Pittards plc
Sherborne Road, Yeovil, Somerset,
BA21 5BA United Kingdom
Tel: +44 (0)1935 474321
Fax: +44 (0)1935 427145
E: yeovil_reception@pittards.com
www.pittardsleather.com
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Pittards plc Annual Report and Accounts 2014
Pittards is a global brand supplying premium
leather and leather products, working with leading
international brands, retailers and manufacturers.
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Pittards recently hosted a factory
visit from members of the Institute
of Directors in the South West.
CEO Reg Hankey and Director of
Marketing Debbie Burton gave tours
and presentations explaining our
development from leather producer
into also making our own premium
leather goods.
John Moriarty, former ETSC general
manager, cuts the ribbon to formally
open the new classroom funded by
ETSC at the local Ejersa village school,
watched by current GM Jason Perry
and enthusiastic young pupils. This
represents the latest development in
our ongoing support for the school.
Our Ethiopian Environmental
management team were re-certificated
with ISO 2001:2004 during the
year, providing our workforce and
stakeholders with assurance that
environmental impact is being
continuously monitored and improved.
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Polo’s world No. 1 player Adolfo
Cambiaso was wearing Ona Polo gloves
made in Pittards Atomic patterned
WR100 leather when he won the Veuve
Cliquot Gold Cup at the British Open ,
part of polo’s Triple Crown.
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As part of Pittards commitment to
reducing waste a range of canvas
and leather bags, part of the Qo’da
collection, has been developed to utilise
off cuts from our industrial work gloves
production to great effect.
Master Glover Alison Gowman of
the Worshipful Company of Glovers
presented certificates to the latest
group of Pittards staff to complete 25
years’ service with the company taking
the current total to 56.
Our relationship with Wells Lamont,
part of the Berkshire Hathaway Group,
grows stronger as we continue to
increase the annual volume of industrial
gloves we make for them using our Asa
leather.
As our prowess at finished product
manufacturing grows we are delighted
to be working with iconic British brand
Jack Wills developing a new range of
beautiful on trend bags with them to
show off the best of British.
Designed and produced by Robson Dowry (www.robsondowry.co.uk). Printed in England by Taylor Brothers.
In keeping with Pittards’ environmental policy this report has been printed on an environmentally responsible paper that has been manufactured
using environmentally friendly technologies and follows strict European environmental legislation. The paper is made from Elemental Chlorine Free
(ECF) pulp obtained from sustainable wood forests.
Company Number 102384
Results in brief
Revenue
Profit from operations before finance costs
Profit before taxation
Net debt
Net assets
Per weighted average 50p share:
Profit (basic)
Net assets per 50p share
Gearing
Pittards plc Annual Report & Accounts 2014
1
2014
£’m
34.7
2.0
1.6
7.6
2013
£’m
35.8
2.0
1.7
7.1
18.3
16.9
Pence per share
12.06
197.99
42%
15.68
182.97
42%
Highlights
– Profit from trading activities before finance costs unchanged at £2.0m
– EBITDA up to £2.39m (2013: £2.36m)
– Profit before tax down slightly at £1.6m (2013: £1.7m)
– Exceptional Ethiopian tax charge of £0.19m settled in year
– Cash generated from operations of £0.7m (2013: used £0.7m)
– Net assets increased to £18.3m (2013: £16.9m)
– Gearing level at 42%
– Percentage of revenue outside the UK 91% (2013: 91%)
CONTENTS
2 Chairman’s statement
3 Directors and officers
3 Advisers
3 Strategic report
5 Directors’ report
7 Statement of directors’ responsibilities
8 Independent auditor’s report
10 Consolidated income statement and consolidated
statement of comprehensive income
11 Consolidated statement of changes in equity
13 Balance sheets
14 Statement of cash flows
14 Notes to the consolidated accounts
38 Analysis of shareholders
38 Five year review
38 Financial calendar
39 Notice of meeting
Company Number 102384
2
Pittards plc Annual Report & Accounts 2014
Chairman’s statement
The second half of 2014 was significantly more profitable than the first half leading to a full year result in line with
expectations. Sterling strength, principally against the dollar in which a significant proportion of our sales are invoiced,
was a major issue for the business until July when it peaked and then rapidly moved back to more acceptable levels.
Turnover for the year was £34.7m compared to £35.8m in 2013 and this shortfall was entirely attributable to the
currency situation in the first half. Sales of industrial and dress gloves made by our Pittards Products Manufacturing (PPM)
subsidiary in Ethiopia continued to grow during the year and our consumer product division in UK gained more traction.
Sales of dress glove leather were adversely affected by another mild start to the winter in most regions as this sector is
particularly weather sensitive. Military procurement was very patchy with few draw downs from contracts already in place
for military leathers.
Gross margins of 20% were consistent year on year as whilst turnover was reduced by the strong pound in the first half,
we also benefitted when buying raw materials in dollars and euros. Cost reduction exercises implemented in the first half
meant that distribution costs were £0.278m lower than in 2013 and administrative expenses remained virtually the same.
Profit from operations of £1.971m was therefore very similar to the prior year (£2.004m). As the Ethiopian consumer
division grows we have taken out more funding for working capital in Ethiopia where interest rates are considerably
higher. This has led to an increase in finance costs from £0.350m in 2013 to £0.427m in the current year therefore profit
before tax was £1.589m (2013: £1.712m).
During the year the Ethiopian Revenue and Customs carried out their first four yearly taxation audit since the Ethiopia
Tannery Share Company (ETSC) was acquired by Pittards in late 2009. This resulted in an additional corporation tax
charge of £0.193m during the year, so the total taxation charge for 2014 was £0.479m compared to £0.265m in 2013.
It is expected that the taxation charge will revert to normal levels in 2015.
The Group’s net assets rose from £16.9m to £18.3m in the year reflecting its continuing profitability but the slowdown in
certain key sectors noted above meant that inventory rose further in the period. Gearing remained at 42%.
The Directors do not recommend payment of a dividend.
We continue to reinforce our global presence as both a premium leather brand and increasingly a premium leather goods
brand by exhibiting at trade fairs around the world. This enables us to regularly meet with key customers such as FootJoy
to whom we sell leathers for golf gloves, golf shoes and now golf accessories, Spanish designer casual shoe brand
Camper and outdoor footwear specialists Berghaus (which incorporates Brasher Boot).
On the consumer side of the business we have forged a strong relationship with Wells Lamont (part of the Berkshire
Hathaway group) in the industrial gloves sector and our Pittards consumer brand is gaining increasing recognition. We
have ongoing third party manufacturing contracts with prestigious British brands including Jaguar and Jack Wills.
Our workforce now numbers c.1700 across both the UK and Ethiopia and we have been recognised for our UK
apprenticeship scheme. My thanks go to each and every one of our employees for their continued efforts this year.
In late 2014 Peter Gyllenhammar, who injected £2m of new money into the restructured business in March 2006, sold
the remainder of his holding. Our thanks go to Peter for his support through some difficult times.
Whilst there are global uncertainties in various areas of the world we have started 2015 with more favourable currency
rates and stable raw material prices. Trading is currently in line with our expectations and we have identified a number of
opportunities for expansion which we look forward to bringing to fruition.
Stephen Boyd Chairman
20 March 2015
Company Number 102384
Pittards plc Annual Report & Accounts 2014
3
Directors and officers
S D Boyd | BSc Hons, Chairman, non-executive A B C
J G Holmstrom | non-executive A B C
Stephen Boyd (65) joined the Group in 2004 as Executive
Chairman. He became non-executive Chairman on 7 December
2007. He is also Deputy Chairman of Pure Wafer plc and senior
non-executive director at The Mission Marketing Group plc. He
owns a number of private companies including Axminster Carpets.
G P Davis | FCA non-executive A B
Godfrey Davis (66) joined the Board in February 2014. He is
Executive Chairman of Mulberry Group plc. He is also a director of
Hestercombe Gardens Ltd and Woodard Schools (Taunton) Ltd.
Jan Holmstrom (62) joined the Group in March 2010. He is
Managing Director of Browallia AB in Sweden and holds a
number of UK directorships including Densitron Technology plc,
Leeds Group plc and Johnson & Starley Ltd.
J Williams | LLB Hons, ACA, Secretary
Jill Williams (57) joined the Group as Finance and Planning
Manager in 1989. She became Company Secretary in 1991, and
Finance Director on 1 June 2007.
A Member of the audit committee.
B Member of the remuneration committee.
C Member of nominations committee.
Registered office Sherborne Road, Yeovil, Somerset BA21 5BA
Company Number 102384
Bankers
Lloyds Bank plc, Canons House, Canons Way, Bristol BS99 7LB
Registrars
Capita Registrars, The Registry, 34 Beckenham Road, Beckenham,
Kent BR3 4TU
R H Hankey | FSLTC, LCGI, FCMI, CDipAF C
Reg Hankey (59) was appointed to the board in January 1998
having joined the Group as Technical Director of the Yeovil
Division in 1990. He was appointed Chief Executive on 19 July
2007. He is a director of UK Leather Federation (formerly BLC
Research).
Advisers
Stockbrokers
WH Ireland, 4 Colston Avenue, Bristol BS1 4ST
Nominated Advisers
WH Ireland, 4 Colston Avenue, Bristol BS1 4ST
Independent Auditors
PricewaterhouseCoopers LLP, Chartered Accountants & Statutory
Auditors, 31 Great George Street, Bristol BS1 5QD
Strategic report
for the year ended 31 December 2014
Principal activities
The principal activities of the Company are the design, production and procurement of technically advanced leather for sale to
manufacturers and distributors of shoes, gloves, luxury leathergoods and sports equipment, the provision of consultancy services within
the global leather industry and the retail of leather, leathergoods and leather garments. The principal activities of its subsidiaries are the
production of leather, leathergoods, leather garments and gloves.
Business review
Financial results
Revenue reduced by £1.1m to £34.7m in 2014, which was due to the impact of dollar and euro exchange rates in the first half as noted
in the Chairman’s Statement in our 2014 Interim report.
The profit from operations before finance costs was the same for both years at £2.0m, despite the impact of currency in the first half,
as the second half result was much stronger.
Total finance costs were higher than 2013 at £0.43m (2013: £0.35m), as more borrowings were in Ethiopia where interest rates are higher.
There was a tax charge of £0.479m (2013: £0.265m) representing corporation tax payable by ETSC including an adjustment relating to
prior years plus withholding tax on payment of royalties from Ethiopia to the parent company.
Company Number 102384
4
Pittards plc Annual Report & Accounts 2014
Strategic report (continued)
for the year ended 31 December 2014
Year end position
Net assets at 31 December 2014 were £18.3m (2013: £16.9m) reflecting profitability achieved in the year.
Total net debt (including obligations, finance leases and overdrafts) was £7.60m, (2013: £7.09m), with gearing remaining at 42%
(2013: 42%), consistently within the target range of 10% to 50%.
Business environment
The leather industry is a global business: wherever countries have meat and dairy industries hides and skins will be produced as
by-products.
The Group operates mainly in the UK, where it sources most of its hides, and in Ethiopia where it sources the majority of its hairsheep
skins, however it exports on average around 90% of its production into most areas of the world.
Strategy
The Group seeks to increase its hides and goatskins business in the UK as more of its sheepskin business is carried out in Ethiopia. It
has established various new sources of skins to process into its technically advanced leathers in Yeovil, and this sourcing continues to be
refined. It is also starting to import more skins into Ethiopia to supplement local supplies.
The Group’s strategy is to increase the consumer facing side of its business, building on its brand values of innovation, service and
integrity with new ranges of finished products. This was initiated in 2011 with the establishment of Pittards Products Manufacturing
(PPM) in Ethiopia and has developed further as PPM is now producing larger volumes of dress gloves, both for the Pittards brand and
third party customers. The Design Centre in Yeovil is now a busy production unit making both Pittards England and Daines & Hathaway
products alongside our Walsall facility, and fulfilling more substantial third party contracts for prestigious UK consumer brands.
Principal risks and uncertainties
The following are identified as the principal risks and uncertainties facing the Group:
•
•
The volatility of the US dollar. The Group manages this by using forward exchange contracts if appropriate or selling any surplus US
dollars when the rate is favourable. Some purchases are also made in US dollars. Future cashflow forecasts are updated weekly and
monthly.
The availability of quality raw materials. The Group owns ETSC (which is its main supplier of Ethiopian skins) and has strong
relationships with other major suppliers of skins and hides in the UK, Ethiopia and around the world.
• Continuing escalation in energy and environmental costs. The Group uses industry experts to obtain the best energy rates available
and continuous improvements are sought in reducing waste of all kinds from the business. For instance, a range of products utilising
the small pieces of leather remaining from cutting out larger pieces for bags, gloves etc, where the trimmings might otherwise have
gone to landfill, has been established as the Pittards Qo’da collection.
• The availability of working capital to finance its operations. The Group monitors its weekly and monthly financial requirements closely
against facility to ensure its needs are met. The banking relationship with Lloyds Bank remains strong and increased facilities have
been renewed with them for 2015. We have also negotiated additional bank facilities in Ethiopia.
Key performance indicators
The principal key performance indicators used to assess the performance and position of the Group are as follows:
• Profit before tax. The Group’s profit before taxation of £1.589m is close to £1.712m achieved in 2013, despite a difficult first half,
due to adverse currency exchange rates.
• Gearing. The Group’s gearing stayed at 42%, which remains comfortably within the target level of between 10% and 50%.
• Environmental measures. The Group has targets to improve energy and processed water usage on which it reports in its
Environmental updates. The 2010 report can be found on the Company’s website at www.pittardsleather.com
• Borrowings. The Group monitors its bank balances against facilities on a daily basis and prepares weekly, monthly and annual
cashflow forecasts to ensure that it has sufficient funds to run the business. Borrowings at the end of 2014 were higher than in
2013 due to the expansion of the consumer product side of the business which increased working capital. Additionally a slowing
down in the dress glove market towards the end of 2014 reduced sell through of stock of that type.
This report was approved by the board on 20 March 2015 and signed on its behalf by
J Williams
Company Secretary
20 March 2015
Company Number 102384
Pittards plc Annual Report & Accounts 2014
5
Directors’ report
The directors submit their report together with the audited consolidated financial statements of the Group and the Company for the
year ended 31 December 2014.
Principal activities
The principal activities of the Company are the design, production and procurement of technically advanced leather for sale to
manufacturers and distributors of shoes, gloves, luxury leathergoods and sports equipment, the provision of consultancy services within
the global leather industry and the retail of leather, leathergoods and leather garments. The principal activities of its subsidiaries are the
production of leather, leathergoods, leather garments and gloves.
Future developments
The Group will continue to look for new opportunities to develop the Pittards brand and build on its relationships across the supply
chain and it will seek to maximise the benefits from owning facilities in Ethiopia and manufacturing both leather and finished leather
products in a lower cost environment. It will continue to establish itself as a recognised consumer brand via the Pittards brand and the
Daines & Hathaway collection, seeking more retail outlets to increase customer recognition of the brand and building its online sales.
Dividends and reserves
No interim dividend was paid in respect of 2014 (2013: nil) and the directors do not recommend payment of a final dividend (2013: nil).
A profit of £1.11m is transferred to reserves (2013: £1.45m).
In January 2014 a share consolidation on a 1:50 basis was carried out to facilitate payment of a dividend when the board considers it in
the best interest of the business, see Note 19 for further details.
Going concern
After making enquiries and taking into consideration the factors described in Note 1b to the accounts, the directors have a reasonable
expectation that the Group and Company have adequate resources to continue in operation for the foreseeable future. For this reason,
they continue to adopt the going concern basis in preparing the financial statements.
Research and development
The Group recognises the importance of continuous product and process development to maintaining its reputation for innovative high
performance leathers. It works closely with both customers and suppliers to develop clearly differentiated products using advanced
technology. It uses trend information from designers in order to reflect current trends in more fashion orientated products and holds
consumer focus groups and attends relevant trade shows to better understand its potential consumers.
Treasury policies
The Group finances its activities with a combination of bank loans, overdrafts, finance leases and hire purchase contracts, as disclosed
in Note 24. Other financial assets and liabilities, such as trade receivables and trade payables, arise directly from the Group’s operating
activities. The Group has not traded in financial instruments during the year.
Overall, some 72% of Group revenue is in US dollars, 10% in sterling, 6% in birr and 12% in euros. Group policy is to sell away surplus
dollars.
22% of the Group’s raw material purchases are in US dollars, and this forms a natural hedge against a proportion of the dollar sales.
The Group’s principal borrowings are in pounds sterling, US dollars and Ethiopian Birr (for ETSC, PPM and PGS) which are used to
manage timing differences in cash flows arising from trading activities as set out in Note 24d. The debt is a combination of floating and
fixed rate. The Group’s policy is to use interest rate caps to manage exposure to significant fluctuations in interest rates when it believes
that the risk justifies the cost, however at the year-end no interest rate caps were in place (2013: no caps in place).
The Group’s objective is to maintain a balance between continuity of funding and flexibility through the use of overdrafts, bank loans
and finance leases. No specific policy exists with regard to liquidity. Short-term and medium term floating rate debt is favoured and the
Group renewed and increased some medium-term borrowings in 2014 in Ethiopia.
Transactions with customers are either credit insured or under confirmed letters of credit. Where these terms are not possible goods will
not be released without payment in advance of despatch, unless the Group sets an internal credit limit based on its previous experience
of the customer or external credit rating agencies.
Group policies also restrict the counterparties with which funds may be invested, to those approved by the Board.
As with all companies that operate in this sector the Group has significant exposure to changes in raw material prices for hides and
skins which are a by-product of the meat and dairy industry. The Group manages its risk in this area by using industry wide information
on pricing and working closely with its suppliers and committing to purchase on the basis of anticipated and actual forward sales
Company Number 102384
6
Pittards plc Annual Report & Accounts 2014
Directors’ report (continued)
orders. The purchase of ETSC enabled this risk in respect of Ethiopian skins and hides to be managed more closely, with greater market
information.
Creditor payment policy
The Group does not follow a particular code for the payment of suppliers. It is the Group’s policy in respect of major suppliers to settle
terms of payment when the terms of each transaction are agreed, to ensure the supplier is made aware of the terms of payment and
to abide by the terms of payment. For small local suppliers the policy is to pay within 45 days of invoice and for other suppliers to pay
within 40 days. Trade payables at the year end represented 40 days’ purchases (2013: 42 days).
Disabled employees
Every consideration is given to the employment, training and career development of the disabled and those who have become disabled
during employment, having regard to their particular aptitudes and abilities. Applications for employment by disabled persons are given
full and fair consideration.
Employee consultation and involvement
The Group recognises the need for good communications with employees and places great importance on employee involvement. Joint
consultative committees have been active for many years and a Staff Forum was established in 2009. Management are encouraged to
develop the skills and attitudes required for clear communications and consultation. Matters of particular interest or importance are
communicated to all employees through special briefing meetings.
Substantial interests
In addition to those disclosed under directors’ interests, the Company has been notified of the following interests under section 793
Companies Act 2006 as at 20 March 2015:
Holding of 50p shares
Artemis Investment Management LLP discretionary
1,850,000
(20.0%)
Hargreave Hale Nominees Ltd
Pension Protection Fund
Armstrong Investments Ltd
Zaphiriou Zarifi Overseas Investments Ltd
Rath Dhu Ltd
Directors
873,756
790,747
375,000
333,333
285,000
(9.4%)
(8.5%)
(4.0%)
(3.6%)
(3.1%)
The persons named on page 3 are the directors during the period and up to the date of approval of the Annual Report and Accounts.
R H Hankey retires by rotation and offers himself for re-election. GP Davis was appointed a director on 6 February 2014.
Directors’ interests
The directors at the end of the year and their interests in the shares of the Company were:
SD Boyd
GP Davis
RH Hankey
J Holmstrom
J Williams
At end of year
Ordinary Shares of 50p
At beginning of year or date
of appointment
Ordinary Shares of 50p
Total interests fully paid
50p shares
Total interests fully paid
50p shares
171,666
31,000
175,000
24,000
23,426
362,666
–
158,734
6,000
23,426
No changes took place in the interests of directors in the shares of the Company between 31 December 2014 and 20 March 2015.
Company Number 102384
Pittards plc Annual Report & Accounts 2014
7
Directors’ report (continued)
Annual general meeting
A special resolution (number 5) will be proposed to enable the Company to make market purchases of its own shares.
An ordinary resolution (number 4) will be proposed to enable the Company to issue and allot shares up to an aggregate nominal value
of £463,102. This authority lasts until the 2016 AGM. A special resolution (number 6) will be proposed to increase the authority to allot
equity shares for cash to a nominal amount of £463,102. The authority will last until the 2016 AGM.
Independent auditors
A resolution to re-appoint PricewaterhouseCoopers LLP as the Company’s auditors will be proposed at the forthcoming Annual General
Meeting.
This report was approved by the board on 20 March 2015 and signed on its behalf by
J Williams
Company Secretary
20 March 2015
Statement of directors’ responsibilities in relation to financial statements
The directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and
regulations.
Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have prepared
the group and parent company financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted
by the European Union. Under company law the directors must not approve the financial statements unless they are satisfied that they
give a true and fair view of the state of affairs of the group and the company and of the profit or loss of the group for that period. In
preparing these 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 applicable IFRSs as adopted by the European Union have been followed, subject to any material departures disclosed
and explained in the financial statements; and
• prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company and the group
will continue in business.
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the company’s
transactions and disclose with reasonable accuracy at any time the financial position of the company and the group and enable them to
ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the
company and the group 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 company’s website. Legislation in the United Kingdom governing
the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
Disclosure of information to the auditors
Each of the persons who is a director at the date of approval of this report confirms that:
• so far as the director is aware, there is no relevant audit information of which the Company’s auditors are unaware; and
• the director has taken all the steps that he/she ought to have taken as a director in order to make himself/herself aware of any
relevant audit information and to establish that the Company’s auditors are aware of that information.
This confirmation is given and should be interpreted in accordance with the provisions of s418 of the Companies Act 2006.
Company Number 102384
8
Pittards plc Annual Report & Accounts 2014
Independent auditor’s report to the members of Pittards plc
Report on the financial statements
Our opinion
In our opinion:
• Pittards plc’s Group financial statements and parent company financial statements (the “financial statements”) give a true and fair
view of the state of the Group’s and of the parent company’s affairs as at 31 December 2014 and of the Group’s profit and the
Group’s and the parent company’s cash flows for the year then ended;
• the Group financial statements have been properly prepared in accordance with International Financial Reporting Standards (“IFRSs”)
as adopted by the European Union;
• the parent company financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union
and as applied in accordance with the provisions of the Companies Act 2006; and
• the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
What we have audited
Pittards plc’s financial statements comprise:
• the Group and Company Balance Sheets as at 31 December 2014;
• the Consolidated Income Statement and the Consolidated Statement of Comprehensive Income for the year then ended;
• the Group and Company Statement of Cash Flows for the year then ended;
• the Consolidated and Company Statements of Changes in Equity for the year then ended; and
• the notes to the financial statements, which include a summary of significant accounting policies and other explanatory information.
The financial reporting framework that has been applied in the preparation of the financial statements is applicable law and IFRSs as
adopted by the European Union and, as regards the parent company financial statements, as applied in accordance with the provisions
of the Companies Act 2006.
In applying the financial reporting framework, the directors have made a number of subjective judgements, for example in respect of
significant accounting estimates. In making such estimates, they have made assumptions and considered future events.
Opinion on other matter prescribed by the Companies Act 2006
In our opinion, the information given in the Strategic Report and the Directors’ Report for the financial year for which the financial
statements are prepared is consistent with the financial statements.
Other matters on which we are required to report by exception
Adequacy of accounting records and information and explanations received
Under the Companies Act 2006 we are required to report to you if, in our opinion:
• we have not received all the information and explanations we require for our audit; or
• 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.
We have no exceptions to report arising from this responsibility.
Directors’ remuneration
Under the Companies Act 2006 we are required to report to you if, in our opinion, certain disclosures of directors’ remuneration
specified by law are not made. We have no exceptions to report arising from this responsibility.
Company Number 102384
Pittards plc Annual Report & Accounts 2014
9
Independent auditor’s report to the members of Pittards plc (continued)
Responsibilities for the financial statements and the audit
Our responsibilities and those of the directors
As explained more fully in the Statement of directors’ responsibilities in relation to financial statements set out on page 7, the directors
are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view.
Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International
Standards on Auditing (UK and Ireland) (“ISAs (UK & Ireland)”). Those standards require us to comply with the Auditing Practices
Board’s Ethical Standards for Auditors.
This report, including the opinions, has been prepared for and only for the Company’s members as a body in accordance with Chapter
3 of Part 16 of the Companies Act 2006 and for no other purpose. We do not, in giving these opinions, accept or assume responsibility
for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly
agreed by our prior consent in writing.
What an audit of financial statements involves
We conducted our audit in accordance with ISAs (UK & Ireland). An audit involves obtaining evidence about the amounts and
disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material
misstatement, whether caused by fraud or error. This includes an assessment of:
• whether the accounting policies are appropriate to the Group’s and the parent company’s circumstances and have been consistently
applied and adequately disclosed;
• the reasonableness of significant accounting estimates made by the directors; and
• the overall presentation of the financial statements.
We primarily focus our work in these areas by assessing the directors’ judgements against available evidence, forming our own
judgements, and evaluating the disclosures in the financial statements.
We test and examine information, using sampling and other auditing techniques, to the extent we consider necessary to provide
a reasonable basis for us to draw conclusions. We obtain audit evidence through testing the effectiveness of controls, substantive
procedures or a combination of both.
In addition, we read all the financial and non-financial information in the Annual Report and Accounts 2014 to identify material
inconsistencies with the audited financial statements and to identify any information that is apparently materially incorrect based on, or
materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent
material misstatements or inconsistencies we consider the implications for our report.
Colin Bates (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
Bristol
24 March 2015
Company Number 102384
10
Pittards plc Annual Report & Accounts 2014
Consolidated income statement
for the year ended 31 December 2014
Continuing operations:
Revenue
Cost of sales
Gross profit
Distribution costs
Administrative expenses
Profit from operations before finance costs
Finance costs
Finance income
Profit before taxation
Taxation
Profit for the year after taxation
Profit attributable to:
Owners of the parent
Non controlling interest
Earnings per share attributable to the owners of the parent
Basic
Diluted
Consolidated statement of comprehensive income
for the year ended 31 December 2014
Profit for the year after taxation
Other comprehensive income (expense)
Items that will not be reclassified to profit or loss
Revaluation of land and buildings
Items that may be subsequently reclassified to profit or loss
Unrealised exchange gain (loss) on translation of overseas subsidiaries
Other comprehensive income (expense)
Total comprehensive income for the year
Total comprehensive income (expense) attributable to:
Owners of the parent
Non controlling interest
The accompanying notes on pages 14 to 37 form an integral part of the Financial Statements.
Company Number 102384
Note
2014
£’000
2013
£’000
3
34,729
35,813
(27,696)
(28,487)
7
7
4
8
9
9
Note
10
7,033
(2,001)
(3,061)
1,971
(427)
45
1,589
(479)
1,110
1,115
(5)
1,110
7,326
(2,279)
(3,043)
2,004
(350)
58
1,712
(265)
1,447
1,449
(2)
1,447
12.06p
12.06p
15.68p
15.68p
2014
£’000
1,110
2013
£’000
1,447
245
245
41
41
286
139
139
(469)
(469)
(330)
1,396
1,117
1,398
(2)
1,131
(14)
Pittards plc Annual Report & Accounts 2014
11
Consolidated statement of changes in equity
for the year ended 31 December 2014
Share
capital
£’000
Share
premium
account
£’000
Capital
redemption
reserve
£’000
Share
options
reserve
£’000
Note
(Accumulated
losses)
Retained
earnings
£’000
Capital
reserve
£’000
Translation
reserve
£’000
Shares held
by ESOP
£’000
Revaluation
reserve
£’000
Total equity
attributable to
owners of
the parent
£’000
Non-
controlling
interest
£’000
Total
equity
£’000
At 1 January 2013
4,631
5,250
8,158
48
6,475
(7,413)
(2,417)
(495)
1,370 15,607
188 15,795
Comprehensive income for
the year:
Profit (loss) for the year after
taxation
Other comprehensive
income:
Gain (loss) on the revaluation
of buildings
10
Unrealised exchange loss
on translation of foreign
subsidiaries
Total other comprehensive
(expense) income
Total comprehensive income
(expense) for the year
Transactions with owners:
Reserves transfer
20
Total transactions with
owners
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1,449
–
–
(374)
(374)
–
–
–
1,449
(374)
–
–
–
–
(5,250)
(8,158)
(48)
– 13,456
(5,250)
(8,158)
(48)
– 13,456
–
–
–
–
–
–
–
–
–
–
1,449
(2)
1,447
148
148
(9)
139
(92)
(466)
(3)
(469)
56
(318)
(12)
(330)
56
1,131
(14)
1,117
–
–
–
–
–
–
–
–
At 1 January 2014
4,631
Comprehensive income for
the year:
Profit (loss) for the year after
taxation
Other comprehensive
income:
Gain on the revaluation of
buildings
10
Unrealised exchange gain
on translation of foreign
subsidiaries
Total other comprehensive
income
Total comprehensive income
(expense) for the year
–
–
–
–
–
At 31 December 2014
4,631
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
6,475
7,492
(2,791)
(495)
1,426 16,738
174 16,912
–
–
–
–
–
–
–
1,115
–
–
–
–
–
–
–
1,115
–
–
41
41
41
–
–
–
–
–
–
1,115
(5)
1,110
242
242
–
41
242
283
3
–
3
245
41
286
242
1,398
(2)
1,396
6,475
8,607 (2,750)
(495) 1,668 18,136
172 18,308
Company Number 102384
12
Pittards plc Annual Report & Accounts 2014
Company statement of changes in equity
for the year ended 31 December 2014
Share
capital
£’000
Share
premium
account
£’000
Capital
redemption
reserve
£’000
Note
Share
options
reserve
£’000
(Accumulated
losses)
Retained
earnings
£’000
Shares held
by ESOP
£’000
Total
equity
£’000
At 1 January 2013
4,631
5,250
8,158
48
(5,796)
(495)
11,796
Comprehensive income for the year:
Retained profit for the year
Total comprehensive income for the year
Transactions with owners:
Reserves transfer
Total transactions with owners
At 1 January 2014
Comprehensive income for the year:
Retained profit for the year
Total comprehensive income for the year
At 31 December 2014
20
–
–
–
–
4,631
–
–
4,631
–
–
–
–
–
–
1,757
1,757
(5,250)
(8,158)
(48)
13,456
(5,250)
(8,158)
(48)
13,456
–
–
–
–
1,757
1,757
–
–
–
–
–
–
–
–
–
–
–
–
–
–
9,417
(495)
13,553
529
529
–
–
529
529
9,946
(495)
14,082
Company Number 102384
Balance sheets
as at 31 December 2014
ASSETS
Non-current assets
Property, plant and equipment
Intangible assets
Investments in subsidiary undertakings
Deferred income tax asset
Available for sale financial instruments
Total non-current assets
Current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Current income tax recoverable
Deferred income tax asset
Total current assets
Total assets
LIABILITIES
Current liabilities
Deferred income tax liability
Trade and other payables
Current income tax liability
Interest bearing loans, borrowings and overdrafts
Total current liabilities
Non-current liabilities
Interest bearing loans, borrowings and overdrafts
Total non-current liabilities
Total liabilities
Net assets
EQUITY
Share capital
Capital reserve
Shares held by ESOP
Retained earnings
Translation reserve
Revaluation reserve
Total equity attributable to owners of the parent
Non-controlling interest
TOTAL EQUITY
Pittards plc Annual Report & Accounts 2014
13
Company
2014
£’000
2013
£’000
1,618
187
186
1,636
–
3,627
9,570
9,703
88
–
164
19,525
23,152
–
(4,647)
–
(4,393)
(9,040)
(30)
(30)
1,669
164
186
1,194
–
3,213
8,770
9,664
84
–
606
19,124
22,337
–
(4,449)
–
(4,293)
(8,742)
(42)
(42)
Note
Group
2014
£’000
2013
£’000
6,095
164
–
1,194
2
7,455
15,441
5,312
522
84
606
21,965
29,420
6,560
187
–
1,636
2
8,385
17,796
4,896
529
–
164
23,385
31,770
(64)
(5,097)
(171)
(6,877)
(27)
(4,868)
–
(6,196)
(12,209)
(11,091)
(1,253)
(1,253)
(1,417)
(1,417)
10
11
25
18
25
12
13
13
18
18
14
15
16
19
20
20
20
20
20
(13,462)
(12,508)
(9,070)
(8,784)
18,308
16,912
14,082
13,553
4,631
6,475
(495)
8,607
(2,750)
1,668
18,136
172
18,308
4,631
6,475
(495)
7,492
(2,791)
1,426
16,738
174
16,912
4,631
–
(495)
9,946
–
–
14,082
–
14,082
4,631
–
(495)
9,417
–
–
13,553
–
13,553
The financial statements on pages 10 to 37 were approved and authorised for issue by the board of directors on 20 March 2015 and
signed on its behalf by:
J Williams
Finance Director
Company Number 102384
14
Pittards plc Annual Report & Accounts 2014
Statement of cash flows
for the year ended 31 December 2014
Cash flows from operating activities
Cash generated from (used in) operations
Tax paid
Interest paid
Net cash generated from (used in) operating activities
Note
21
Cash flows from investing activities
Purchases of property, plant and equipment
Purchases of intangible assets
Net cash used in investing activities
Cash flows from financing activities
Proceeds from borrowings
Repayment of bank loans
Repayment of obligations under finance leases and hire
purchase obligations
Net cash generated from (used in) financing activities
Decrease in cash and cash equivalents
Group
Company
2014
£’000
744
(151)
(451)
142
(607)
(35)
(642)
1,063
(680)
(45)
338
(162)
2013
£’000
(685)
(63)
(334)
(1,082)
(358)
(57)
(415)
1,265
(1,029)
(38)
198
(1,299)
2014
£’000
280
–
(183)
97
(146)
(35)
(181)
–
–
(45)
(45)
(129)
2013
£’000
(680)
–
(106)
(786)
(224)
(57)
(281)
–
–
(38)
(38)
(1,105)
Cash and cash equivalents at beginning of the year
(4,388)
(3,105)
(4,164)
(3,074)
Exchange gains on cash and cash equivalents
(1)
16
–
15
Cash and cash equivalents at end of the year
22
(4,551)
(4,388)
(4,293)
(4,164)
Notes to the consolidated accounts
1. Statement of accounting policies
General information
Pittards plc is a public limited company incorporated and domiciled under the Companies Act 2006 in England and is quoted on the
Alternative Investment Market (AIM). The address of the registered office is given on page 3. The nature of the Group’s operations and
its principal activities are set out in the Strategic report on page 4.
(a) Basis of preparation
The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards adopted by
the International Accounting Standards Board (“IASB”) and interpretations issued by the International Financial Reporting Interpretations
Committee of the IASB (together “IFRS”) as endorsed by the European Union.
The consolidated financial statements have been prepared in accordance with the Companies Act 2006, applicable to companies
reporting under IFRS.
The consolidated financial statements have been prepared under the historical cost convention, as modified by the revaluation of
buildings.
Company Number 102384
Pittards plc Annual Report & Accounts 2014
15
Notes to the consolidated accounts (continued)
1. Statement of accounting policies (continued)
(a) Basis of preparation (continued)
The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires
management to exercise its judgement in the process of applying the Group’s accounting policies. The areas involving a high degree
of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements, are
disclosed in Note 2.
The accounting policies outlined below have been consistently applied.
(b) Going concern
The Group meets its day-to-day working capital requirements through its bank facilities. The Group’s forecasts and projections, taking
account of reasonably possible changes in trading performance, show that the Group should be able to operate within the level of its
current facilities. After making enquiries, the directors have a reasonable expectation that the Group has adequate resources to continue
in operational existence for the foreseeable future. The Group therefore continues to adopt the going concern basis in preparing its
consolidated financial statements. Further information on the Group’s borrowings is given in Note 24.
(c) New and amended standards adopted by the Group
The IFRSs or IFRIC interpretations that are effective for the first time for the financial year beginning on or after 1 January 2014 are
shown below.
IFRS10 Consolidated financial statements
IFRS11 Joint arrangements
IFRS12 Disclosure of interests in other entities
IAS27 Separate financial statements
IAS28 Associates and joint ventures
Amendments to IFRS10,11 and 12 on transition guidance
Amendments to IFRS10,12 and IAS27 on consolidation for investment entities
Amendments to IAS32 on Financial instruments assets and liability offsetting
Amendments to IAS36 Impairment of assets on recoverable amount disclosures
Amendments to IAS39 Financial Instruments: Recognition and measurement on novation of derivative and hedge accounting
IFRIC21 Levies
The presentational impact of these standards and interpretations has been assessed. The directors consider that these standards and
interpretations do not have a material impact on the financial statements of the Group.
(d) Basis of consolidation
The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its
subsidiaries) made up to 31 December each year. Control is achieved where the Company has the power to govern the financial and
operating policies of an investee entity so as to obtain benefits from its activities.
Subsidiaries are all entities over which the Group has the power to govern the financial and operating policies generally accompanying a
shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that are currently exercisable
or convertible are considered when assessing whether the Group controls another entity. Subsidiaries are fully consolidated from the
date on which control is transferred to the Group.
Non-controlling interests in the net assets of consolidated subsidiaries are identified separately from the Company’s equity herein. Non-
controlling interests consist of the amount of those interests at the date of the original business combination and the non-controlling
interest’s share of changes in equity since the date of the combination. Losses applicable to the non-controlling interest in excess of the
non-controlling interest in the subsidiary’s equity are allocated against the interests of the Company except to the extent that the non-
controlling interest has a binding obligation and is able to make an additional investment to cover the losses.
The purchase method of accounting is used to account for the acquisition of subsidiaries by the Group. Acquisition costs are expensed
as incurred. The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities
incurred or assumed at the date of exchange. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business
combination are initially measured at fair value at the acquisition date irrespective of the extent of any non-controlling interest. Where
necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with those
used by other members of the Group.
Company Number 102384
16
Pittards plc Annual Report & Accounts 2014
Notes to the consolidated accounts (continued)
1. Statement of accounting policies (continued)
(d) Basis of consolidation (continued)
Goodwill is initially measured as the excess of the aggregate of the consideration transferred and the fair value of non-controlling
interest over the net identifiable assets acquired and liabilities assumed. If this consideration is lower than the fair value of the net assets
of the subsidiary acquired, the difference is recognised in profit or loss as a bargain gain on purchase.
All intra-group transactions, balances, income and expenditure are eliminated on consolidation.
In accordance with the exemptions given by section 408 of the Companies Act 2006, the Company has not presented its own
Statement of Comprehensive Income or Income Statement. The Company achieved a profit of £0.549m (2013: £1.957m)
(e) Subsidiaries
On consolidation, the assets and liabilities of the Group’s overseas operations are translated into the Group’s presentation currency at
exchange rates prevailing on the balance sheet date. Income and expense items are translated at the average exchange rates for the
year. Exchange differences arising, if any, are recognised in other comprehensive income and transferred to the Group’s translation
reserve.
(f) Revenue recognition
Revenue is measured at fair value of the consideration received or receivable and represents amounts receivable for goods and services
and consultancy income provided in the normal course of business, net of discounts, value added tax and other sales related taxes.
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably
measured.
i) Sales of goods
Revenue from the sale of skins, hides and retail and leather goods is not recognised until the significant risks and rewards of ownership
of the goods have passed to the buyer and the amount of revenue can be measured reliably, this is usually on despatch.
ii) Sales of services
Where services are provided revenue is recognised on an accruals basis in the accounting period in which the service is rendered.
(g) Finance income
Finance income comprises interest receivable in respect of overdue debtors.
(h) Finance expenses
Finance expenses comprise interest payable on interest-bearing loans and borrowings. Finance expenses are recognised using the
effective interest method.
(i) Foreign currency translation
These financial statements are presented in sterling as that is considered to be the currency of the primary economic environment in
which the Company operates. This decision was based on the fact that sterling is the currency in which management reporting and
decision making is based.
Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic
environment in which the entity operates (‘the functional currency’). The consolidated financial statements are presented in sterling
which is the Company’s functional and the Group’s presentation currency.
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the
transactions or valuation where items are re-measured. Foreign exchange gains and losses resulting from the settlement of such
transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are
recognised in the income statement as gain or loss on foreign exchange.
Foreign exchange gains and losses that relate to borrowings and cash and cash equivalents are presented in the income statement
within administrative expenses (Note 4).
(j) Exceptional items
Items that are material in size, unusual and infrequent in nature are presented as exceptional items in the Income Statement. The
directors are of the opinion that the separate disclosure of such items provides helpful information about the Group’s underlying
business performance.
Company Number 102384
Pittards plc Annual Report & Accounts 2014
17
Notes to the consolidated accounts (continued)
1. Statement of accounting policies (continued)
(k) Intangible assets
An intangible asset, which is an identifiable non-monetary asset without physical substance, is recognised to the extent that it is
probable that the expected future economic benefits attributable to the asset will flow to the Group and that its cost can be measured
reliably. The asset is deemed to be identifiable when it is separable or when it arises from contractual or other legal rights.
Computer software that is not integral to an item of property, plant and equipment is recognised separately as an intangible asset and
is carried at cost less accumulated amortisation and accumulated impairment losses. Costs include software licences and consulting costs
attributable to the development, design and implementation of the computer software. Amortisation is calculated using the straight-line
method so as to charge the cost of the computer software to the Income Statement over its estimated useful life (1-7 years).
Expenditure on research activities is recognised as an expense in the period in which it is incurred.
(l) Property, plant and equipment
Property, plant and equipment (other than freehold buildings) are stated at cost less accumulated depreciation and any recognised
impairment loss. Property, plant and equipment are initially recorded at cost of purchase or construction. Cost includes expenditure
that is directly attributable to the acquisition of the items. Depreciation is charged so as to write off the cost or valuation of assets on a
straight-line basis over their estimated useful lives, as follows:
Freehold buildings
Plant, machinery and motor vehicles
2%
6-33%
A revaluation policy is applied to freehold buildings. Buildings were revalued at December 2014 and December 2013 based on the
fair value as determined by an independent licensed loss assessor qualified to value buildings in Ethiopia. The increase in value has
been reflected via a revaluation of land and buildings in other comprehensive income. Buildings have been depreciated at 2%. No
depreciation has been charged on the building being constructed by Pittards Global Sourcing Private Limited in Ethiopia as it is still
under construction.
The carrying values of property, plant and equipment are reviewed for impairment when events or changes in circumstances indicate
that the carrying value may not be recoverable. The gain or loss arising on the disposal or retirement of an asset is determined as the
difference between the sale proceeds and the carrying amount of the asset and is recognised in income.
The residual values and useful lives of assets are reviewed annually and adjusted when appropriate.
(m) Leased assets
Assets held under finance leases, which are leases where substantially all the risks and rewards of ownership of the asset have been
transferred to the Group, are capitalised in the balance sheet and depreciated over the shorter of the lease term or their useful lives. The
asset is recorded at the lower of its fair value and the present value of the minimum lease payments at the inception of the lease. The
capital elements of future obligations under finance leases are included in liabilities in the balance sheet and analysed between current
and non-current amounts. The interest elements of future obligations under finance leases are charged to the Income Statement over
the periods of the leases and represent a constant proportion of the balance of capital repayments outstanding in accordance with the
effective interest rate method.
Leases where the lessor retains substantially all the risks and rewards of ownership are classified as operating leases. The cost of
operating leases (net of any incentives received from the lessor) is charged to the Income Statement on a straight line basis over the
periods of the leases.
(n) Inventories
Inventories are stated at the lower of cost or net realisable value. Cost is determined on a first in first out (FIFO) basis. Net realisable
value is the estimated selling price less all costs to be incurred. Raw materials are valued according to the cost of the materials
purchased plus any direct transport costs. Work in progress (WIP) is valued as the cost of raw materials plus an appropriate proportion
of production overheads. Finished goods are valued as the cost of raw materials plus full absorption of production overheads based on
normal operating capacity.
Company Number 102384
18
Pittards plc Annual Report & Accounts 2014
Notes to the consolidated accounts (continued)
1. Statement of accounting policies (continued)
(n) Inventories (continued)
Inventory held at ETSC is stated at the lower of cost and net realisable value but cost is determined on an average cost basis. An
impairment reserve to reflect the directors’ best estimates of the difference between FIFO and average was established on acquisition.
The directors have satisfied themselves that there was no material difference between FIFO and average. Inventories include goods in
transit from the suppliers to our factory where ownership has effectively passed to the Group.
Provision is made against slow moving and obsolete inventory to ensure the value at which inventory is held in the balance sheet is
reflective of anticipated future sales patterns. Provision is made having regard to the saleability and condition of inventory.
(o) Current and deferred income tax
Current tax is the expected tax payable or receivable on the taxable income for the year, on the basis of tax laws enacted or
substantively enacted at the balance sheet date, and any adjustments to tax payable in respect of previous years, in the countries where
the Company and its subsidiaries operate and generate taxable income.
Deferred tax is provided in full using the liability method on temporary differences between the tax basis of assets and liabilities and
their carrying amounts in the financial statements. A deferred tax asset is only recognised to the extent it is probable that sufficient
taxable profits will be available in the future for it to be utilised.
Deferred tax is determined using the tax rates that have been enacted or substantively enacted at the balance sheet date and are
expected to apply when the deferred tax asset or liability is realised or settled.
Tax is recognised in the Income Statement, except where it relates to items recognised in other comprehensive income or directly in
equity, in which case it is recognised in other comprehensive income or equity.
(p) Retirement benefit costs
The Group operated a stakeholder pension scheme for the benefit of its UK employees under which no employer contribution was
made. The scheme ceased at the end of April when the new Auto Enrolment scheme was introduced. Matching contributions are made
by the employer in line with scheme rules. Pension contributions are made for employees at ETSC, PPM and PGS under the Ethiopian
Social Security Agency scheme.
(q) Provisions
Provisions are recognised where a legal or constructive obligation has been incurred which will probably lead to an outflow of resources
that can be reasonably estimated. Provisions are recorded for the estimated ultimate liability that is expected to arise, taking into
account the time value of money. A contingent liability is disclosed where the existence of the obligations will only be confirmed by
future events, or where the amount of the obligation cannot be measured with reasonable reliability.
(r) Financial instruments
Investment
Where the investing entity does not exercise significant influence or control over the other entity, its investment is recorded initially at
cost and then at fair value through profit and loss.
Trade and other receivables
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost less provision for impairment. A
provision for impairment of trade receivables is established when there is objective evidence that the Group will not be able to collect
all amounts due according to the original terms of receivables. The amount of the provision is recognised in the Income Statement in
Distribution costs.
Trade payables
Trade payables are recognised initially at fair value and subsequently measured at amortised cost.
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and demand deposits that are readily convertible to a known amount of cash and are
subject to an insignificant risk of change in value. For the purpose of the cash flow statement, cash and cash equivalents includes bank
overdrafts.
Bank borrowings
Interest-bearing bank loans and overdrafts are recorded as the proceeds received, net of direct issue costs. Finance charges, including
premiums payable on settlement or redemption, are accounted for on an accruals basis and are added to the carrying amount of the
instrument to the extent that they are not settled in the period in which they arise.
Company Number 102384
Pittards plc Annual Report & Accounts 2014
19
Notes to the consolidated accounts (continued)
1. Statement of accounting policies (continued)
s) Share based payments
The Group has applied the requirements of IFRS 2 Share-based Payment to all grants of equity instruments after 7 November 2002 that
were unvested at 1 January 2007.
The Group has periodically issued equity-settled share based payments to certain employees and invited all employees to participate in
Save As You Earn share option schemes. There are currently no share based payment schemes within the Group.
(t) Employee share ownership trust
The assets of the employee share ownership trust are fully consolidated within the accounts of the Group. Shares held in the Trust are
deducted from shareholders’ funds and are stated at cost. The shares were originally bought to reflect potential awards with a previous
bonus scheme which is no longer in existence.
(u) Segmental reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The
chief operating decision maker has been identified as the board of Pittards plc which makes strategic decisions.
(v) Share capital
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new ordinary shares or options are shown
in equity as a deduction, net of tax, from the proceeds.
2. Critical judgements and estimation uncertainty
The preparation of the financial statements requires management to make estimates and assumptions that affect the reported amount
of revenues, expenses, assets and liabilities, and the disclosure of contingent liabilities at the date of the financial statements. If in the
future such estimates and assumptions, which are based on management’s best judgement at the date of preparation of the financial
statements, deviate from actual circumstances, the original estimates and assumptions will be modified as appropriate in the year in
which circumstances change.
(a) Inventory valuation
The calculation of WIP and finished goods inventory value requires an estimate of the total production cost and an estimate of
production levels in order to determine the value of direct costs to absorb into inventory. Estimates are revised periodically through the
year to ensure that absorption of overheads is materially correct as at the end of the year.
The Group reviews its finished goods inventory on a regular basis and, where appropriate, makes provisions for slow moving and
obsolete inventory based on estimates of future sales activity. The estimates of the future sales activity will be based on both historical
experience and expected outcomes based on knowledge of the markets in which the Group operates. The level of inventory provisions
at year end represents the consistent application of an agreed formula plus additional specific provisions which management have
deemed to be appropriate.
(b) Recognition of deferred tax asset
The recognition of deferred tax assets is based upon whether it is more likely than not that sufficient and suitable taxable profits will
be available in the future against which the reversal of temporary differences can be deducted. Where the temporary differences are
related to losses, the availability of the losses to offset against forecast taxable profits is also considered. Recognition therefore involves
judgement regarding the future financial performance of the entity in which the deferred tax asset has been recognised.
Company Number 102384
20
Pittards plc Annual Report & Accounts 2014
Notes to the consolidated accounts (continued)
3. Business segments information
Management has determined the operating segments based on the reports reviewed by the board that are used to make strategic
decisions. With effect from 2014 the board consider the business in terms of four divisions: UK leather, UK consumer, Ethiopian leather,
Ethiopian consumer. The consolidation adjustment segment represents those adjustments made to prepare the group accounts. The
segment information is shown below:
2014
Turnover
Inter-segmental trading
Gross Profit
Taxation
Assets
Liabilities
2013
Turnover
Inter-segmental trading
Gross Profit
Taxation
Assets
Liabilities
UK
Leather
£’000
31,513
(2,356)
29,157
4,083
(49)
29,233
UK
Consumer
£’000
1,054
–
1,054
49
–
930
Ethiopian
Leather
£’000
11,402
(9,522)
1,880
2,520
(430)
Ethiopian
Consumer
£’000
Consolidation
Adjustment
£’000
2,651
(13)
2,638
381
–
–
–
–
–
–
Total
£’000
46,620
(11,891)
34,729
7,033
(479)
13,609
3,314
(15,316)
31,770
(14,446)
(1,040)
(6,661)
(2,229)
10,914
(13,462)
UK
Leather
£’000
33,132
(2,440)
30,692
4,947
(236)
27,937
(13,895)
UK
Consumer
£’000
981
(47)
934
7
–
455
(467)
Ethiopian
Leather
£’000
12,656
(9,939)
2,717
2,034
(29)
Ethiopian
Consumer
£’000
Consolidation
Adjustment
£’000
1,504
(34)
1,470
338
–
–
–
–
–
–
Total
£’000
48,273
(12,460)
35,813
7,326
(265)
12,862
2,874
(14,708)
29,420
(6,475)
(2,000)
10,329
(12,508)
Geographical analysis of revenue (based on the customer’s country of domicile):
2014
UK
Europe
North America
Rest of the world
2013
UK
Europe
North America
Rest of the world
UK
Leather
£’000
2,285
4,413
2,104
20,355
29,157
UK
Leather
£’000
2,657
5,321
1,319
21,395
30,692
UK
Consumer
£’000
727
129
198
–
1,054
UK
Consumer
£’000
716
122
96
–
934
Ethiopian
Leather
£’000
–
–
–
1,880
1,880
Ethiopian
Leather
£’000
–
173
–
2,544
2,717
Ethiopian
Consumer
£’000
10
–
2,407
221
2,638
Ethiopian
Consumer
£’000
5
79
1,333
53
1,470
Total
£’000
3,022
4,542
4,709
22,456
34,729
Total
£’000
3,378
5,694
2,748
23,993
35,813
Revenues of approximately £5.309m (2013: £5.006m) within the UK Leather segment are derived from one customer. Revenues of
approximately £8.398m (2013: £8.295m) within the UK Leather segment are derived from another customer. Both customers’ revenues
fall within the Rest of the world geographical segment.
Company Number 102384
Pittards plc Annual Report & Accounts 2014
21
Notes to the consolidated accounts (continued)
4. Profit before taxation
The following items have been included in arriving at profit before taxation:
Depreciation of property, plant and equipment (Note 10)
Amortisation of intangible assets (Note 11)
Operating lease rentals recognised as an expense
Staff costs (Note 5)
Employee benefit expense (life and health insurances)
Research and development expenditure
Net gain on foreign currency translation
Auditors’ remuneration
The analysis of fees payable to the Company’s auditors is as follows:
Fees payable to the Company’s auditors in respect of the audit of the parent company
and consolidated accounts
Fees payable to the Company’s auditors in respect of the audit of subsidiaries
Total audit fees
2014
£’000
407
12
302
7,675
135
111
104
2013
£’000
355
5
302
7,524
120
175
78
2014
£’000
2013
£’000
43
5
48
40
5
45
No non-audit fees were paid during the year (2013: £nil). The audit fees include £2,000 in respect of work performed on the
accounting system.
5. Staff costs
The average number of employees of the Group (including directors), on an average monthly basis was:
Production
Sales, distribution and administration
Directors
Their aggregate remuneration comprised:
Wages and salaries
Social Security costs
Other pension costs
There are no share options outstanding at the end of 2014 (2013: nil).
2014
No.
1,450
230
5
1,685
£’000
6,859
713
103
7,675
2013
No.
1,111
202
5
1,318
£’000
6,801
682
41
7,524
Company Number 102384
22
Pittards plc Annual Report & Accounts 2014
Notes to the consolidated accounts (continued)
6. Directors’ remuneration
Executive
RH Hankey
J Williams
Non-executive
SD Boyd
LM Cretton
GP Davis
JG Holmstrom
Salary & fees
£’000
Profit
Related
Bonus
£’000
Benefits
£’000
Pension
Contributions
£’000
196
106
64
–
31
34
431
23
13
–
–
–
–
36
10
6
3
–
–
–
19
6
3
–
–
–
–
9
2014
Total
£’000
235
128
67
–
31
34
495
2013
Total
£’000
208
113
68
34
–
34
457
In 2014 the Remuneration Committee established a Profit Related Bonus scheme for the executive directors and key management. It
is a cash settled scheme with a minimum profit before tax threshold which must be exceeded otherwise no bonus will be paid. It is
designed to incentivise key staff in the business and align them closely with shareholders.
Benefits received consist of health insurance and life assurance. The values of the benefits are based on the taxable value.
In May 2014 the Company set up an Auto Enrolment compliant pension scheme in line with the Government staging date. In the case
of directors and key management the Company matches employee contributions up to a maximum of 5% of basic salary.
Key management compensation
Key management represents the directors of the Yeovil supervisory board. The compensation paid or payable to key management for
employee services is shown below:
Salaries, bonus and other short-term benefits
Pension contributions
Total
7. Finance costs and income
a) Finance costs
Interest on bank loans and overdrafts
Interest on obligations under finance leases and hire purchase contracts
b) Finance income
Interest on overdue debtors
2014
£’000
554
11
565
2014
£’000
417
10
427
2013
£’000
526
–
526
2013
£’000
347
3
350
(45)
(58)
Company Number 102384
Pittards plc Annual Report & Accounts 2014
23
Notes to the consolidated accounts (continued)
8. Taxation
(a) Analysis of the charge in the year
The charge based on the profit for the year comprises:
Corporation tax on profit for the year
Foreign tax on profit for the year
Foreign tax related to prior years
Total current tax
Deferred Tax
Origination and reversal of temporary differences
Impact of change in UK tax rate
Total deferred tax
Income tax charge
2014
£’000
2013
£’000
217
32
193
442
(49)
86
37
479
–
36
–
36
40
189
229
265
The standard rate of Corporation Tax in the UK changed from 23% to 21% with effect from 1 April 2014 and further reduces to 20%
with effect from 1 April 2015. Accordingly, the Company’s profits for this accounting year are taxed at an effective rate of 21.50% and
will be taxed at 20% in the future.
Following the first tax audit of ETSC since it was purchased in 2009 the corporation tax calculations for the preceding four years were
revised upwards.
(b) Factors affecting the charge for the year
Profit on ordinary activities before tax
Tax calculated at domestic tax rates applicable to profits in the respective countries
Income not subject to tax
Corporation tax related to prior years
Expenses not deductible for tax purposes
Allowable tax deductions
Foreign tax paid
Double tax relief
Utilisation of tax losses
Impact of change in UK tax rate
Total tax charge for the year (Note 8(a))
2014
£’000
2013
£’000
1,589
1,712
428
(49)
193
125
(270)
32
(31)
(35)
86
479
552
(141)
–
90
(225)
36
(11)
(225)
189
265
(c) Factors that may affect future tax charges
Resolutions passed by the UK parliament during March 2013 reduced the main rate of corporation tax to 23% from 1 April 2013, to
21% from 1 April 2014 and to 20% from 1 April 2015. These changes were substantially enacted on 2 July 2013 therefore all UK
deferred tax assets have been measured using the rate in place at the time they expect to be realised or settled.
The Group has recognised a deferred tax asset of £1.800m (2013: £1.773m) out of a total potential deferred tax asset of £1.990m
(2013: £2.244m). The element of the deferred tax asset not yet recognised would be available to be utilised against future UK taxable
profits (Note 18).
Company Number 102384
24
Pittards plc Annual Report & Accounts 2014
Notes to the consolidated accounts (continued)
9. Earnings per ordinary share
Analysis of the profit in the year:
Profit for the year attributable to owners of the parent
Weighted average number of ordinary shares in issue
(excluding the shares owned by the Pittards Employee Share Ownership Trust)
Basic
Diluted
Basic earnings per ordinary 50p share
Diluted earnings per ordinary 50p share
2014
£’000
Restated
2013
£’000
1,115
1,449
‘000’s
‘000’s
9,243
9,243
12.06p
12.06p
9,243
9,243
15.68p
15.68p
On 15 January 2014 the shareholders approved a 1:50 share consolidation which changed the structure of the share capital from
463,101,933 1p shares to 9,262,039 50p shares.
10. Property, plant and equipment
Cost or valuation
At 1 January 2013
Exchange differences
Additions
Disposals
Revaluation of property
At 1 January 2014
Exchange differences
Additions
Disposals
Revaluation of property
At 31 December 2014
Accumulated depreciation
At 1 January 2013
Exchange differences
Charge for year
Release of depreciation on revaluation
At 1 January 2014
Exchange differences
Charge for year
Disposals
Release of depreciation on revaluation
At 31 December 2014
Net book value
At 31 December 2014
At 31 December 2013
At 31 December 2012
Company Number 102384
Group
Plant,
machinery and
motor vehicles
£’000
Company
Plant,
machinery and
motor vehicles
£’000
Total
£’000
Total
£’000
15,740
19,287
11,483
11,483
(256)
411
–
–
(472)
426
–
66
–
292
–
–
–
292
–
–
Freehold
buildings
£’000
3,547
(216)
15
–
66
3,412
15,895
19,307
11,775
11,775
16
5
–
165
17
602
(104)
–
33
607
(104)
165
–
146
–
–
–
146
–
–
3,598
16,410
20,008
11,921
11,921
–
–
73
(73)
–
–
80
–
(80)
–
13,122
(192)
282
–
13,122
9,931
9,931
(192)
355
(73)
–
175
–
–
175
–
13,212
13,212
10,106
10,106
13
327
(104)
–
13
407
(104)
(80)
–
197
–
–
–
197
–
–
13,448
13,448
10,303
10,303
3,598
3,412
3,547
2,962
2,683
2,618
6,560
6,095
6,165
1,618
1,669
1,552
1,618
1,669
1,552
Pittards plc Annual Report & Accounts 2014
25
Notes to the consolidated accounts (continued)
10. Property, plant and equipment (continued)
Depreciation of £0.330m (2013: £0.336m) has been charged to cost of sales and £0.066m (2013: £0.019m) to administrative expenses
and £0.011m (2013: £nil) to distribution expenses in the Income Statement.
Included in the Group’s and Company’s plant, machinery and motor vehicles are leased assets and assets being acquired under hire
purchase agreements with a net book value of £0.156m (2013: £0.170m).
Freehold buildings includes an amount of £0.544m (2013: £0.515m) in respect of work commenced on the building for Pittards Global
Sourcing Private Limited Company. As this building is under construction no depreciation has been charged.
The Group’s buildings were revalued to fair value based on market rates as at 31 December 2014. Fair value was determined by
Getachew Tesfaye, licensed loss assessor, who is an independent valuer.
If buildings were stated on historic cost basis the net book value would be £0.822m (2013: £0.900m).
11. Intangible assets
Cost
At 1 January 2013
Additions
At 1 January 2014
Additions
At 31 December 2014
Accumulated amortisation
At 1 January 2013
Charge for year
At 1 January 2014
Charge for year
At 31 December 2014
Net book value
At 31 December 2014
At 31 December 2013
12. Inventories
Raw material and sundry inventory
Work in progress
Finished goods
Group
Computer
Software
£’000
Company
Computer
Software
£’000
1,685
57
1,742
35
1,777
1,573
5
1,578
12
1,590
187
164
Group
Company
2014
£’000
4,757
5,461
7,578
2013
£’000
5,182
4,516
5,743
17,796
15,441
2014
£’000
2,390
2,137
5,043
9,570
1,677
57
1,734
36
1,770
1,565
5
1,570
13
1,583
187
164
2013
£’000
2,705
1,969
4,096
8,770
During the year £0.018m in respect of a stock provision was debited to the Income Statement (2013: £0.003m) as part of the cost
of sales, and £18.803m inventory was charged to the Income Statement as cost of sales (2013: £18.836m). Raw material and sundry
inventory includes £0.269m of goods in transit at year end (2013: £0.277m).
Company Number 102384
26
Pittards plc Annual Report & Accounts 2014
Notes to the consolidated accounts (continued)
13. Current financial assets
Trade and other receivables
Trade receivables
Less provision for impairment of trade receivables
Trade receivables net
Other receivables
Prepayments and accrued income
Amounts owed by Group undertakings
Movement on the provision for impairment of trade receivables
was as follows:
As at 1 January
Release of provision for receivables impairment
Receivables written off during the year as uncollectable
As at 31 December
Group
Company
2014
£’000
4,445
(259)
2013
£’000
4,352
(289)
4,186
4,063
463
247
–
963
286
–
4,896
5,312
289
(30)
–
259
307
(24)
6
289
2014
£’000
4,089
(259)
3,830
103
208
5,562
9,703
289
(30)
–
259
The table below shows an analysis of the ageing of trade receivables which are past due but not impaired.
Up to 60 days
60-90 days
More than 90 days
Group
Company
2014
£’000
832
117
596
1,545
2013
£’000
611
21
284
916
2014
£’000
817
115
540
1,472
2013
£’000
3,983
(289)
3,694
309
241
5,420
9,664
307
(24)
6
289
2013
£’000
624
19
189
832
As at 31 December the provision against trade receivables was £0.259m (2013: £0.289m) for the Group and £0.259m (2013: £0.289m)
for the Company. The ageing of the receivables impaired against which part provisions have been made is as follows:
Not overdue
Up to 60 days
60-90 days
More than 90 days
Group
2014
£’000
266
135
62
83
546
2013
£’000
35
323
36
28
422
Company
2014
£’000
266
135
62
83
546
2013
£’000
35
323
36
28
422
The directors consider that the carrying amounts of trade and other receivables approximate to their fair value and that the above
unprovided elements are recoverable.
An analysis of the currencies in which trade receivables are held is shown in Note 24 (c).
Cash and cash equivalents
Cash and cash equivalents
Company Number 102384
2014
£’000
529
2013
£’000
522
2014
£’000
88
2013
£’000
84
Pittards plc Annual Report & Accounts 2014
27
Notes to the consolidated accounts (continued)
13. Current financial assets (continued)
Credit risk
The Group’s credit risk is attributable to its trade receivables. The amounts presented in the balance sheet are net of allowances for
impaired receivables. An allowance for impairment is made where there is an identified loss event which, based on previous experience,
is evidence of a reduction in the recoverability of the cash flows. Where possible, the Group mitigates its credit risk by using credit
insurance policies to insure its credit sales and as a result the reserve made for irrecoverable amounts is not material. The maximum
exposure, representing trade and other receivables not covered by insurance, impaired, or due from government or similar institutions
was £1.418m (2013: £1.569m). Management carries out a review of trade receivables past due date and makes provision for any debts
which are considered to be impaired. Provision is also made for any customer claims or allowances where a credit note has yet to be
issued. The Group does not hold any collateral as security. However, the Group has traded with a high proportion of its customers for
several years and is experienced in managing this risk, resulting in low levels of impairment.
14. Trade and other payables
Trade payables
Other taxes and social security costs
Accruals and deferred income
Other payables
Amounts owed to Group undertakings
Group
Company
2014
£’000
3,458
206
1,126
307
–
5,097
2013
£’000
3,676
175
865
152
–
4,868
2014
£’000
1,643
148
999
40
1,817
4,647
2013
£’000
1,983
153
1,172
7
1,134
4,449
The directors consider that the carrying amounts of trade and other payables approximate to their fair value.
15. Interest-bearing loans, borrowings and overdrafts – current
Unsecured:
Loans
Secured:
Overdrafts
Loans
Obligations under finance leases
Group
Company
2014
£’000
2013
£’000
2014
£’000
2013
£’000
63
165
–
–
5,080
1,722
12
6,877
4,910
1,075
46
6,196
4,381
4,247
–
12
–
46
4,393
4,293
Company Number 102384
28
Pittards plc Annual Report & Accounts 2014
Notes to the consolidated accounts (continued)
16. Interest-bearing loans, borrowings and overdrafts – non-current
Unsecured:
Loans
Secured:
Loans
Obligations under finance leases
Repayable as follows:
Between one and five years by instalments
Group
Company
2014
£’000
2013
£’000
2014
£’000
2013
£’000
107
40
1,116
30
1,253
1,335
42
1,417
1,253
1,253
1,417
1,417
–
–
30
30
30
30
–
–
42
42
42
42
During 2014 ETSC took out a loan for £0.317m with the Commercial Bank of Ethiopia. The loan has been taken for a period of three
years at an interest rate of 9.5% and is secured against assets of ETSC. During 2014 PPM took out a loan for £0.458m with the
Commercial Bank of Ethiopia at an interest rate of 9.5%. The loan is rolling and is secured against confirmed orders. PPM also took out a
five year loan for £0.288m with the Development Bank of Ethiopia at an interest rate of 9.5%.
The fair value of the Group’s loan and overdraft facilities is materially the same as book value, and the secured facilities are supported by
fixed and floating charges over the assets of the Group, principally property, plant and equipment, inventory and receivables. Obligations
under finance leases are secured by the related asset.
17. Obligations under leases
Operating lease agreements where the Group is lessee
The Group has entered into commercial leases on certain properties.
Future aggregate minimum rentals payable under non-cancellable operating leases are as follows:
Not later than one year
After one year but not more than five years
Group
Company
2014
£’000
297
408
705
2013
£’000
302
705
1,007
2014
£’000
297
408
705
2013
£’000
302
705
1,007
During 2007 the Group entered into a sale and leaseback agreement for its Yeovil operating facility. The lease is for a term of 10 years
following a six month rent free period.
Company Number 102384
Pittards plc Annual Report & Accounts 2014
29
Notes to the consolidated accounts (continued)
17. Obligations under leases (continued)
The Group uses finance leases to acquire plant and machinery. Future minimum lease payments under finance leases and hire purchase
contracts are as follows:
Future minimum payments due:
Not later than one year
After one year but not more than five years
Less finance charges allocated to future periods
Present value of minimum lease payments
The present value of minimum lease payments is analysed as follows:
Not later than one year
After one year but not more than five years
Group
Company
2014
£’000
2013
£’000
2014
£’000
2013
£’000
21
24
45
(3)
42
12
30
42
48
57
105
(18)
87
46
42
88
21
24
45
(3)
42
12
30
42
48
57
105
(18)
87
46
42
88
All lease obligations are denominated in sterling. The fair value of the Group’s lease obligations approximates their carrying amount.
18. Deferred taxation
The Group has recognised and unrecognised deferred tax assets in respect of temporary differences and losses. In accordance with the
requirements of IAS12 the directors considered the potential utilisation of the deferred tax asset and have decided to maintain a deferred
tax asset of £1.800m in view of the Group’s prospects and future profitability.
Deferred tax assets
Group
Company
Deferred tax asset to be recovered after more than 12 months
Deferred tax asset to be recovered within 12 months
Deferred tax liabilities
Deferred tax liability to be realised after more than 12 months
Deferred tax liability to be realised within 12 months
2014
£’000
1,636
164
1,800
2014
£’000
(64)
–
(64)
2013
£’000
1,194
606
1,800
2013
£’000
(27)
–
(27)
2014
£’000
1,636
164
1,800
2013
£’000
1,194
606
1,800
2014
£’000
2013
£’000
–
–
–
–
–
–
Deferred tax assets (net)
1,736
1,773
1,800
1,800
Company Number 102384
30
Pittards plc Annual Report & Accounts 2014
Notes to the consolidated accounts (continued)
18. Deferred taxation (continued)
The movement on the net deferred tax account during the year is as follows:
At 1 January
Income Statement charge
At 31 December
a) Deferred tax assets
The analysis of the deferred tax asset is as follows:
Recognised
At 1 January 2013
Income Statement (charge) credit
At 1 January 2014
Income Statement credit (charge)
At 31 December 2014
Group
Company
2014
£’000
1,773
(37)
1,736
2013
£’000
2,005
(232)
1,773
Tax losses
£’000
1,806
(206)
1,600
113
1,713
2014
£’000
1,800
–
1,800
Group
ACA
£’000
199
1
200
(113)
87
2013
£’000
2,000
(200)
1,800
Total
£’000
2,005
(205)
1,800
–
1,800
In addition the Group has £0.190m of unrecognised deferred tax assets in relation to tax losses (2013: £0.430m) and £nil in relation to
temporary timing differences (2013: £0.041m).
Recognised
At 1 January 2013
Income Statement (charge) credit
At 1 January 2014
Income Statement credit (charge)
At 31 December 2014
Company
ACA
£’000
199
1
200
(113)
87
Tax losses
£’000
1,801
(201)
1,600
113
1,713
Total
£’000
2,000
(200)
1,800
–
1,800
In addition the Company has £0.190m of unrecognised deferred tax assets in relation to tax losses (2013: £0.430m) and £nil in relation
to temporary timing differences (2013: £0.041m).
b) Deferred tax liabilities
The deferred tax liability of £0.064m (2013: £0.027m) represents temporary timing differences.
Company Number 102384
Pittards plc Annual Report & Accounts 2014
31
Notes to the consolidated accounts (continued)
19. Share capital
Issued and fully paid
At 1 January and 31 December
Number of ordinary shares of 50p each
At 1 January and 31 December
2014
£’000
Restated
2013
£’000
4,631
4,631
2014
Shares
Restated
2013
Shares
9,262,039
9,262,039
The Company has one class of ordinary shares which carry no right to fixed income.
Share options
At 31 December 2014 directors and employees held nil options to subscribe for shares (2013: nil).
On 15 January 2014 the shareholders approved a 1:50 share consolidation which changed the structure of the share capital from
463,101,933 1p shares to 9,262,039 50p shares.
20. Reserves
The share premium account represented the difference between the issue price and the nominal value of shares issued.
The capital redemption reserve represented shares redeemed by the Company at various times.
The capital reserve relates to goodwill arising on previous acquisitions written off directly to reserves.
The share premium and capital redemption reserve were cancelled and the balances transferred to retained earnings, following approval
by the Company Court in 2013.
The retained earnings reserve represents the cumulative net gains and losses recognised in the Consolidated statement of comprehensive
income.
The translation reserve represents the cumulative net unrealised exchange loss arising from the translation of overseas subsidiaries.
The revaluation reserve represents the revaluation of the buildings at ETSC, Pittards Products Manufacturing and Pittards Global Sourcing
Private Limited undertaken annually.
The share options reserve represented the cost to the Company of the Matching Share Options issued to directors and employees
following the placing exercise in December 2009. Following the lapsing of all options the reserve was transferred to retained earnings in
2013.
The Pittards Employee Share Ownership Trust holds Pittards plc ordinary shares to meet potential obligations under the restricted share
plan scheme. Shares are held in trust until such time as they may be transferred to employees in accordance with the terms of the
scheme. There are no further awards in the scheme which could vest in the participants. At 31 December 2014 the trust held a total of
19,026 50p shares (2013:19,026 (restated post share consolidation)) with a market value at that date of £21,118 (2013: £28,540).
Company Number 102384
32
Pittards plc Annual Report & Accounts 2014
Notes to the consolidated accounts (continued)
21. Cash generated from (used in) operations
Group
Company
Profit before taxation
Adjustments for:
Depreciation of property, plant and equipment
Amortisation
Bank and other interest charges
Other non-cash items in Income Statement
2014
£’000
1,589
407
12
451
(31)
2013
£’000
1,712
355
5
334
(44)
Operating cash flows before movement in working capital
2,428
2,362
Movements in working capital (excluding exchange differences on
consolidation):
Increase in inventories
Decrease (increase) in receivables
Increase (decrease) in payables
Cash generated from (used in) operations
(2,328)
(1,541)
437
207
744
(963)
(543)
(685)
22. Analysis of the changes in cash and cash equivalents and bank overdrafts
2014
£’000
549
197
13
183
(18)
924
(800)
(42)
198
280
2013
£’000
1,957
175
5
106
663
2,906
(842)
(1,573)
(1,171)
(680)
Group
Cash at bank and in hand
Bank overdraft
Company
Cash at bank and in hand
Bank overdraft
23. Related party transactions
(a) Related party trading
Group
The following transactions with related parties took place during the year:
Transactions with related parties:
Purchases from related parties
Sales to related parties
Company Number 102384
As at
1 January
2014
£’000
522
(4,910)
(4,388)
As at
1 January
2014
£’000
84
(4,248)
(4,164)
Cash flow
£’000
6
(168)
(162)
Cash flow
£’000
4
(134)
(129)
Exchange
movements
£’000
As at
31 December
2014
£’000
1
(2)
(1)
529
(5,080)
(4,551)
Exchange
movements
£’000
As at
31 December
2014
£’000
–
–
–
88
(4,381)
(4,293)
Group
2014
£’000
17
56
Restated
2013
£’000
24
8
Pittards plc Annual Report & Accounts 2014
33
Notes to the consolidated accounts (continued)
23. Related party transactions (continued)
(a) Related party trading (continued)
Purchases and sales are disclosed from entities where a member of the board of directors holds a further directorship. Purchases and
sales are made on normal commercial terms and conditions.
The prior year figures in relation to purchases and payables above have been restated to exclude payments made to directors as part of
their standard emoluments package. These amounts are separately disclosed within the Directors’ Remuneration note on page 24.
Year end balances arising from purchases:
Payables to related parties
Receivables from related parties
Company
The following transactions with other Group undertakings took place during the year:
Transactions with subsidiaries:
Purchases from subsidiaries
Sales to subsidiaries
Group
2014
£’000
6
2
Company
2014
£’000
8,959
1,469
Restated
2013
£’000
8
8
Restated
2013
£’000
9,261
1,483
The prior year sales to subsidiaries figure has been restated to exclude sales made by a fellow group company.
Pittards plc holds intercompany balances with various subsidiary companies, and settles expenses on behalf of these companies which
are charged to the intercompany accounts.
There are no provisions for impaired debts relating to the amount of outstanding intercompany balances.
Amounts due from subsidiaries
Pittard Garnar Services Limited
Ethiopia Tannery Share Company
Pittards Global Sourcing Private Limited Company
Pittards Products Manufacturing
Amounts due to subsidiaries
Pittards Group Limited
Ethiopia Tannery Share Company
Pittards Global Sourcing Private Limited Company
Note
Company
2014
£’000
5,185
44
2
331
2013
£’000
4,903
252
1
264
13
5,562
5,420
(30)
(30)
(1,768)
(1,088)
(19)
(16)
14
(1,817)
(1,134)
(b) Transactions with directors
Disclosures required under IAS24 regarding remuneration of key management personnel are covered by the Directors’ remuneration
disclosure in Note 6 and interests in shares are disclosed in the Directors’ Report.
Company Number 102384
34
Pittards plc Annual Report & Accounts 2014
Notes to the consolidated accounts (continued)
24. Financial instruments
Financial risk factors
The Group’s activities expose it to a variety of financial risks: market risk (including currency risk, interest rate risk and price risk), credit
risk and liquidity risk. The Group’s overall risk management systems seek to minimise potential adverse effects on the Group’s financial
performance. The Group can use derivative financial instruments to mitigate its foreign currency exposure risk where appropriate and
also uses credit insurance policies to mitigate its credit risk. The Company’s financial risk factors are considered to be consistent with
those of the Group so are not presented separately.
The board of directors has approved policies for the management of the risks identified.
(a) Risk management policies
Foreign currency exchange rate risk
The Group operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily with
respect to US dollar, Euro and Ethiopian Birr. Foreign exchange risk arises from future commercial transactions, recognised assets and
liabilities and net investments in foreign operations. This risk is managed by the use of fixed contracts and options where applicable and
the selling of surplus US dollars.
Approximately 91% (2013: 91%) of the Group’s revenue is from sales outside the UK, with some 72% (2013: 69%) in US dollars. US
dollar based raw material purchases amounted to 22% in 2014 (2013: 14%), creating an increased natural hedge on the prior year.
Price risk
Price risk includes the variability in selling prices of hides and skins which are internationally traded commodities with no futures
markets. The Group addresses this by buying forward to match anticipated revenues. This risk was reduced by the purchase of ETSC
which buys a substantial proportion of the sheepskins sourced in Ethiopia.
Interest rate risk
The Group mitigates its exposure to interest rate fluctuations by using fixed rates where possible and when it is felt to be beneficial and
the directors would consider taking out an interest rate cap if this was felt to be beneficial.
Liquidity risk
Borrowing facilities are monitored against the Group’s forecast requirements and it is the Group’s policy to mitigate risk by staggering
the maturity of borrowings and by maintaining undrawn committed facilities, using overdrafts and medium term loans. Regular cash
flow forecasts are prepared to assess the adequacy of undrawn facilities and appropriate action to improve cash flow where necessary.
Credit risk
The Group is exposed to credit risk to the extent of non-payment by either its customers or the counterparties of its financial
instruments. The Group utilises credit insurance policies to mitigate its risk from its trading exposure or seeks secure terms or payment in
advance. It mitigates its financial exposure on financial instruments by only using instruments from banks and financial institutions with
a minimum rating of ‘A’.
(b) Significant accounting policies
Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of measurement
and the basis on which income and expenses are recognised, in respect of each class of financial asset, financial liability and equity
instrument are disclosed in Note 1 to the financial statements.
Company Number 102384
Pittards plc Annual Report & Accounts 2014
35
Notes to the consolidated accounts (continued)
24. Financial instruments (continued)
(c) Foreign currency risk management
The Group undertakes certain transactions denominated in foreign currencies, hence exposures to exchange rate fluctuations arise.
The carrying amount of the Group’s foreign currency denominated monetary assets and monetary liabilities at the reporting date is as
follows:
US Dollar
Euro
Ethiopian Birr
Other
GBP
Total
Assets
Liabilities
Cash
2014
£’000
2,663
536
356
1
3,556
630
4,186
2013
£’000
2,812
523
156
4
3,495
568
4,063
2014
£’000
307
(213)
2013
£’000
1,077
(98)
(5,639)
(4,931)
–
(5,545)
(2,176)
14
(3,938)
(7,503)
(7,721)
(11,441)
2014
£’000
(1,234)
638
258
8
(330)
(3,522)
(3,852)
2013
£’000
76
–
362
–
438
84
522
(d) Foreign currency sensitivity
As 72% (2013: 69%) of the Group’s revenue is in US dollars, the sensitivity analysis is only on the US dollar impact.
The following table details the Group’s sensitivity to a 10% increase in pounds sterling against the US dollar. 10% is considered to
be a reasonable movement and also enables the users of the accounts to calculate other % movements. The sensitivity analysis of the
Group’s exposure to foreign currency risk at the reporting date has been determined based on the change taking place at the beginning
of the financial year and held constant throughout the reporting period. A positive number indicates an increase in profit or loss and
other equity where pounds sterling decrease against the respective currency.
Group
Loss (i)
2014
£’000
2013
£’000
(2,080)
(2,041)
(i) This is mainly attributable to the exposure on revenue and outstanding US dollars receivables, payables and cash at the year end in
the Group.
(e) Forward foreign exchange contracts
It is the policy of the Group to sell surplus dollars and to enter into forward foreign exchange contracts to manage the risk associated
with anticipated foreign currency sales and purchase transactions, when this is felt appropriate, however no such contracts were
entered into in 2014 or 2013.
(f) Liquidity and interest rate risk
i) Interest rate risk management
The Group is exposed to interest rate risk as it borrows funds at both fixed and floating interest rates. The risk is managed by
borrowing where appropriate on fixed interest rates.
ii) Interest rate sensitivity
The sensitivity analysis has been determined on the exposure to interest rates at the reporting date and the stipulated change taking
place at the beginning of the year and held constant throughout the reporting period. 50 basis point haves been applied in the
sensitivity analysis as this is considered to be an indicative movement for the analysis of interest rate risk.
At the reporting date, if interest rates had been 50 basis points higher and all other variables were held constant, the Group’s net profit
would decrease by £0.044m (2013: £0.033m). This is attributable to the Group’s exposure to interest rates on its variable borrowings.
Company Number 102384
36
Pittards plc Annual Report & Accounts 2014
Notes to the consolidated accounts (continued)
24. Financial instruments (continued)
(f) Liquidity and interest rate risk (continued)
iii) Liquidity risk management
Ultimate responsibility for liquidity risk management rests with the board of directors, which has built an appropriate liquidity risk
management framework for the management of the Group’s short, medium and long-term funding and liquidity management
requirements. The Group manages liquidity risk by maintaining adequate banking and borrowing facilities by continuously monitoring
forecast with actual cash flows and matching profiles of financial assets and liabilities.
iv) Liquidity and interest risk tables
The interest rate profile of the non-derivative financial liabilities of the Group and its contractual maturity as at 31 December 2014 and
at 31 December 2013 are as follows:
As at 31 December 2014
Group
Fixed rate
Other loans
Obligations under finance leases
Floating rate
Bank overdrafts and loans
Trade and other payables
Other loans
As at 31 December 2013
Group
Fixed rate
Other loans
Obligations under finance leases
Floating rate
Bank overdrafts and loans
Trade and other payables
Other loans
Less than
3 months
£’000
3 months to
1 year
£’000
1-2
years
£’000
–
4
5,080
3,766
–
–
8
875
–
–
Less than
3 months
£’000
3 months to
1 year
£’000
–
–
4,910
3,829
–
205
–
–
–
210
–
–
–
–
211
1-2
years
£’000
–
88
–
–
–
2-5
years
£’000
171
30
1,752
–
–
2-5
years
£’000
–
–
2,200
–
–
The Group has the following undrawn borrowing facilities:
Group
Floating rate
Expiring within one year
Expiring beyond one year
The facilities expiring within one year are subject to review at various dates in 2015.
Company Number 102384
Over
5 years
£’000
–
–
–
–
–
Over
5 years
£’000
–
–
–
–
–
2014
£’000
714
–
714
Total
£’000
171
42
7,707
3,766
211
Total
£’000
205
88
7,110
3,829
210
2013
£’000
752
–
752
Pittards plc Annual Report & Accounts 2014
37
Notes to the consolidated accounts (continued)
24. Financial instruments (continued)
(g) Capital risk management
The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide
returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.
In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, issue new
shares or sell assets to reduce debt. Consistent with others in the industry, the Group monitors capital on the basis of the gearing ratio.
This ratio is calculated as net debt divided by total capital. Net debt is calculated as total borrowings (including ‘current and non current
borrowings’ as shown in the consolidated balance sheet) less cash and cash equivalents. Total capital is calculated as ‘equity’ as shown
in the consolidated balance sheet.
During 2014, the Group’s strategy was to maintain the gearing ratio at an acceptable level, which is considered to be between 10%
and 50%. The gearing ratios at 31 December 2014 and 2013 were as follows:
Group
Total borrowings
Less cash at bank and in hand
Net debt
Total equity
Gearing ratio
25. Investments
Company
At 1 January
Dissolution of R&A Kohnstamm
At 31 December
2014
£’000
8,130
(529)
7,601
18,308
41.5%
2014
£’000
186
–
186
2013
£’000
7,613
(522)
7,091
16,912
41.9%
2013
£’000
865
(679)
186
The subsidiary undertakings whose results or financial position affect the figures in the consolidated financial statements are:
Pittards Group Limited
Pittard Garnar Services Limited
Principal activities
Dormant
Consultancy and other related services
to the leather industry
Country of incorporation
Functional currency
United Kingdom
United Kingdom
£ sterling
£ sterling
Daines & Hathaway Limited
Dormant
United Kingdom
£ sterling
Pittards Global Sourcing Private
Limited Company
Production of quality leather garments
Ethiopia
Ethiopian Birr
Ethiopia Tannery Share Company
Leather production
Pittards Products Manufacturing
Production of quality leather gloves and
leather goods
Ethiopia
Ethiopia
Ethiopian Birr
Ethiopian Birr
Pittards plc holds directly or indirectly all the issued ordinary share capital and voting rights of its principal trading subsidiary
undertakings except for Pittards Global Sourcing Private Limited Company where it holds 67% of the capital and voting rights
Non-consolidated investments held
Non-consolidated subsidiaries
2014
£’000
2
2013
£’000
2
The directors believe that the carrying value of the Group’s investments is supported by their underlying net assets.
The non-consolidated investment represents a non-controlling investment in Ethiopian Leather Industries Development held by ETSC.
Company Number 102384
38
Pittards plc Annual Report & Accounts 2014
Analysis of shareholders
as at 31 December 2014
Ordinary shares
Category:
Individuals
Trust and investment companies
Pension funds
Size of holding
Up to 999 shares
1,000 to 9,999 shares
10,000 to 49,999
50,000 shares and over
Five year review
Revenue
Percentage sold outside UK
Profit from operations before finance costs
Profit on ordinary activities before taxation
Profit on ordinary activities after taxation
Ordinary dividends
Equity attributable to owners of the parent
Earnings per 50p ordinary share (restated from 1p share)
Dividends per ordinary share
Financial calendar
Annual General Meeting
Announcement of half year results for 2015
Number of
holders
% held
Number of
shares held
1,417
99.23
4,686,006
7
4
0.49
0.28
3,780,061
795,972
% held
50.59
40.81
8.60
1,428
100.00
9,262,039
100.00
1,214
134
53
27
85.01
9.38
3.71
1.90
113,354
478,533
1,177,992
7,492,160
1.22
5.17
12.72
80.89
1,428
100.00
9,262,039
100.00
2014
£’000
34,729
91%
1,971
1,589
1,110
–
18,136
12.06p
–
2013
£’000
35,813
91%
2,004
1,712
1,447
–
16,738
15.68p
–
2012
£’000
37,029
93%
574
300
270
–
15,607
3.05p
–
2011
£’000
38,194
93%
3,050
2,758
3,637
–
15,601
41.41p
–
2010
£’000
36,086
91%
3,297
2,931
3,662
–
11,551
42.52p
–
12 May 2015
September 2015
5 November 2015
March 2016
Payment of interim dividend for 2015 (if declared) to shareholders registered on 10 October 2015
(ex dividend date 9 October 2015)
Announcement of 2015 results
Company Number 102384
Pittards plc Annual Report & Accounts 2014
39
Notice of meeting
Notice is hereby given that the 106th Annual General Meeting of Pittards plc will be held at the registered office at 12 noon on 12 May
2015 for the following purposes:
Ordinary resolutions
1 To receive the annual statement of accounts for the year ended 31 December 2014 and the directors’ and auditor’s reports thereon.
2 To re-elect the following director retiring by rotation:
Mr R H Hankey
3 To re-appoint the auditors, PricewaterhouseCoopers LLP, and to authorise the directors to determine their remuneration.
4 To consider and if thought fit resolve that the directors be and they are hereby unconditionally authorised pursuant to section 551
of the Companies Act 2006 (the “Act”) to allot equity securities (as defined in section 560 of the Act) up to an aggregate nominal
value of £463,102 (in substitution for and to the exclusion of previous allotment authorities granted prior to the meeting) to such
persons and at such time and on such terms as they think proper during the period commencing on the date of the passing of this
resolution and expiring at the 2016 AGM unless previously revoked, varied or extended by the Company in general meeting; and
the Company be and is authorised to make prior to the expiry of such period any offer or agreement which would or might require
equity securities to be allotted after the expiry of the said period and the Directors may allot equity securities in pursuance of any
such an offer or agreement notwithstanding the expiry of the authority given by this resolution.
Special Business
5 To consider and, if thought fit, resolve that in accordance with Article 5 of the Articles of Association of the Company and Section
693(4) of the Companies Act 2006, the Company be hereby granted general and unconditional authority to make market purchases
of any of its own shares on such terms and in such manner as the Board of Directors of the Company may from time to time
determine provided that the authority conferred by this Resolution shall:
(a) be limited to 926,203 Ordinary Shares of 50p each (10% of the issued Ordinary Shares)
(b) not permit the price (exclusive of expenses) to be paid per share to be more than 5% above the average of the middle market
quotations for an Ordinary Share as derived from the London Stock Exchange Daily Official List for the 5 business days before the
purchase is made or to be less than 50p, and
(c) expire on the date falling 15 months after the passing of this Resolution or the date of the next Annual General Meeting of the
Company, whichever is the earlier, except in relation to the purchase of shares the contract for which was concluded before the
expiration of the said period and which is executed wholly or partly after such date.
6 To consider and if thought fit resolve that, subject to and conditional upon the passing of resolution 4 above, the directors be and
are hereby empowered, pursuant to section 570 of the Act, to allot equity securities (as defined in section 560 of the Act) for cash,
pursuant to the authority under section 551 of the Act conferred on the directors pursuant to resolution 4 above, as if section
561(1) of the Act did not apply to any such allotment, such power to operate in addition to any previous or subsequent power
given to the directors pursuant to section 95(1) of the Companies Act 1985 or section 570 of the Act (whichever is relevant) and
to expire on the 2016 AGM resolution (unless previously revoked, varied or extended by the Company in general meeting), and
provided that such power shall be limited to the allotment of equity securities having an aggregate nominal value of up to £463,102
save that the Company may at any time prior to the expiry of such power make an offer or enter into an agreement (subject to the
foregoing limitations) which would or might require equity securities to be allotted after the expiry of such power and the directors
may allot equity securities (subject to the foregoing limitations) in pursuance of such an offer or agreement as if such power had not
expired.
By order of the board
J Williams
Secretary
Yeovil, Somerset
Date: 20 March 2015
Note (unaudited):
A member entitled to attend and vote at the above meeting may appoint a proxy, who need not be a member, to attend and vote instead of him/her.
The register of directors’ holdings and copies of directors’ contracts of service will be available for inspection at the registered office of the Company
during the usual business hours from the date of this notice until the date of the Annual General Meeting and at the place of the Annual General
Meeting from at least fifteen minutes prior to and until the conclusion of the meeting.
Company Number 102384
40
Pittards plc Annual Report & Accounts 2014
Notes
Company Number 102384
Pittards is a global brand supplying premium
leather and leather products, working with leading
international brands, retailers and manufacturers.
1
5
1
2
6
2
3
7
3
Pittards recently hosted a factory
visit from members of the Institute
of Directors in the South West.
CEO Reg Hankey and Director of
Marketing Debbie Burton gave tours
and presentations explaining our
development from leather producer
into also making our own premium
leather goods.
John Moriarty, former ETSC general
manager, cuts the ribbon to formally
open the new classroom funded by
ETSC at the local Ejersa village school,
watched by current GM Jason Perry
and enthusiastic young pupils. This
represents the latest development in
our ongoing support for the school.
Our Ethiopian Environmental
management team were re-certificated
with ISO 2001:2004 during the
year, providing our workforce and
stakeholders with assurance that
environmental impact is being
continuously monitored and improved.
4
8
4
Polo’s world No. 1 player Adolfo
Cambiaso was wearing Ona Polo gloves
made in Pittards Atomic patterned
WR100 leather when he won the Veuve
Cliquot Gold Cup at the British Open ,
part of polo’s Triple Crown.
5
6
7
8
As part of Pittards commitment to
reducing waste a range of canvas
and leather bags, part of the Qo’da
collection, has been developed to utilise
off cuts from our industrial work gloves
production to great effect.
Master Glover Alison Gowman of
the Worshipful Company of Glovers
presented certificates to the latest
group of Pittards staff to complete 25
years’ service with the company taking
the current total to 56.
Our relationship with Wells Lamont,
part of the Berkshire Hathaway Group,
grows stronger as we continue to
increase the annual volume of industrial
gloves we make for them using our Asa
leather.
As our prowess at finished product
manufacturing grows we are delighted
to be working with iconic British brand
Jack Wills developing a new range of
beautiful on trend bags with them to
show off the best of British.
Designed and produced by Robson Dowry (www.robsondowry.co.uk). Printed in England by Taylor Brothers.
In keeping with Pittards’ environmental policy this report has been printed on an environmentally responsible paper that has been manufactured
using environmentally friendly technologies and follows strict European environmental legislation. The paper is made from Elemental Chlorine Free
(ECF) pulp obtained from sustainable wood forests.
Company Number 102384
Pittards plc
Sherborne Road, Yeovil, Somerset,
BA21 5BA United Kingdom
Tel: +44 (0)1935 474321
Fax: +44 (0)1935 427145
E: yeovil_reception@pittards.com
www.pittardsleather.com
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Pittards plc Annual Report and Accounts 2014