group £’000 11,182 7,147 2023 2024 18,329 Total 54 M S I N T E R N A T I O N A L p l c Notes to the financial statements Continued 27 Financial instruments Management of financial risks The major financial risks faced by the Group and Company are funding risks, interest rate risks, currency risks, and credit risks. Funding risk At the reporting date the Group had a cash and cash equivalents balance of £18,092,000 with a further £1,158,000 of restricted cash held in Escrow (2021 – £17,390,000 with £6,165,000 in Escrow). The Company had a cash and cash equivalents balance of £3,258,000 (2021 – £943,000). 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 daily by the Board to ensure any risk is minimised. The Board believe that the main interest rate risk relates to not maximising interest income on cash balances. If interest rates had been 0.5% higher/lower and all other variables were held constant, there would have been nil impact on the profit before tax (2021 – £25,000 and £13,000 respectively). Foreign currency risk Exposure to risk is incurred by the Group and Company through overseas sales. This exposure is minimised by the following: (1) (2) invoicing in sterling where practicable. using foreign currency received for purchases where appropriate. Currency exposures The table below shows the Group’s currency exposures i.e., those transactional exposures that give rise to the net currency gains and losses recognised in the income statement. Such exposures comprise the monetary assets and monetary liabilities of the Group that are not denominated in the operating (or “functional”) currency of the operating unit involved. As at 30th April, 2022 these currency exposures are as follows:- Group Sterling £’000 US Dollar £’000 Euro £’000 Others £’000 Total £’000 2022 Cash and cash equivalents 38 – (1) 22222222222222222222 2222 2222 2222 2222 2,041 918 (1,663) Trade and other receivables Trade and other payables 3,899 – (96) 8 – – 37 22222222222222222222 2222 2222 2222 2222 3,803 1,296 8 Total 2021 Cash and cash equivalents Trade and other receivables 8 – 2,883 – 2,101 654 41 4 Trade and other payables – 22222222222222222222 2222 2222 2222 2222 45 22222222222222222222 2222 2222 2222 2222 2,226 2,878 Total (529) (5) 8 – 5,986 918 (1,760) 222 5,144 222 5,033 658 (534) 222 5,157 222 55 M S I N T E R N A T I O N A L p l c Notes to the financial statements Continued 27 Financial instruments (continued) Company Sterling £’000 US Dollar £’000 Euro £’000 Others £’000 Total £’000 2022 Cash and cash equivalents 12 – – 22222222222222222222 2222 2222 2222 2222 1,039 3,701 (1,210) Trade and other receivables Trade and other payables 524 3,882 (899) – – – 12 22222222222222222222 2222 2222 2222 2222 3,507 3,530 – Total 2021 Cash and cash equivalents Trade and other receivables – – (1,138) 1,571 1,279 2,613 13 – Trade and other payables – 22222222222222222222 2222 2222 2222 2222 13 22222222222222222222 2222 2222 2222 2222 3,370 Total (522) (19) 414 – – 1,575 7,583 (2,109) 222 7,049 222 154 4,184 (541) 222 3,797 222 The Group and Company’s exposure to a 5% exchange rate fluctuation on its foreign currency monetary assets and liabilities would be as follows: Group Sterling £’000 8 US Dollar £’000 3,622 Euro £’000 1,234 Others £’000 32 12 22222222222222222222 2222 2222 2222 2222 Company 3,339 3,362 – Total £’000 4,896 6,713 222 Fair values No significant differences exist between the book value and the fair value of the financial assets and liabilities as at 30th April, 2022 and 30th April, 2021. 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. The Group applies the IFRS 9 simplified model of recognising lifetime expected credit losses for all trade receivables as these items do not have a significant financing component. In measuring the expected credit losses, the trade receivables have been assessed on a collective basis as they possess shared credit risk characteristics. The expected loss rates are based on the payment profile for sales over the recent reporting periods as well as the corresponding historical credit losses during that period. Trade receivables and contract assets are written off (i.e. derecognised) when there is no reasonable expectation of recovery. Detailed credit risks disclosure for trade receivables and contract assets has not been included as it is immaterial. 222222222222222222222222222222222222222222222222 28 Capital commitments Group Company 2022 £’000 2021 £’000 2022 £’000 2021 £’000 34 222222222222222222222222222222222222222222222222 Contracted but not provided in the financial statements 47 34 – 29 Contingent liabilities The Group is contingently liable in respect of guarantees, indemnities, and performance bonds given in the ordinary course of business amounting to £1,293,000 at 30th April, 2022 (2021 – £4,165,000). 222222222222222222222222222222222222222222222222 56 M S I N T E R N A T I O N A L p l c Notes to the financial statements Continued 30 Related party transactions The following transactions took place, during the year, between the Company and other subsidiaries in the Group. Purchases of goods and services £1,225,000 (2021 – £824,000) Sales of goods and services £5,345,000 (2021 – £4,591,000) The following balances between the Company and other subsidiaries in the Group are included in the Company statement of financial position as at 30th April, 2022. Amounts owed to the Company £13,024,000 (2021 – £13,872,000) Amounts owed by the Company £1,970,000 (2021 – £1,098,000) The following transactions took place, during the year, between the Group and the joint venture: Purchases of goods and services £nil (2021 – £nil) Sales of goods and services £683,000 (2021 – £1,260,000) The following balances between the Group and the joint venture are included in the Consolidated statement of financial position as at 30th April, 2022. Amounts owed by joint venture £228,000 (2021 – £130,000) Amounts owed to joint venture £8,000 (2021 – £9,000) Sales and purchases between related parties are made at normal market prices. Terms and conditions for transactions with subsidiaries and the joint venture are unsecured and interest free. Balances are placed on inter- company accounts with no specified credit period. Key management personnel (main board directors) compensation. Group Company 2022 £’000 2021 £’000 2022 £’000 Short-term employee benefits Pension contributions Social security costs Share option expense 1,671 52 185 13 22222222222222222222222222 2222 2222 2222 1,921 22222222222222222222222222 2222 2222 2222 See Directors’ remuneration report on pages 70 to 72 1,570 42 177 13 1,810 52 203 13 2,078 1,802 2021 £’000 1,431 42 159 13 222 1,645 222 31 Share-based payments The Group operates two employee share option schemes: MS INTERNATIONAL plc Long Term Incentive Plan and the MS INTERNATIONAL plc Company Share Option Plan. Under the terms of the MS INTERNATIONAL plc Long Term Incentive Plan, options are exercisable at a price of nil in two equal amounts at two and three years after the date of the grant but are subject to meeting a share price performance target of £3 per share for 90 consecutive days. At the reporting date, this target had not been met. Under the terms of the MS INTERNATIONAL plc Company Share Option Plan, options are exercisable in three equal amounts at three, four and five years after the date of grant at a price of £1.41. Of the 1,000,000 share options outstanding at the 30th April, 2022, there was a total of 620,000 non tax-advantaged share options and 380,000 tax-advantaged share options. The non-tax advantaged share options are subject to meeting a share price target of £2 per share for 90 consecutive days. This was achieved on 29th October, 2021. The tax-advantaged options do not have a share price target. Under the terms of the MS INTERNATIONAL plc Company Share Option Plan, a total of 400,000 UK tax- advantaged share options were granted to certain directors and employees on 30th April, 2020 at a price of £1.41. The options are exercisable in three equal instalments at three, four, and five years after the date of the grant. There is no share price performance target for these options. The contractual life of all of the options is 10 years and there are no cash settlement alternatives. The weighted average remaining contractual life is 8 years. 57 M S I N T E R N A T I O N A L p l c Notes to the financial statements Continued 31 Share-based payments (continued) The following tables illustrate the number and weighted average exercise prices (WAEP) of share options during the year: Long Term Incentive Plan Company Share Option Plan Total Number 500,000 – – – WAEP – – – – Number 1,075,000 – (75,000 ) – Outstanding at 30th April, 2020 Granted in year Forfeited/lapsed in year Exercised in year – (£1.41) – 22222222222222222 2222 2222 2222 2222 2222 2222 £0.94 Outstanding at 30th April, 2021 Granted in year Forfeited/lapsed in year Exercised in year – – – 22222222222222222 2222 2222 2222 2222 2222 2222 £0.94 22222222222222222 2222 2222 2222 2222 2222 2222 Outstanding at 30th April, 2022 1,500,000 1,000,000 500,000 £1.41 1,000,000 – – – 1,500,000 – – – 500,000 – – – £1.41 – – – – – – – – WAEP £1.41 – (£1.41) – Number 1,575,000 – (75,000 ) – WAEP £0.96 The Group recognised a total charge of £29,000 (2021 – £29,000) in relation to equity-settled share-based payment transactions. At 30th April, 2022 there were no share options exercisable in either the LTIP or CSOP share option schemes (2021 – nil). The fair value of awards granted under these share plans are determined using the Black Scholes and Monte Carlo valuation models. The fair value of share options and the assumptions used are shown in the table below: Company Long Term Share Option Plan - type 1 Incentive Plan Monte Carlo 500,000 £0.06 £1.38 £0.00 5.9% 25% 6.0 years 0.06% Monte Carlo 620,000 £0.09 £1.38 £1.41 5.9% 25% 5.0 years 0.09% Valuation model Number of shares under option Fair value Share price at grant Exercise price Dividend yield Expected volatility Expected life Risk-free interest rate Company Share Option Plan - type 2 Tranche 2 Black Scholes 126,667 £0.13 £1.38 £1.41 5.9% 26% 4.0 years 0.06% Tranche 1 Black Scholes 126,667 £0.12 £1.38 £1.41 5.9% 26% 3.0 years 0.04% Tranche 3 Black Scholes 126,666 £0.13 £1.38 £1.41 5.9% 26% 5.0 years 0.09% The weighted average fair value of options outstanding at the end of the year is £0.09 (2021: £0.09) 222222222222222222222222222222222222222222222222 32 Capital management The primary objective of the Group’s capital management is to ensure that it maintains a strong credit rating and healthy capital ratios in order to support its business and maximise shareholder value. The Group manages its capital structure and makes adjustments to it, in light of changes in economic conditions. To maintain or adjust the capital structure, the Group may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares. No changes were made to the objectives, policies or processes during the years ended 30th April, 2022 and 30th April, 2021. Capital comprises equity attributable to the equity holders of the parent company £38,575,000 (2021 – £31,036,000). 222222222222222222222222222222222222222222222222 58 M S I N T E R N A T I O N A L p l c Summary of Group results 2018 – 2022 CONSOLIDATED INCOME STATEMENT 2022 £’000 2021 £’000 2020 £’000 2019 £’000 2018 £’000 61,539 Group revenue Group operating profit/(loss) Share of joint venture profit Finance costs 68,085 74,524 22222222222222222222 2222 2222 2222 2222 2222 4,253 6,187 – – (214) (220) 22222222222222222222 2222 2222 2222 2222 2222 4,039 5,967 (653) (1,035) 22222222222222222222 2222 2222 2222 2222 2222 3,386 4,932 22222222222222222222 2222 2222 2222 2222 2222 Profit/(loss) before taxation Taxation (3,119) – (134) Profit/(loss) for the year 4,996 – (209) 1,786 28 (222) (3,253) 762 4,787 (975) 1,592 (415) (2,491) 61,153 77,708 3,812 1,177 CONSOLIDATED STATEMENT OF FINANCIAL POSITION Assets employed: Intangible assets Property, plant and equipment Right-of-use assets Investments Other net current liabilities Cash, cash equivalents, and restricted cash 4,893 3,002 20,766 24,537 – 1,479 – 34 (1,171) (2,706) 15,866 19,250 22222222222222222222 2222 2222 2222 2222 2222 40,354 45,596 22222222222222222222 2222 2222 2222 2222 2222 4,140 20,111 1,214 – (2,240) 16,125 4,483 20,426 – – (4,784) 22,886 3,558 19,113 530 36 (8,334) 23,555 Current net assets employed 38,458 39,350 43,011 Financed by: Ordinary share capital Reserves 1,840 1,784 31,560 36,791 22222222222222222222 2222 2222 2222 2222 2222 33,400 38,575 6,954 7,021 22222222222222222222 2222 2222 2222 2222 2222 40,354 45,596 22222222222222222222 2222 2222 2222 2222 2222 Shareholders’ funds Net non-current liabilities 1,840 28,288 1,784 29,252 1,840 33,958 30,128 9,222 31,036 7,422 35,798 7,213 39,350 38,458 43,011 59 M S I N T E R N A T I O N A L p l c Corporate governance statement As an AIM quoted company MSI INTERNATIONAL plc, under AIM Rule 26, is required to adopt a recognised corporate governance code, describe how it complies with that code and provide details of where it does not comply with its chosen corporate governance code. MS INTERNATIONAL plc has chosen to adopt as far as practical for a Group of its size the April 2018 QCA Corporate Governance Code with effect from 28th September, 2018. The Chairman assumes principal responsibility for corporate governance. The Board The Board is responsible for ensuring that MS INTERNATIONAL plc has the strategy, people, structure, and culture in place to deliver value over the medium to long-term to shareholders and other stakeholders of the Group and is committed to high standards of governance, as is appropriate for a company of its size and structure. The Board is chaired by the Executive Chairman Michael Bell, who has no other significant commitments and is responsible for the operation, strategic focus, and direction of the business. The executive directors include Michael O’Connell and Nicholas Bell. There are two non-executive directors, Roger Lane-Smith and David Hansell, with Roger Lane-Smith being designated as Senior Independent Director. The two non-executive directors devote sufficient time to fulfil their responsibilities to the Company. The Board has considered their length of service as directors and employees and has determined that in terms of interest, experience, and judgement they all remain independent. Consequently, the Board considers itself to be compliant with the QCA code in having two or more independent non-executive directors. The Board meets at least quarterly throughout the year to direct and assess the overall strategy and operating performance of the Group. All directors have full and timely access to all relevant information to allow them to carry out their responsibilities. Executive directors, except for Company business trips and holidays, meet on a daily basis when possible. Additionally, each of the divisional operations have monthly review meetings which are attended by the Executive Chairman and the Group Financial Director. The Board is supported by an Audit Committee and a Remuneration Committee. Roger Lane-Smith and David Hansell are members of both committees, with Roger Lane-Smith serving as Chairman. The Audit Committee normally meets two or three times a year and has the responsibility for reviewing the interim statements, the annual report, and the effectiveness of the system of internal controls with the Group’s external auditor. The external auditor has direct access to the Committee without the executive directors being present. The ultimate responsibility for reviewing and approving the Group financial statements remains with the Board. The Remuneration Committee, which meets as required, has the responsibility for making recommendations to the Board on the remuneration packages, including share option schemes and bonuses, of each of the executive directors. Due to the size of the Group there is no Nominations Committee. The Chairman discusses the appointment or replacement of directors with the Board as a whole. The Board are aware of the age profile of the directors, and this is under review. The number of meetings and members attendance of Board and Committee meetings during the financial year ended 30th April, 2022 was as follows: Remuneration Committee Number of meetings in the year 1 2222222222222222222222222222222222222 – Michael Bell Audit Committee 3 Board 6 6 – Michael O’Connell Nicholas Bell Roger Lane-Smith David Hansell 6 6 4 4 – – 3 3 – – 1 1 Board experience, skills, and evaluation Due to the size of the Group, and the nature of its operations and strategic demands, there is no formal Board performance evaluation process in place. However, the Chairman periodically meets with the executive and non- executive directors to ensure they are committed, their respective contributions are effective and productive and, where relevant, they have maintained their independence. 60 M S I N T E R N A T I O N A L p l c Corporate governance statement Continued Board experience, skills, and evaluation (continued) The Board has considered its structure and composition and believes it to be appropriate having taken into account the nature and characteristics of the Group. As the directors have all served the Group as employees and directors over many years, the Board believes it is not necessary to give any further details of their experience other than that shown in the list of directors and the Notice of Annual General Meeting. In the opinion of the Board, the directors as a whole have the appropriate balance of skills and experience necessary to ensure that the Group is managed for the long-term benefit of all stakeholders. Internal control systems 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 operating 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 set out below. The Board has overall responsibility for the Group and there is a formal schedule of matters specifically reserved for decisions by the Board which covers the key areas of the Group’s affairs, including dividend policy, acquisitions and divestment policy, approval of budgets, capital expenditure, major buying and selling contracts and general treasury and risk management policies. There is a clearly decentralised structure which delegates authority, responsibility, and accountability, including responsibility for internal financial controls, to management of the operating companies. Responsibility levels and delegation of authority and authorisation levels throughout the Group are set out in the Group’s corporate accounting and procedures manual. There is a comprehensive system for reporting financial results. Monthly accounts are prepared on a timely basis. They include income statement, balance sheet, cash flow and capital expenditure reporting with comparisons to budget and forecast. The budget is prepared annually and revised forecasts are provided monthly. There is an investment evaluation process to ensure Board approval for all major capital expenditure commitments. There is also a contract evaluation process to ensure directors approval for all major sales contracts. QCA Code Details of how the Company has addressed the ten principles of the QCA Code in compliance with AIM Rule 26 are set out below: 1 Establish a strategy and business model which promotes long-term value for shareholders The Group’s long-term strategy is to invest in people, products, and processes to seek continuous improvement in its four diverse operating divisions: ‘Defence’, ‘Forgings’, ‘Petrol Station Superstructures’ and ‘Corporate Branding’, each holding a leading position in its specialist market. 2 3 Seek to understand and meet shareholder needs and expectations The shareholding structure of the Company is set out on the 'Securities' page on the Company's website: msiplc.com/securities. The composition of the shareholders, including the directors, is currently primarily weighted towards private investors, with a significant institutional shareholder. The AGM is the main forum for dialogue and discussion with private investors and the Board. The directors routinely attend the AGM and are available to answer any questions raised by shareholders. Shareholders can engage with the Company between AGMs by contacting the Company Secretary, Shelley Ashcroft (shelley.ashcroft@msiplc.com). The Board also contacts significant institutional investors as and when appropriate. Take into account wider stakeholder needs and expectations The Group is aware of its corporate social responsibilities and the need to maintain effective relationships with all of the stakeholders in the business including shareholders, employees, customers, suppliers and regulatory authorities. The Group’s operations, processes, and procedures are monitored and adapted to take account of changing stakeholder relationships whilst maintaining focus on the Board’s strategic objective of delivering value over the medium to long-term for the benefit of all stakeholders. 61 M S I N T E R N A T I O N A L p l c Corporate governance statement Continued QCA Code (continued) 3 4 5 6 7 8 9 Take into account wider stakeholder needs and expectations (continued) The Board aims to do what is in the best interests of the Company and seeks to maintain the highest standards of integrity in the conduct of the Group’s operations. The requirement for regular disclosure of directors’ other interests and compliance to share dealing regulations all require high standards of behaviour. The Group’s employment policies, such as Whistleblowing and Anti-Bribery and Corruption assist in setting a culture of ethical behaviour throughout the Group. Through the various procedures and processes the Group has adopted, each diverse operating division ensures full compliance with the health and safety and environmental legislation applicable to each division. Embed effective risk management, considering both opportunities and threats, throughout the organisation The Board reviews the effectiveness of the system of internal controls, and together with operational management, identifies and evaluates the critical business and financial risks of the Group. These risks are reviewed continually by both the directors and operational and divisional management. Where appropriate, action is taken to manage risks facing the business. The Group’s corporate governance environment and its embedded procedures and systems will be updated and adapted to future changes in stakeholder relationships when considered appropriate by the Board. Maintain the Board as a well-functioning, balanced team led by the chair Details of how the Board functions and its members are included in the ‘The Board’ section of this Corporate Governance statement. The Board is supported by an Audit Committee and a Remuneration Committee, both chaired by Roger Lane- Smith. David Hansell, a non-executive director, also serves on both the Audit Committee and the Remuneration Committee. The Board as a whole operates as the Nominations Committee as and when required. Ensure that between them the directors have the necessary up-to-date experience, skills, and capabilities Details of the directors’ experience, skills and capabilities can be found in the ‘Board experience, skills, and evaluation’ section of this Corporate Governance report. Evaluate board performance based on clear and relevant objectives, seeking continuous improvement While there is no formal evaluation process in place, the Chairman periodically meets with executive and non-executive directors to discuss their performance and ensure that their respective contributions remain effective. Promote a corporate culture that is based on ethical values and behaviours The Group’s four operating divisions hold leading positions within their specialist markets and have long- standing reputations as being highly competent and professional organisations with innovation and quality being integral to this. This reputation has been established over many years through leadership and the reinforcement of ethical principles by directors, managers, and employees. Maintain governance structures and processes that are fit for purpose and support good decision making by the Board The Board maintains corporate governance policies and processes that are appropriate to the size and structure of the Group. The responsibility for corporate governance rests with the Board as a whole, with the Chairman assuming principal responsibility. The effectiveness of policies and processes are reviewed and adapted as necessary. 10 Communicate how the company is governed and is performing by maintaining a dialogue with shareholders and other relevant stakeholders The Board communicates its corporate governance policies through the Annual Report and through the Group website (www.msiplc.com). The AGM is the main forum for dialogue and discussion with private investors and the Board. The Notice of Annual General Meeting is sent to shareholders at least 21 days before the meeting and all of the directors routinely attend the AGM and are available to answer any questions raised by shareholders. The results of each AGM are published on the website and by way of an RNS when the meeting has concluded. Copies of notice of meetings and Annual Reports from the last five years are kept on the Company’s website. Shareholders can engage with the Company between AGMs by contacting the Company Secretary, Shelley Ashcroft (shelley.ashcroft@msiplc.com). The Board also contacts significant institutional investors as and when appropriate. 62 M S I N T E R N A T I O N A L p l c Audit Committee report Committee governance Roger Lane-Smith and David Hansell were members of the Audit Committee throughout the year under review, with Roger Lane-Smith serving as Chairman. Both have considerable experience in senior financial and commercial operational roles with extensive knowledge of the Group’s operations, related financial risks and internal control. The committee meets two or three times a year. The meetings are held with the external auditor at which representatives of the Group’s financial management team are present. Key responsibilities The committee is required to: Monitor the integrity of the Group’s financial statements and external announcements of both the interim and full year results; Advise on the clarity of disclosures and information contained in the Annual Report and accounts; In conjunction with the Group’s Executive Board and external auditor, ensure compliance with applicable accounting standards and the consistency of methodologies applied; Review the adequacy and effectiveness of the Group’s internal control and risk management systems; Oversee the relationship with the external auditors, review their performance and independence, and advise the Board on their appointment and remuneration. The Audit Committee has undertaken the following during the year under review: Internal control and risk management The Audit Committee has worked with the Board in the continued evaluation of the critical business and financial risks of the Group and where appropriate supported actions to manage the risks facing the business. External audit The services performed by Grant Thornton UK LLP relates only to the Group’s external audit. All other non- audit work is performed by independent accountancy firms which will enhance the Group’s governance. The Audit Committee has reviewed the services provided and work undertaken by Grant Thornton UK LLP and is satisfied with their performance in carrying out and completing the external audit. There is no formal policy in respect of the rotation of the external auditor. This will be reviewed and taken into consideration if the AIM listed company rules are changed so that the rotation of the external auditor becomes a requirement. Significant reporting issues and judgements The Audit Committee considered whether the 2022 Annual Report is fair, balanced, and understandable and whether it provides the necessary information for shareholders and other stakeholders to assess the Group’s financial performance, business model and strategy. The committee was satisfied that, as a whole, the 2022 Annual Report met these requirements. The key issues and accounting policies considered by the Audit Committee in relation to the 2022 Annual Report were: The factors used for the impairment assessment of the carrying value of the Group’s intangible assets The revenue recognition of contract accounting. The Audit Committee has assessed these specific issues and is satisfied that the methodologies adopted in the Annual Report are appropriate and satisfy the relevant IFRS standards. Roger Lane-Smith Chairman Audit Committee 27th June, 2022 63 (cid:0) (cid:0) (cid:0) (cid:0) (cid:0) (cid:0) (cid:0) M S I N T E R N A T I O N A L p l c Remuneration Committee report Committee governance Roger Lane-Smith and David Hansell were members of the Remuneration Committee throughout the year under review, with Roger-Lane Smith serving as Chairman. Both have considerable experience in senior financial and commercial operational roles with extensive knowledge of the Group’s operations. The committee meets as required. One meeting was held during the financial year. Key responsibilities The committee has the responsibility for making recommendations to the Board on the remuneration packages, including share option schemes and bonuses, of each executive director. Review of directors’ remuneration packages The Remuneration Committee believes that the current basic salaries and bonus award system for the executive directors remain appropriate. The Remuneration Committee has approved the award of bonuses in line with the executive directors’ bonus scheme rules. Total bonus to be paid to the executive directors amounts to £399,000. Share options There are currently two share options plans in place in which the executive directors hold share options: MS INTERNATIONAL plc Long Term Incentive Plan (LTIP) and MS INTERNATIONAL plc Company Share Option Plan (CSOP). Two executive directors have been granted a total of 500,000 shares under the LTIP scheme at a price of £nil. These options are exercisable in two equal amounts at two and three years after the date of the grant but are subject to meeting a share price performance target of £3 per share for 90 consecutive days. At the reporting date, the share price performance target of £3 had not been met. Three executive directors have been granted a total of 60,000 tax advantaged share options and 210,000 non- tax advantaged share options under the CSOP scheme at a price of £1.41. The options are exercisable in three equal instalments at three, four and five years after the date of grant. The tax advantaged share options are not subject to any share price performance targets. The non-tax advantaged share options are subject to meeting a share price target of £2 per share for 90 consecutive days. The share price target was met on 29th October, 2021. Roger Lane-Smith Chairman Remuneration Committee 27th June, 2022 64 M S I N T E R N A T I O N A L p l c Report of the directors The directors present their report together with the Group financial statements for the year ended 30th April, 2022. The directors present their Corporate governance statement on pages 60 to 62 of this report. 222222222222222222222222222222222222222222222222 1 Principal activities and business review The principal activities of the divisions within the Group are: ‘Defence’: the design and manufacture of defence equipment. ‘Forgings’: the manufacture of fork-arms and open die forgings ‘Petrol Station Superstructures’: the design, manufacture, and construction of petrol station superstructures ‘Corporate Branding’: the design, manufacture, installation, and service of corporate branding, including media facades, way-finding signage, public illumination, creative lighting solutions, and the complete appearance of petrol station superstructures and forecourts. The Group has subsidiary companies in overseas locations but the Company does not have any overseas branches. A review of the Group’s trading, performance and future prospects are contained in the Chairman’s statement and Strategic report on pages 3 to 4 and 7 to 9 respectively. 222222222222222222222222222222222222222222222222 2 Results and dividends The profit for the year attributable to shareholders amounted to £4,932,000 (2021 – £1,177,000). The directors recommend a final dividend of 7.5 pence per share (2021 – 6.5 pence per share), making a total of 9.25 pence per share (2021 – 8.25 pence per share). 222222222222222222222222222222222222222222222222 3 Going concern The financial statements have been prepared on a going concern basis. The Group’s business activities, together with factors likely to affect its future development, performance, and position are set out in the Chairman’s statement and Strategic report on pages 3 to 4 and 7 to 9 respectively. At 30th April, 2022, the Group held cash and cash equivalents of £18.09m with a further £1.12m of restricted cash held in an Escrow account maturing in greater than 90 days. The Group also has a number of large long-term contracts and a healthy orderbook. As such, the directors are satisfied that the Group has sufficient liquidity to meet its current liabilities and working capital requirements. The performance of the Group is dependent on a number of external factors and the wider economic environment. Despite the easing of Covid-19 restrictions, the Group still faces challenges and uncertainties. The increase in inflation, the cost and supply of raw materials, and soaring energy prices are all challenges for the Group. However, management remain vigilant and are regularly monitoring the impact of these external factors in order to mitigate any impact upon the business. Forecasts have been prepared for the 18 months following the reporting date, which the directors believe reflect a reasonable expectation, based on the information available at the date of signing these financial statements. The forecasts have been assessed for the potential impact of possible sensitivities, including a 10% fall in the forecasted revenue across the Group and a 10% increase in material prices. In all scenarios the Group has sufficient headroom to be able to continue to meet its liabilities as they fall due. As a result, the directors consider there to be no material uncertainties that could cast significant doubt on the Group’s ability to continue to operate as a going concern. They believe that the Group has sufficient financial resources to continue operating for the foreseeable future, being at least 18 months from the reporting date. As a result, the directors continue to adopt the going concern basis of accounting in preparation of these financial statements. 222222222222222222222222222222222222222222222222 4 Financial risk management and exposure The main financial risks faced by the Group include currency risks, funding risks, interest rate risks, and credit risks. Details of these exposures can be found in note 27 to the financial statements. 222222222222222222222222222222222222222222222222 65 (cid:0) (cid:0) (cid:0) (cid:0) M S I N T E R N A T I O N A L p l c Report of the directors Continued 5 Research and development During the year the Group has incurred research and development costs of £1,416,000 (2021: £1,064,000). 222222222222222222222222222222222222222222222222 6 Post balance sheet events There are no material post balance sheet events to note. 222222222222222222222222222222222222222222222222 7 Directors The names of the directors of the Company at 27th June, 2022 are shown on page 5. All of the directors served throughout the year and up to the date of this report. 222222222222222222222222222222222222222222222222 8 Substantial interests in shares The directors had been advised of the following notifiable interests:- % of share capital held at 30th April, 2022 % of share capital held at 27th June, 2022 Michael Bell Ms Adrienne Bell Stonehage Fleming Investment Management David Pyle Michael O’Connell Administrators of the estate of Mrs Patricia Snipe deceased 17.5% 13.6% 13.3% 10.9% 9.2% 5.0% 17.5% 13.6% 13.3% 10.9% 9.2% 5.0% Apart from these, the directors have not been formally notified of any other notifiable shareholdings in excess of 3% of share capital held on 27th June, 2022. 222222222222222222222222222222222222222222222222 9 Employee involvement The directors have continued their commitment to the development of employee involvement and communication throughout the Group. Regular meetings are held with employees to provide and discuss information of concern to them as employees, including financial and economic factors affecting the performance of the Company in which they are employed. 222222222222222222222222222222222222222222222222 10 Employment of disabled persons The Company and its subsidiaries have continued the policy regarding the employment of disabled persons. Full and fair consideration is given to applications for employment made by disabled persons having regard to their particular aptitudes and abilities. Appropriate training is arranged for disabled persons, including retraining for alternative work of employees who may become disabled, to promote their career development within the organisation. 222222222222222222222222222222222222222222222222 11 Carbon and energy reporting As an AIM listed company, MS INTERNATIONAL plc has to report on its UK energy usage and carbon emissions. This includes all companies within the Group that reside in the United Kingdom. Energy consumption in the UK includes electricity, natural gas, LPG, production gases, and fuel for transport directly purchased by the Group within the UK. The total UK energy use for the base year, being the year ended 30th April, 2021, and the financial year ended 30th April, 2022 were collated in kilowatt hours and converted to tCO₂e using government 2021 standard conversion factors published on 9th June, 2020. In the year ended 30th April, 2021 7.55m kilowatt hours were consumed within the UK, which is the equivalent of 1,629 tonnes of CO₂ emissions. While the total consumption in kilowatt hours increased slightly in the year ended 30th April, 2022 to 7.81m kilowatt hours, there has been an overall reduction in CO₂ emissions by 33.38 CO₂2 to the equivalent of 1,595 tonnes of CO₂ emissions. This is mainly as a result of reductions in the use of LPG and transport diesel of 11 tonne and 12 tonne respectively. 66 M S I N T E R N A T I O N A L p l c Report of the directors Continued 11 Carbon and energy reporting (continued) The Company has adopted CO₂ tonnes consumed per £ of UK sales as its key energy intensity ratio. The ratio has reduced from 36.71 CO₂ tonnes per £1m of UK sales in the year ended 30th April, 2021 to 30.30 CO₂ tonnes per £1m of UK sales in the year ended 30th April, 2022. The reduction in consumption has been largely due to projects undertaken at both the Doncaster and Norwich sites. At the Doncaster site, the compressed air control system has been upgraded to include automatic switching at the start and end of each shift. In addition, a separate air compressor for the heat treatment furnace doors has been fitted, which enables the main door compressors to be turned off outside of factory working hours. At the Norwich site projects that have reduced energy consumption include the replacement of sodium halide and fluorescent lighting with LED lighting, the replacement of inefficient air-conditioning units, and the replacement of high level gas heaters with more energy efficient heaters. Plans to install a solar panel array have been submitted and are currently waiting approval. Across both sites the use of video conferencing has reduced the number of journeys taken. The planned energy saving projects for the year commencing 1st May, 2022 include the potential replacement of existing furnace burners with higher efficiency options and the commencement of a Carbon Footprint Report with the aim of identifying further areas for energy saving. In addition, hybrid and fully electric vehicles will continue to be purchased to replace existing company owned vehicles where practical. 222222222222222222222222222222222222222222222222 12 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. On 15th January, 2021 555,000 ordinary shares of 10p each were purchased by the Company for a total consideration of £636,236 and were subsequently cancelled. The following provides the additional information required for shareholders as a result of the implementation of the Takeover Directive into UK Law. At 27th June, 2022 the Company’s issued share capital comprised: Ordinary shares of 10p each Ordinary shares of 10p each held in treasury Ordinary shares of 10p each not held in treasury Number 17,841,073 1,646,334 16,194,739 £’000 1,784 165 1,619 % of total share 100 9.2 90.8 The above figure (16,194,739 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. 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. 67 (cid:0) (cid:0) M S I N T E R N A T I O N A L p l c Report of the directors Continued 12 Additional information for shareholders (continued) Company share schemes The Employee Share Ownership Trust holds 1.51% 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. 222222222222222222222222222222222222222222222222 13 Special business at the Annual General Meeting Resolution 9: Purchase by the Company of its own shares Resolution 9, 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 1,619,473 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 27th June, 2022. 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 28th October, 2023 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 9 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 from 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. At 27th June, 2022, the Company holds 1,646,334 ordinary shares of 10p each in treasury which represents 9.2% of the total number of ordinary shares of 10p each issued. Resolution 10: Notice period for general meetings Resolution 10 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 10 seeks such approval in order to preserve this flexibility. The shorter notice period would not however be used as a matter of routine for such meetings, but only where it is merited by the business of the meeting and is considered to be in the interests of shareholders as a whole. If given, the approval will be effective until the Company’s next annual general meeting, when it is intended that a similar resolution will be proposed. Note that the changes to the 2006 Act mean that, in order to be able to call a general meeting on less than 21 clear days notice, the Company must make a means of electronic voting available to all shareholders for that meeting. 222222222222222222222222222222222222222222222222 14 Auditors A resolution to reappoint the auditor, Grant Thornton UK LLP, will be proposed at the Annual General Meeting. 222222222222222222222222222222222222222222222222 68 M S I N T E R N A T I O N A L p l c Report of the directors Continued 15 Directors’ statement as to disclosure of information to auditors The directors who were members of the Board at the time of approving the Report of the directors are listed on page 5. 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. 222222222222222222222222222222222222222222222222 16 We confirm that to the best of our knowledge: the financial statements, prepared in accordance with UK adopted International Accounting Standards, 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, Shelley Ashcroft Company Secretary 27th June, 2022 69 (cid:0) (cid:0) (cid:0) (cid:0) M S I N T E R N A T I O N A L p l c Directors’ remuneration report Information not subject to audit Policy on remuneration of executive directors The Remuneration Committee currently comprises Roger Lane-Smith and David Hansell. It aims to ensure that remuneration packages and service contracts are competitive and are 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:- Basic salary Salaries for executive directors are reviewed annually by the Remuneration Committee. Performance related annual bonus 1. 2. An annual bonus is paid depending on achievement of profitability targets. Total bonus payments achieved for the year ended 30th April, 2022 amounted to 38.0% (2021 – 16.4%) of total executive basic salaries. The Remuneration Committee consider the £349,000 charge to the Consolidated income statement for the impairment of goodwill to be outside of the definition of "usual working and management expenses and outgoings" as set out in clause 1.2 of the executive directors’ bonus scheme. Consequently, the bonus for the directors for the year ended 30th April, 2022 has been based on an adjusted Group profit before impairment and taxation of £6,326,000. 3. Share Options Directors are eligible to participate in the 2020 MS INTERNATIONAL plc Long Term Incentive Plan and the 2020 MS INTERNATIONAL plc Company Share Option Plan. The Remuneration Committee is responsible for granting options. On 30th April, 2020, 500,000 share options were granted to two executive directors under the terms of the 2020 MS INTERNATIONAL plc Long Term Incentive Plan and 355,000 share options were granted to four directors under the terms of the 2020 MS INTERNATIONAL plc Company Share Option Plan. 4. Pension contributions Pension contributions are 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 Other benefits are provided in the form of company cars, death in service benefit cover, and medical and disability insurance. 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. The Board takes into account any proposals made by the Remuneration Committee in determining the annual fee for non-executive directors. There are no formal service contracts between the Company and any of the non-executive directors. 70 M S I N T E R N A T I O N A L p l c Directors’ remuneration report Continued Information subject to audit Emoluments of directors Directors’ remuneration in respect of the year to 30th April, 2022. 2022 2022 2022 2022 2021 2021 salary £ and fees £ and fees £ 2022 Other benefits £ 2021 Other benefits £ 2021 Basic salary Basic salary Additional Additional Total salary £ £ 222222222222222222222222222222222222222222222222 Michael Bell 72,140 766,197 622,561 – 222222222222222222222222222222222222222222222222 Michael O’Connell 61,070 407,710 363,550 – 222222222222222222222222222222222222222222222222 Nicholas Bell 36,070 357,191 307,168 – 222222222222222222222222222222222222222222222222 David Hansell – 198,700 197,950 222222222222222222222222222222222222222222222222 Roger Lane-Smith 78,917 – 222222222222222222222222222222222222222222222222 59,250 138,700 138,700 500,000 491,917 250,000 246,083 300,000 295,250 58,504 199,262 Bonus £ Bonus £ Total £ 80,000 60,000 80,000 99,631 99,631 66,935 25,015 78,917 8,079 7,560 7,230 2021 – – – – – – – – – – – In addition to his role as non-executive director, David Hansell has carried out additional executive services during the period for the ‘Defence’ division. His remuneration during the year for these services is shown as additional salary. Other benefits represent the provision of company cars, death in service benefit, and medical and disability insurance. Pension contributions 2021 Total £ 222222222222222222222222222222222222222222222222 Michael Bell – 222222222222222222222222222222222222222222222222 Michael O’Connell – 222222222222222222222222222222222222222222222222 Nicholas Bell 42,323 222222222222222222222222222222222222222222222222 Roger Lane-Smith – 222222222222222222222222222222222222222222222222 David Hansell – 222222222222222222222222222222222222222222222222 2022 Total £ 52,445 – – – – Directors’ share options Share options The directors have the following interests in share options granted in the Long Term Incentive Plan and Company Share Option Plan: Director Michael Bell Michael O’Connell Nicholas Bell David Hansell * Date issued 30th April, 2020 30th April, 2020 30th April, 2020 30th April, 2020 Long Term Incentive Plan Company Share Option Plan Exercise Price £nil £nil – – Number 300,000 200,000 – – Exercise Price £1.41 £1.41 £1.41 £1.41 Number 100,000 75,000 75,000 75,000 Total Number 400,000 275,000 75,000 75,000 * in relation to his additional executive duties carried out on behalf of the ‘Defence’ division The share options granted under the Long Term Incentive Plan are exercisable in two equal instalments after two and three years of the date of the grant. The options are subject to meeting a share price performance target of £3 per share for 90 consecutive days. At the reporting date, the share price target had not been met. 71 M S I N T E R N A T I O N A L p l c Directors’ remuneration report Continued Information subject to audit Directors’ share options (continued) The share options granted under the Company Share Option Plan are exercisable in three equal instalments after three, four, and five years of the date of the grant. The UK non tax-advantaged options are subject to meeting a share price performance target of £2 per share for 90 consecutive days. On 29th October, 2021 the share price performance target had been met. There is no share price performance target for the 20,000 UK tax-advantaged share options granted to each director. QCA code The Remuneration Committee is of the opinion that the disclosures required by the code are contained within this report. By order of the Board, Shelley Ashcroft Company Secretary 27th June, 2022 72 M S I N T E R N A T I O N A L p l c List of subsidiaries (1) Principal operating subsidiaries by division Company Registered address Description Country of incorporation ‘Defence’ MSI-Defence Systems Ltd. Salhouse Road, Norwich, NR7 9AY England Design, manufacture and service of defence equipment. England & Wales MSI-Defence Systems US LLC 1298 Galleria Boulevard, Design, manufacture and Rock Hill, SC 29730 USA service of defence equipment. USA ‘Forgings’ MSI-Forks Ltd. Balby Carr Bank, Doncaster, DN4 8DH England Manufacture of fork-arms for the fork lift truck, construction, agricultural and quarrying equipment industries. England & Wales MSI-Quality Forgings Ltd. Balby Carr Bank, Manufacture of open die forgings. England & Wales Doncaster, DN4 8DH England MSI-Forks LLC MSI-Forks Garfos Industriais Ltda. 1298 Galleria Boulevard, Manufacture of fork-arms for the Rock Hill, SC 29730 USA 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. USA Brazil ‘Petrol Station Superstructures’ Global-MSI plc Balby Carr Bank, Doncaster DN4 8DH England Design, manufacture and construction of petrol station superstructures. England & Wales Global-MSI Sp. z o.o. ‘Corporate Branding’ MSI-Sign Group B.V. Armada Janse B.V. MSI-Sign Group GmbH Petrol Sign Ltd. Ul. Działowskiego 13, 30-339 Krakow Poland Design, manufacture and construction of petrol station superstructures. Poland De Hoef 8 5311 GH Gameren The Netherlands The design, manufacture, installation The Netherlands and service of corporate branding, including media facades, way-finding signage, public illumination, creative lighting solutions and the complete appearance of petrol station superstructures. De Hoef 8 5311 GH Gameren The Netherlands Wohlenbergstrasse 6 30179 Hannover, Germany Balby Carr Bank, Doncaster DN4 8DH England Design, restyling, production and installation of illuminated signage Design, restyling, production and installation of the complete appearance of petrol station superstructures and forecourts. Design, restyling, production and installation of the complete appearance of petrol station superstructures and forecourts. The Netherlands Germany England & Wales 73 M S I N T E R N A T I O N A L p l c List of subsidiaries Continued ‘Estates’ MS INTERNATIONAL Estates Ltd. MS INTERNATIONAL Estates LLC Balby Carr Bank, Doncaster DN4 8DH England Property holding company of the Group’s UK properties. England & Wales 1298 Galleria Boulevard, Property holding company Rock Hill, SC 29730 USA of the Group’s USA property. USA NOTES 1. 100% of the ordinary shares are held in all cases. (2) Non-trading subsidiaries Conder Ltd. Global-MSI (Overseas) Ltd. M D M Investments Ltd. Mechforge Ltd. MS INTERNATIONAL Inc MSI – Petrol Sign Ltd. Petrol Sign – MSI Ltd. NOTES 1. 100% of the ordinary share capital of each entity is held in all cases. 2. 3. All companies are registered in England and Wales with the exception of MS INTERNATIOANAL Inc, which is registered in the 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 and MS INTERNATIONAL Inc, which is a holding company for the trading companies within the USA. 74 M S I N T E R N A T I O N A L p l c 75 M S I N T E R N A T I O N A L p l c 76