ANNUAL REPORT 2020
Company number: 102384
Pittards PLC 2020 Annual Report
Page 1 of 84
www.pittards.com
Adam Scott wears market leading FootJoy gloves and
footwear made with Pittards performance leather. Golf
has emerged as a post-pandemic growth sector as an
outdoor activity that allows for social distancing.
Pittards PLC 2020 Annual Report Page 2 of 84 www.pittards.com
Contents
Reports
Background - page 5
• Principal activities - page 5
• Strategic objectives statement - page 5
Chairman’s statement - page 6
Strategic report - pages 7 to 25
• Chief Executive Officer’s report - pages 9 to 21
• Section 172 report - pages 17 to 19
• Chief Financial Officer’s report - pages 23 to 25
Directors, Officers and Advisers - pages 26 to 27
• Corporate Governance report - pages 29 to 33
• Directors’ report - pages 34 to 38
• Carbon report - page 36
Statement of Directors’ responsibilities in respect of the financial statements - pages 39 to 41
Independent Auditor’s report - pages 43 to 47
Financial statements and notes
• Consolidated income statement - page 48
• Consolidated statement of comprehensive income - page 49
• Consolidated and company Balance sheets - page 50
• Consolidated statement of changes in equity - page 51
• Company statement of changes in equity - page 52
• Statement of cash flows - page 53
• Accounting policies - pages 54 to 58
• Notes to the consolidated accounts - pages 59 to 77
Dates and AGM
• Six year financial summary - page 78
• Financial calendar – page 79
• Notice of Annual General Meeting - pages 80 to 82
Pittards PLC 2020 Annual Report Page 3 of 84 www.pittards.com
We continue to invest in capital equipment where an improvement in production
efficiency, energy and water is apparent. In 2020, we initiated the purchase of: a
new vacuum drier, three dye drum vessels, a whole hide splitting machine and
two shaving machines.
Pittards PLC 2020 Annual Report Page 4 of 84 www.pittards.com
Background
Principal activities
The principal activities of the Group are the design, procurement and production of technically advanced leather for manufacturers and distributors
of shoes, gloves, luxury leather goods, interiors, sports equipment and the retail of leather and leather goods. The principal activities of its subsidiaries
are the production of leather, leather goods, gloves and shoes.
Strategic Objectives
• Manufacture and supply of niche performance leathers and finished products, standing out for their superior performance in
sport, automotive, aviation, interior, fashion, gloves, workwear, apparel and leather goods.
• Diversify our sales in a range of newly entered markets, developing market share in these new sectors.
• Optimise our use of production facilities in Ethiopia by diversifying our business operations to utilise our lower operating costs
along with our established expertise in Ethiopia.
• Grow our people, place and market position, supporting our staff, customers and shareholders so that we have a sustainable
model that attracts and retains the best talents.
• Leading technical competence and best practice through our investment in R&D, approach to the environment, our people,
our customers and wider community through which we attract and retain customers.
• Work responsibly, respecting the environment, employee welfare and quality to the customer to deliver a world class leather
and brand.
Pittards PLC 2020 Annual Report Page 5 of 84 www.pittards.com
Chairman’s statement
for the year ended 31 December 2020
A dominant feature of 2020 has been the COVID-19 pandemic, testing businesses both in terms of their underlying strength at the outset and their
adaptability in responding to challenges as the year progressed.
I can report that Pittards has acquitted itself robustly against both these parameters, endorsing both the soundness of the strategies that we
already had in place for developing our Group as the year began, and the honing of the business that we implemented as the year progressed.
We validated our strategic objectives by developing our relationships in the interiors market with regular orders from automotive and further
established ourselves as a shoe manufacturer in Ethiopia, despite COVID-19 disruptions.
We mitigated some of our first half operating cash losses through inventory reduction, by optimising operations. This is testament to our
heightened cost focus, whilst delivering transformational improvements due to the continued dedication of all Pittards employees, to whom I would
like to express my gratitude in these challenging times.
The resilience of the Group was evidenced by a return to positive EBITDA during the second half of 2020 and our cash flow improved significantly
during that period. Our re-shaped business is more agile and set for growth and the creation of longer-term value.
There were no changes to the Board during the year. The Board is confident in the business strategy and committed to its future success, with
each Board member increasing their investment in Pittards by buying shares during the year. The Board’s collective holding rose to 6.4% at the
end of 2020 (2019: 3.2%).
In November 2020 we undertook a share buyback purchasing 0.9m shares into treasury.
Outlook
Aligned with our strategic priorities, we are delivering a broader range of products to more markets and creating a more balanced portfolio. We
continue to invest in new technology, and we have planned increased capital investment compared to the previous year.
Dividend payments are considered an important future step and will be paid when covered by free cash flows.
We have entered 2021 stronger, with a more diverse and flexible business, ready to take full advantage of opportunities in our markets. It remains
too early to judge how strong the recovery will be, but on balance, we see more reason to be positive that we can make further progress to build
on the momentum of the second half of last year, starting the year with stronger demand from customers.
Stephen Yapp
Chairman
23 March 2021
Pittards PLC 2020 Annual Report Page 6 of 84 www.pittards.com
Strategic report
for the year ended 31 December 2020
Chief Executive Officer’s report
Key performance indicators 2020
Revenue
Gross profit
Gross margin
Profit/(Loss) before tax
EBITDA
Net assets
Inventory
Net debt
Net debt adjusted for treasury shares held
Gearing
Staff numbers
Basic (loss)/earnings per share (in pence)
Net assets per share (in pence)
Highlights
Second half
2020
2019 Change
Full year
2020
2019
£m
8.6
2.1
24%
(0.0)
0.3
13.9
15.0
10.1
9.7
£m
10.2
3.3
32%
0.4
0.9
17.5
17.3
9.6
9.6
£m
(1.6)
(1.2)
-8%
0.4
(0.6)
(3.6)
(2.3)
(0.5)
(0.1)
£m
15.2
3.2
21%
(2.3)
(1.1)
13.9
15.0
10.1
9.7
£m
22.3
6.9
31%
0.6
2.0
17.5
17.3
9.6
9.6
73.0%
54.7%
-18%
73.0%
55.0%
1,096
(17.7)
107.0
1,224
2.9
126.3
• Order book opened 2021 stronger than the start of the previous 2 years
• Underlying margins improved on 2019
• Second half of 2020 break even and positive EBITDA
•
• Repeat orders from both interiors and big shoe markets
• Reduced cost base by £2m, changed operating model
• Re-engineered production and extended our manufacturing capabilities in Ethiopia.
Inventory reduced by £2.3m in 2020
COVID-19 response
During the first quarter of 2020, alongside many other businesses, we were challenged with the sudden impact of COVID-19. As a global
pandemic unfolded, this unusual situation affected our people, our customers and supply chains.
We implemented a new business plan that enabled a responsive approach to the challenges we faced and reviewed this on a weekly basis. The
key pillars of this plan were focused on:-
• Safety of people - Implemented best practice in line with government advice as it evolved
• Customer support - Continued to supply and kept close dialogue
• Cash management – strict daily control
• Cost control – realignment of all costs
Pittards PLC 2020 Annual Report Page 7 of 84 www.pittards.com
2020 saw the development and launch of a new advanced
anti-microbial leather technology. PittardsTri Protex® ;
combines its own MicrospikeTM and Microdefence® together
with Micro-FreshTM to create a protective environment
throughout the leather structure. Pittards Tri Protex®
conforms to AATCC100, achieving 99.9% elimination of
bacteria.
Pittards PLC 2020 Annual Report Page 8 of 84 www.pittards.com
Chief Executive Officer’s report
Performance review
Continued weak global demand for leather and related goods was a feature in the first half, with full year revenue at £15.2m (2019: £22.3). The
impact of the first half was challenging operationally, given the sudden change in demand related to COVID-19.
During this challenging time our first priority was the safety of our employees. We quickly implemented changes in working practice in line with up
to date government guidance throughout the year. We are fortunate to have quite large factories which enables us to implement socially distanced
working practices.
Sales demand has become more fragmented but broader in the markets we reach. The changing shape of the business is aligned with the strategic
priorities to achieve a more balanced customer portfolio, specifically the inroads made in Ethiopia in shoe production and sales, along with UK
interiors and key shoe accounts. These remain priority development markets for the Group. Sales to these markets grew to 22% of sales, up from
18% of sales in 2019 on a like for like basis.
Cost management was a key focus for the year, in which extra disciplines were introduced and there was a targeted headcount reduction which
further reduced the cost base. This has left us leaner, but in a scalable position with the appropriate expertise to meet specific customer needs. We
have expanded our design and production management functions, despite overall headcount reduction. Our key objective was to establish a much
more resilient business, at lower levels of activity and this was achieved.
Our reported gross margins include labour and fixed production costs, however our underlying margins comprised of sales less underlying variable
material cost. Our underlying margins have continued to improve during 2020. Our reported gross margin was 21% (2019: 31%) and EBITDA fell
to negative £1.1m (2019: positive £2.0m) and PBT to a loss of £2.3m (2019: £0.6m profit), although we returned to a profitable model during the
second half of 2020, resulting in positive EBITDA for the second half as a whole.
Inventories reduced to £15.0m (2019: £17.3m), as our change in mix of business and operational improvements facilitated a more consistent and
predictable pattern for managing down inventory. Our counter measures for operational costs continued to gather pace with headcount reducing to
1,096 (2019: 1,224). Raw material prices have broadly stabilised, and we have recalibrated our procurement accordingly.
Net debt at 31 December was £10.1m (2019: £9.7m). The shape of the business necessitated increased debtor days, whilst at the same time
supporting our customers who took longer to pay. Despite this, we have actively sought to improve payment to suppliers and therefore we actually
paid them 1 day faster on average than 2019.
Currency moved slightly against us for 2020, although average exchange rates were broadly unchanged on 2019. The Group aims to hedge between
40% to 60% of requirements, with an average rate of $1.34 to June 2022. The average rate in 2020 for the Group was $1.31, broadly unchanged
on 2019. As a guide 10% change in US$ against GBP could impact profitability by £0.3m either positively or adversly. This risk is less pronounced
than previous years, illustrating the diminished impact currency had on operating profits compared to recent years.
Over the past three years we have invested £1.2m in machinery to improve our efficiency and expand our capability, particularly in Ethiopia for shoe
manufacturing, although we are not yet fully utilising this capacity. We are planning further capital investment of c£0.9m over the next twelve months,
as we look to improve margins and operating efficiency, whilst anticipating growth in new markets.
Pittards PLC 2020 Annual Report Page 9 of 84 www.pittards.com
In Ethiopia, we have demonstrated our broader manufacturing
capability in the production of footwear as well as, leather for
the Vivobarefoot and Soul of Africa brands. Further
development of finished product manufacturing in Ethiopia
continues to be an important strategic goal.
Pittards PLC 2020 Annual Report Page 10 of 84 www.pittards.com
Chief Executive Officer’s report continued
As a result of COVID-19, our retail venues were forced to close and we decided not to renew our lease at Clarks Village, Somerset, and to focus
more on digital channels which achieved increased sales this year.
Market view
Numerous global factors continued to impact the demand for leather, principally COVID-19 lockdowns, China/US tariffs and general economic
weakness. Brexit has had little impact on the Group, by and large, and we don’t anticipate this changing in the near term.
The trend of global demand over the past few years has been downward for both finished hides and skins. However, given the increase in consumer
appetite for outdoor pursuits, including golf and endurance, it is likely we will see recovery in demand in our market segments when social restrictions
ease.
Some of our market segments have been harder hit by the pandemic, most notably the aviation and automotive industry, where global sales are
down dramatically on 2019, although we continued to sell to them. Notwithstanding the challenges faced by these industries, we have been focused
on innovation to deliver better technical performance and create sustainable products across a broader range of markets, including big shoe,
interiors, military and equestrian.
Operations
During the year we responded to the lower levels of volume by challenging how we work. The supply chain has been supportive in realigning costs
which has led to a lowering of the Group’s operating costs, whilst providing a better fit to support operations. A key change to production was the
recalibration of supply of performance leathers, with processing split between Ethiopia and the UK, to make full use of the technical strengths of
both divisions.
We remain committed to the growth opportunities of the interiors markets and are actively in dialogue with automotive and aviation prospective
customers. We have also launched a new fire retardant technology for the mass transit market. Our new Explorer Firebloc™ leather incorporates
this technology and is aimed at the rail sector.
In Ethiopia, we have demonstrated our broader manufacturing capability in finished product and have increased sales in footwear, alongside the
production of shoe leather for Vivobarefoot and Soul of Africa, marking an important milestone. Further developing our finished product
manufacturing in Ethiopia continues to be an important strategic goal for us.
Investing in the next generation of our team is an important part of our business. With this in mind, we have been approved for the UK Government’s
Kickstart scheme for 16-24 year olds. So far, we have recruited 13 kick start team members and we plan more.
Technical
Jon Loxston has taken on the role of Chief Technical Officer (CTO) to lead our solution driven approach to current and future customer needs.
Pittards HQ in Somerset is the intellectual hub of the Group. Research and development is carried out to create innovative technologies,
processes and performance products. By way of example, in 2020 this led to the release of two new products:
Tri Protex® ; comprising 3 separate anti-microbial technologies bound together to form one synergistic umbrella technology. Pittards technologies
MicrospikeTM and Microdefence® together with Micro-FreshTM, create a protective environment throughout the leather structure destroying
microbials. Pittards Tri Protex® conforms to AATCC100, achieving 99.9% elimination of bacteria.
Pittards Explorer FireblocTM leather has been designed specifically for the management of heat and fire resistance where the highest performance
upholstery leather is required on rail transport. Using advanced chemistry and innovative manufacturing techniques. Pittards has imparted high
performance heat management, smoke, toxic emission control/suppression and fire resistance to upholstery leather which conforms to EN45545-2
2018, the European railway standard for fire safety.
Pittards PLC 2020 Annual Report Page 11 of 84 www.pittards.com
The grounds of our tannery in Ethiopia support our own crops
of mangoes, avocados and coffee together with being home
to 45 bee-hives. Committed to on-going improvements of our
environment we added to the trees planted in celebration of
the Ethiopian Millennium in 2007 with a further 7,500 in
2019 as part of a government reforestation initiative.
Pittards PLC 2020 Annual Report Page 12 of 84 www.pittards.com
Chief Executive Officer’s report continued
We continue to invest in capital equipment which is targeted at improving production efficiency or reduces energy and water use. In 2020 we
initiated the purchase of: a new vacuum drier, three dye drum vessels, a whole hide splitting machine and two shaving machines. Alongside this,
our technical team routinely review our factory processes to improve overall efficiency in line with our sustainable approach to operations in
general.
The world is being adversely affected by increased greenhouse gas emissions, deforestation and increased pollution and it recognised that the
world’s population must address these issues for the good of all. We understand that implementing and adhering to guidelines and regulations will
contribute towards improving the global situation and we recognise the importance of this. Our customers expect compliance to international and
their own standards concerning the environment, health and safety, quality and leather performance.
Pittards is ISO 14001:2015, major brand audited and REACH compliant. We are also ISO 9001:2015 compliant and Leather Working Group
(LWG) Bronze Medal rated in the UK. We have long experience with customer Restricted Substance Lists (RSL) and Material Restricted
Substance Lists (MRSL) and working within the ZDHC framework. We work with chemical partners that take a strategic approach to
environmental impact.
Sustainability highlights
•
In response to COVID-19, Pittards manufactured and donated scrubs bags to NHS workers and manufactured reusable face masks for
distribution to employees and general sale
• Several capital investment projects were committed to reduce process water and energy usage
•
100% of packaging now recyclable
• Kickstart program adopted to provide opportunity for local 16-24 year olds at risk of long-term unemployment
•
Tax award won for recognition of our tax integrity and governance in Ethiopia for the second year running
Sustainability
Pittards can trace its history back to 1826 and is looking forward to its bi-centenary in 2026. One of our consumer brands, Daines and Hathaway,
was founded in 1922 and will commemorate its centenary next year. Pittards Ethiopia Tannery Share Company has been under Pittards control
since 2005, but was established in 1974 and therefore is looking forward to its 50 year anniversary in 2024. Our finished product manufacturing
facitities in Addis Ababa are also over 10 years old.
With this depth of heritage and history the core values of sustainability are embedded deeply into the business and the way we work. People are at
the core of everything we do, not only as our team members, but also within the communities that surround us, our customers and our supply chains.
The Group is proud to have a history of long serving employees with many having served more than 25 years, often alongside family members and
with links back to previous generations. Our companies have long been established in their communities, both in the UK and Ethiopia, and our
committment to these communities is long term in nature.
2020 has been a year of consolidation and recalibration, but we believe we have improved the resilience of our business. During this time we have
focussed on our customers, our team members and innovation. We evaluate our processes and operations in keeping with our continuous
improvement philosophy. Our primary emphasis is to reduce our enviromental impact through reduced energy and water consumption, together with
increased recycling and repurposing of our waste. We also recognise investment in our team members and local communities is critical. This has
been developed into our sustainability objectives.
Pittards PLC 2020 Annual Report Page 13 of 84 www.pittards.com
Community is important. Together with our in-house clinic for
employees and their families we support the local school in
Ethiopia through the construction of new classrooms.
Pittards PLC 2020 Annual Report Page 14 of 84 www.pittards.com
Chief Executive Officer’s report continued
Sustainability objectives
• Carbon decrease of 10% by 2025
• Waste generation and water consumption decreases by 20% by 2025
• Gearing below 60% by 2024
• Continue with our apprenticeship programme
• Continue building more classrooms in Ethiopia
• Continue planting trees, building on the 12,000 already planted
• Establish self-generated renewable energy
• Develop a Repurposed Leather range of leather goods
• Develop a leather goods repair facility
Pittards PLC 2020 Annual Report Page 15 of 84 www.pittards.com
As a key supplier to many first response services, it was
important to support those customers and so we remained
open throughout 2020. Photo credit W&R
Pittards PLC 2020 Annual Report Page 16 of 84 www.pittards.com
Stakeholder engagement shaping our decisions in 2020 (Section 172)
Background
The following two pages comprise our section 172 statement and outline how the Directors have, in performing their duties over the course of the
year, had regard to the matters set out in Section 172(1)(a) to (f) of the Companies Act 2006. Stakeholder engagement is important to align our
mutual goals. We embrace a variety of methods to achieve this including social media.
At Pittards we engage with staff twice yearly with our interim and annual results, to ensure all staff are aware of our performance and how collectively
we can improve to meet our common goals.
The main Board met more frequently via remote virtual meetings in 2020, particularly during the first lockdown, meeting every week during the initial
phase of the pandemic.
Our shareholders were unable to attend the AGM in 2020 due to COVID-19 restrictions. To help communication we chose to provide a trading
update in July 2020 and again in February 2021. Our dialogue with key shareholders helped shape our decision making and we have updated our
plans to accommodate an alignment in mutual goals.
We actively sought to communicate more regularly with suppliers and paid more frequently in 2020 improving our average days to pay. The dialogue
and decision making tries to balance the competing pressures, so we are fair to suppliers, customers and shareholders. We improved payments to
suppliers to paying on average 58 days from invoice date (2019: 59 days).
We took a positive approach to initiatives, particularly the UK government DWP schemes to protect jobs and get business starting back stronger.
Two such initiatives were Furlough and Kickstart; we sought to embrace the spirit of those schemes. We believe they have both been positive
initiatives in strengthening our long-term prospects.
Continue to operate throughout pandemic
We are proud to have supported business through the pandemic to deliver vital support to the response services and indeed balance the fiscal
challenges with keeping staff safe, customers satisfied and operating in a balanced way. It was clear from some customers that they needed us to
continue to supply throughout the pandemic, in order to preserve the supply chain to front line services.
We decided on a strong early response to COVID-19 with a three-week closure of principal production to overcome the risk of the first wave and the
many unknowns at that time. Once through this phase, we sought to bring staff back as quickly as we could, mindful of safety, staff mental well-
being and the needs of our customers whilst also minimising the claim on the government. We also made masks during the pandemic and donated
scrub bags to NHS services.
Furlough of staff
During the first lockdown we furloughed 127 staff out of 168 UK staff. By the summer this had fallen to less than 50 staff on furlough and we were
furlough free by November 2020. The decision to take drastic action early to protect staff and the business, resulted in jobs being saved. This action
ensured we could balance our finances to continue to pay suppliers weekly, improve cash and start 2021 in a stronger position.
Since November 2020 we have not sought significant furlough support; however, we do anticipate for 2021 a small number of staff on Furlough for
health reasons, with Furlough being employee led. We do not anticipate these claims being material and hope all staff can resume full duties when
it is safe to do so.
Long term funding
Engaging with Lloyds Bank as early as February 2020, with a proposal to bolster our finances, demonstrated our commitment to tackle issues
quickly. The successful bid for a CBILS 6 year £1m term loan, enabled our planned changes to achieve a more sustainable business and was key
to both enhancing our finances and strengthening our relationship with Lloyds Bank. We have outperformed on our forecast to them and delivered
on our promise to reform our cost base.
Pittards PLC 2020 Annual Report Page 17 of 84 www.pittards.com
The creation of an in-house design and development resource for
footwear allows for fast-tracking of innovation and broader
capability to support manufacturing partnerships.
Pittards PLC 2020 Annual Report Page 18 of 84 www.pittards.com
Stakeholder engagement shaping our decisions in 2020 (Section 172) (continued)
Headcount restructuring
We needed a more sustainable solution to manage costs against lower volumes, some staff moved voluntarily to reduced hours working contracts.
These changes especially address back office functions and management roles so we could minimise fixed costs. We have sought to automate and
use technology to accelerate developments in our back office functions to succeed in sustaining these changes whilst improving the quality of the
output.
Innovation and insourcing design team
The motivation for this was to improve the balance in the team and address our growing customer needs, by creating new jobs displacing work
previously carried out abroad by third parties, with the added benefit of cost reduction. We were successful in developing, Tri Protex ™ our anti
bacteria technology along with developing in house capacity in the UK for new shoe ranges.
Pay cuts during 2020
Directors and senior staff took a pay cut from April through to November to support the business during exceptional circumstances. This decision
was designed to balance stakeholder interest, including shareholders, bank, and staff (job protection). We would like to express our gratitude to staff
for this financial support and commitment.
Shares buy back
The Board utilised the strong cashflow in Q4 to complete a substantial share buyback of 934,210 shares. In arriving at this decision, the Board
considered the financial performance of Q4 and shareholder views. The Board, Directors and staff were consulted and participated in individual
share purchases at the same time.
Kickstart scheme
In order to facilitate improved development of production process and access higher volumes with customers, the Group signed up to the DWP’s
Kickstart scheme. We anticipate around 30 production staff to join on the kickstart scheme to help improve production, skills and efficiency in 2021.
We aim to offer participants long term opportunities whilst also optimising our production efficiency.
Closure of Clarks Village retail site
We took the decision to close our Clarks Village retail site. There was a break clause within our lease allowing us to exit in 2020, and regrettably this
led to 3 staff redundancies. Our Street retail venue was incidental to the Group’s activities but did offer the group a meaningful annual cost saving
of circa £0.1m. We were able to redeploy some staff towards our web offering, which has performed well in 2020 and enhances our existing
remaining retail venue at our UK site in Yeovil.
Pittards PLC 2020 Annual Report Page 19 of 84 www.pittards.com
Pittards Explorer FireblocTM leather has been designed specifically
for the management of heat and fire resistance where the highest
performance upholstery leather is required on rail transport
Pittards PLC 2020 Annual Report Page 20 of 84 www.pittards.com
Chief Executive Officer’s report continued
Outlook for 2021
The global pandemic has had a big impact upon our business. Our resilience has enabled us to come through one of the most serious set of
circumstances we are likely to face, and we have emerged a stronger business today than we were in 2019.
Looking forward to 2021, we have started the year with a better order book. Whilst some of this may have been from the need to refill the supply
chains there are also signs of a general recovery in demand. In addition to our traditional markets, we are also well placed to respond to our new
strategic market sectors of interiors (automotive, aviation and rail), larger shoe brands and shoe production in Ethiopia.
With a more efficient cost base we will be able to respond more positively to recovering demand in the global marketplace, and new capital projects
being delivered will allow us to grow more capacity in a more efficient way.
Our commitment to our sustainable and responsible supply chains is well established and we will continue to build upon our continuous improvement
culture.
The successful development of Explorer FireblocTM for the mass transit market and Tri Protex® antimicrobial technology, demonstrates our market
led innovation, with more developments to come.
Our employees have come through many challenges during 2020. By working together and evolving our working practices we will continue to
develop our flexible approach allowing agile responses to our customer’s needs.
Although there are still some unpredictable macro-economic factors, and some inflationary cost pressures our confidence is growing as we build a
more balanced business with a broader range of customers.
Cash management will remain a key focus and we believe opportunities currently still outweigh risks to build on our 2020 second half performance.
Reg Hankey
Chief Executive Officer
23 March 2021
Pittards PLC 2020 Annual Report Page 21 of 84 www.pittards.com
Pittards leather is used in the UK production of Dr Martens iconic boots. It is a
partnership that underlines the strength of heritage and manufacturing
expertise that runs through both businesses, together with the growing
importance of UK-made footwear.
Photo credit: Dr Martens
Pittards PLC 2020 Annual Report Page 22 of 84 www.pittards.com
Chief Financial Officer’s report
Financial review
Reduced revenue at £15.2m (2019: £22.3m), arising from the periods of substantial disruption earlier in the year, inevitably led to Group gross profit
falling to £3.2m (2019: £6.9m). This obscured the better mix of business and lower raw material cost, which bodes well for underlying margins. We
expect to resume the improving trend of gross margins from 2019, underpinned by the low-cost facility in Ethiopia, improved operational efficiency
and broader product range.
Cost savings were a key feature of 2020, with annual cost savings heading into 2021 compared to 2019 of £2m. 2021 will benefit from our newly
aligned cost base, whilst 2020 benefitted from furlough support of £0.6m. Furlough support had minimal impact on the second half of 2020 at £0.1m,
as there were no furlough claims in November or December and no material further claims for support are planned for 2021. We are not reliant on
any form of cash deferment or subsidy at this time.
We are addressing inventory control, through lowering capacity and adapting our processing model with Ethiopia, broadening the portfolio into 2020
and improving quality control. Our slow-moving inventory fell to £2.8m (£3.2m:2019), and we have addressed capacity and new channels to aid a
reduction of core skin inventory.
Overall inventory levels have fallen to £15.0m (2019: £17.3m), and we are confident we will build on this progress in 2021, as our newly aligned
capacity plan and business model should facilitate further de-stocking in 2021.
Apart from inventory, working capital has been adversely affected by the changing shape of the business. Credit terms to new markets and customer
mix has resulted in a modest increase in debtor days. We have supported the supply chain with faster payment in 2020 compared to 2019.
We were encouraged to achieve net debt at £10.1m (£9.6m: 2019), after the peak earlier in the year of £11.5m, considering that we have also funded
treasury shares worth £0.4m, with our share buyback during Q4-2020. This was a robust cash performance, with a £1.6m improvement in net debt
since the half of 2020 on a like for like basis, and to preserve debt within £0.1m of 2019 allowing for treasury shares.
One of the Group’s key financial measures is gearing. Our gearing rose to 73% in 2020 but we remain committed to manage down gearing to
sustainably below 70%.
During the year, Return on Capital Employed (ROCE) was negative, decreasing from 4.2% positive in 2019. On an ongoing basis, our Return On
Investment (ROI) is recovering positively and we are targeting to deliver our near term objective of returns above our Weighted Average Cost of
Capital (WACC) which fell to 3.8% in 2020 (2019: 4.9%).
End of year position
Net assets have decreased from £17.5m to £13.9m, mainly due to the loss in the first half of the year and the devaluation of Ethiopian BIRR.
The Group is actively seeking to mitigate foreign exchange risk as far as practical. Due to economic uncertainty, we eased the hedging strategy in
2020 by lowering cover to 40% and extending cover to June 2022. Sales proportionally in GBP increased during 2020 assisting in lowering currency
risk to £0.3m annual impact on PBT, for every 10% move in US$.
Total net debt (including lease obligations and overdrafts) increased to £10.1m as of 31 December 2020. Our headroom on Group facilities improved
however to £3.3m (£2.6m: 2019). Allowing for own share purchases into treasury of £0.4m, our like for like debt was £9.7m net debt as at 31
December 2020 (2019: £9.6m net debt) when we did not have treasury shares. The UK business achieved positive free cashflow (excluding CAPEX)
for the year, helped by falling inventory and improving EBITDA, marking a significant change in operating performance.
Over the last two years we have invested £1.2m in capital programmes to enhance operating capability and efficiency. We plan increased capital
spend in 2021, of circa £0.9m across the Group after a pause during 2020, but these spends will be carefully targeted with short payback, operational
efficiencies and growth prospects.
Pittards PLC 2020 Annual Report Page 23 of 84 www.pittards.com
Chief Financial Officer’s report (continued)
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.
Group policy is to only process hides and skins that are a by-product of these industries.
The Group operates in the UK, where it sources most of its hides, and in Ethiopia, where it sources local hair sheep skins, goat skins and hides. The
Group exports on average 79% of its production into over 44 countries and four continents.
The demand for quality leathers that protect and enhance user experience, especially in sports science, and consumer appetite for outdoor activities,
including golf and endurance, has helped the recovery in these core markets in which we operate.
Anti-Bribery and Corruption
Pittards is committed to conducting its business affairs to ensure that it does not engage in or facilitate any form of bribery or corruption in any parts
of its supply chain or in interaction with other stakeholders regardless of geographical location. Expected standards of behaviour are outlined in the
anti-bribery and corruption policy, which also provides guidance on the giving and receiving of gifts and hospitality.
Principal risks and uncertainties
Risk management is an important part of the management process throughout the Group, with regular reviews of the key risks identified and the
adequacy of the controls in place to mitigate the risks. The current risks considered to be key to the Group are as follows:
Coronavirus (COVID-19)
The safety of our staff, customers and wider community remains our key priority, and we will observe government guidance. It is too early to judge
if things can sustainably improve. The uncertainty of a lock down appears more predictable now, whilst there remains considerable uncertainty both
domestically and internationally. Following a further lockdown enforced in January 2021, it has not so far materially impeded our progress. We have
learnt a great deal about operating the business through periods of disruption, and we maintain contingency both in resources and available funding
should further unforeseen disruption arise.
Currency
The Group is subject to the current volatility in the currency markets, particularly US dollar, Ethiopian Birr and Euro. The Group manages its exposure
by maintaining a natural hedge where possible, for US dollar and Euro. In 2020, the Group entered foreign forward currency contracts to hedge
against movements in the US dollar, adopting a new cash flow hedging strategy, in response to the anticipated continued volatile currency markets.
The Group has moderate forward cover of 40% through to June 2022 and will continue to review strategy in this area in the light of certainty of future
sales, mix of business, customer sentiment and order flow.
Political
Globally the political environment has been variable during 2020, we view this as short term in nature, and it has not impeded business operations.
In the UK, we now have more certainty regarding the country’s future relationship with the European Union. The Group’s exposure to Europe is
largely supply driven, with some of its key purchases derived from Europe. The global situation has a more optimistic tone at the start of 2021 and
in the meantime, we look to diversify as far as practical.
Supply
The availability of quality raw materials is paramount to the business. The Group owns Ethiopia Tannery Share Company (which is a main supplier
of Ethiopian skins) and has strong relationships with other major suppliers of skins and hides in Ethiopia, the UK and around the world.
Pittards PLC 2020 Annual Report Page 24 of 84 www.pittards.com
Chief Financial Officer’s report (continued)
Energy and waste management
The Group is exposed to price volatility in the supply of energy and an increased burden of 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.
Working Capital
The Group actively monitors its liquidity position to ensure it has enough available funds and working capital to operate and meet its planned
commitments. The Group continues to have excellent working relationships with its banking partners both in the UK and Ethiopia and has enough
facility levels to meet its planned requirements.
Through its activities, the Group is exposed to a variety of financial risks; market (including currency, price, and interest rate), liquidity and credit
which are discussed in Note 26.
Bank facilities
As disclosed in Note 1b of the financial statements, our banking facilities have been renewed on similar terms until March 2022. Headroom on our
facilities at year end was £3.3m, up £0.7m on 2019, due mostly to being supported with a new Coronavirus Business Interruption Loan (CBILS),
which has a 6 year term remaining, being repaid in full in 2026. New overdraft facilities are renewed on the same basis as 2020.
Share buybacks
During the year, the company purchased 934,201 of its own ordinary shares, representing 7.98% of the issued share capital, for £355,000.
Richard Briere
Chief Financial Officer
23 March 2021
Pittards PLC 2020 Annual Report Page 25 of 84 www.pittards.com
Directors, officers, and advisers
Non-Executive directors
S Yapp FCMA MBA, Chairman, non-executive B C
Stephen Yapp (63) joined the Group in June 2015 and was appointed as Chairman in May 2016. Stephen has more than 25 years’ experience as a
Director of public and private companies over the course of his career. He is also a former director of Downing Strategic Micro-Cap Investment
Trust Plc, as well as several private companies, having held similar roles in other listed companies over recent years. Stephen is also a Fellow
Chartered Management Accountant and holds an MBA.
G P Davis FCA, non-executive A B
Godfrey Davis (72) joined the Group in February 2014. He is non-executive Chairman of Mulberry Group plc. He also holds several other
directorships, including Hestercombe Gardens Ltd and King’s Schools (Taunton) Ltd. Godfrey is an experienced leader of private and publicly
owned entities and has a strong understanding of the UK AIM market. He has a deep knowledge of the leather goods sector accumulated over
many years’ experience.
L M Cretton BA (Hons), non-executive A B
Louise Cretton (63) rejoined the Group in August 2015 having previously served for twelve years until 2013 and was subsequently appointed as
Audit Committee Chair. Serves as a non-executive director and vice chair of Croydon Health Services, where she chairs people and place committee
and remuneration committee. Louise has extensive experience in international quantitative and qualitative research, brand engineering, strategic
development, and planning. Trustee of Surrey Club for Young People.
Executive directors
R H Hankey BSc, FSLTC, LCGI, FCGI, FCMI, CDipAF, Chief Executive Officer C
Reg Hankey (65) 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 also a Director and past President of Leather UK and chaired LIAC for the University of Northampton
for over 20 years.
R Briere ACMA, CGMA, Chief Financial Officer, Company Secretary
Richard Briere (47) joined the Group as Chief Financial Officer and Company Secretary on 19 March 2019. Richard has broad experience across
the manufacturing and distribution industries, including JCB, A-GAS and Knorr Bremse.
Pittards PLC 2020 Annual Report Page 26 of 84 www.pittards.com
Directors, officers, and advisers (continued)
Associate Directors
J Loxston BA(Hons), FSLTC, Chief Technical Officer
Jon (52), a leather industry professional for over 30 years, started his career with Pittards in Yeovil as a leather technician, achieved Leather
Technology qualifications and progressed through the business. Jon has a degree in International Business, he is a director and pension trustee of
Leather UK, holds a position on the Leather Working Group (LWG) Executive Committee and additionally chairs the LWG Technical Subgroup.
T Mekbib – BSc, MBA, Divisional Managing Director
Tsedenia (43) has both a degree in Chemistry and an MBA from the University of Leicester. Having worked for GlaxoSmithKline, Tsedenia joined
Pittards in 2011. In 2017, she was appointed Managing Director of Pittards Ethiopia with responsibility for operations at the tannery in Ejersa and
the product manufacturing factories in Addis Ababa.
Key for directors
A - Member of the Audit Committee
B - Member of the Remuneration Committee
C - Member of the Nominations Committee
Registered Office and principal place of business
Sherborne Road, Yeovil, Somerset BA21 5BA - Company Number: 102384
Advisers
Nominated Adviser and Broker: WH Ireland, 24 Martin Lane, London, EC4R 0DR
Independent Auditors: PKF Francis Clark, Centenary House, Peninsula Park, Rydon Lane, Exeter EX2 7XE
Bankers: Lloyds Bank plc, Canons House, Canons Way, Bristol BS1 5LL
Registrars: Link Asset Services, The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU
Associate Directors
Associate directors, are invited to main board meetings, but not yet formally registered as directors
Pittards PLC 2020 Annual Report Page 27 of 84 www.pittards.com
Pittards leathers that combine grip performance and
perspiration resistance are a key branded component in
Franklin baseball batting gloves. It is this ability to create
custom technologies for our customers that creates
partnerships for the long term.
Pittards PLC 2020 Annual Report Page 28 of 84 www.pittards.com
Corporate Governance report
for the year ended 31 December 2020
Statement of Corporate Governance
As the Chairman, I recognise the importance of high standards of Corporate Governance and pleased to report below on how the Board of Pittards
maintains its governance and operation of the QCA governance code.
The Group is led and controlled by the Board who are responsible for approving Group policy and strategy for the benefit of its shareholders in
accordance with their fiduciary and statutory duties. The Board comprises of two executive members and three non-executive directors whose
biographies are on pages 26 and 27, and further includes 2 executive associated directors as key senior directors in the business, responsible for
technical and the running of the Ethiopian business. These show the range of business, technical and financial experience on which the Board can
call.
Chairman and Chief Executive
The Chairman, Stephen Yapp, is responsible for the leadership of the Board and ensuring its effectiveness. The Chairman is considered independent
by the Board as he has no outside interests that conflict with the business or otherwise connected to the market in which we operate. Reg Hankey,
Chief Executive, manages the Group and has the prime role, with the assistance of the Board, of developing and implementing business strategy.
Non-Executives
The Non-Executive Directors, under the leadership of the Chairman, undertake detailed examination and discussion of the strategies proposed by
the Executive Directors, to ensure that decisions are in the best, long-term interests of the shareholders and take proper account of the interests of
the Group’s other stakeholders. The Non-Executive Directors bring independent judgement and scrutiny to the decisions taken by the Board. They
monitor the success of management in delivering the agreed strategy within the risk appetite and control framework set by the Board. Their views
are actively sought when developing proposals on strategy and in discussions in meetings.
The QCA code acknowledges that for growing companies it may not be possible for Boards to meet the definition of “independence” for Non-
Executive Directors, although it sets out that it is important for the Board to foster an attitude of independence of character and judgement. The
Board is mindful of the threat to independence and actively manages the potential risk to ensure that the Non-Executives provide the independent,
constructive challenge to help develop the Board’s proposals on strategy. The Non-Executive Directors are considered independent by the Board.
The Senior Independent Director, Godfrey Davis, offers a sounding board for the Chairman and serves as an intermediary for other directors and
shareholders when necessary. All Directors have access to the advice and services of the Company Secretary, who is responsible for ensuring that
Board procedures, applicable rules and regulations are observed.
In the furtherance of their duties on behalf of the Group, the Directors also have access to independent professional advice at the expense of the
Group. The Chairman ensures that the Board meets regularly throughout the year, with additional ad hoc meetings and calls being held as required.
The Chairman ensures that meetings of Non-Executive Directors without the Executive Directors are held.
Communication with Shareholders
The Group holds meetings with significant shareholders on a regular basis and regards the Annual Report and Annual General Meeting (AGM) as
a good opportunity to communicate directly with shareholders. Shareholders participate by submitting questions at the AGM. The Board openly
promotes AGM attendance, whilst also encouraging members of staff to attend. The Group lists contact details on its website should shareholders
wish to communicate with the Board. All announcements and results, including those released via market Regulatory News Service (RNS), are
available on the Group’s website.
The Board encourages engagement with all shareholders, including two-way communications with institutional investors, analysts, and private
investors. The Board holds regular meetings with the larger shareholders and considers it has successfully created an open channel of
communication for specific concerns, questions or updates facilitated by regular meetings, site visits and ad hoc telephone calls as appropriate with
the Chairman, the Chief Executive, and the Chief Financial Officer. Historic reports and accounts, along with all notices and circulars for the last
five years, are available on the Group’s website.
Pittards PLC 2020 Annual Report Page 29 of 84 www.pittards.com
Corporate Governance report
for the year ended 31 December 2020 (continued)
Committees
The Board has three standing committees: The Audit Committee, the Remuneration Committee, and the Nomination Committee. The Terms of
Reference for each of the Committees are available on the Group’s website.
Audit Committee
The Audit Committee currently consists of two Non-Executive Directors who formally met twice during the year under the Chairmanship of Louise
Cretton. Whilst Louise Cretton has been a member of the board for more than 18 years (non-consecutively), the Board nevertheless considers that
Louise Cretton fulfils the roles of Audit Chair and Non-Executive Director with independence of character and judgement and has concluded that it
is appropriate to retain the experience, corporate memory and knowledge of the business possessed by Louise Cretton in her role as Chair of the
Audit Committee.
The Chief Financial Officer (CFO) and the external auditors attend meetings of the Audit Committee by invitation. The Committee may also hold
separate meetings with the external auditors as appropriate.
The audit committee agreed an interim review by PKF Francis Clark of our six months results (unaudited) for a fee to strengthen the review of results
ahead of full year results.
The Audit Committee duties include monitoring internal controls throughout the Group, which includes annual meetings with external auditors,
approving the Group’s accounting policies and reviewing the Group’s interim results and full year statements. The Audit Committee also reviews
the risk register and risk appetite of the Group and monitors the independence of the external auditors. The Audit Committee acts to ensure that the
financial performance of the Group is properly recorded and monitored, and in fulfilling its role, it meets annually with the auditors and reviews the
external audit report.
During this year, the Audit Committee reviewed the audit fees, audit planning, and general recommendations from PKF Francis Clark responding to
emerging best practice and new reporting standards. In between the formal meetings, the Chair, non-executives, and CFO attended a webinar
hosted by PKF Francis Clark to discuss the wider governance topics facing AIM listed companies and to consider the broader topics for discussion
at board meetings and the annual report as we progress through the phases of the pandemic. Emphasis was made, on sustainability and risk
management and regular monitoring of risks and developing the Groups approach to sustainability.
The contents of the meetings are recorded in the minutes which are then circulated to the Committee by the Chair, for review before being issued.
The Chair reports on the full agenda and discussions to the Board.
Remuneration Committee
The Remuneration Committee consists of three Non-Executive Directors and meets at least once a year under the Chairmanship of Godfrey Davis.
The purpose of the Committee is to review the performance of the full-time Executive Directors and to set the scale and structure of their remuneration
and the basis of their service agreements with due regards to the interests of the shareholders. In fulfilling this responsibility, the Remuneration
Committee is responsible for setting salaries, incentives, and other benefit arrangements of Executive Directors. The Remuneration Committee also
advises the Board on the remuneration policy for senior Executives and may invite participation in the Company’s long-term incentive share scheme.
During this year, the Committee reviewed, in detail, the remuneration of the directors and senior employees, including the setting and measurement
of annual bonus and long-term incentive targets. In between formal meetings, the Chair has taken external advice on long-term incentives, which
are an area of focus as the business invests in developing and incentivising its management team and agreed a modification to the growth share
scheme which was implemented in November 2020.
The contents of the meetings are recorded in the minutes which are circulated to the Committee by the Chair, for review before being issued. The
Chair reports on the full agenda and discussions of the Board.
Pittards PLC 2020 Annual Report Page 30 of 84 www.pittards.com
Corporate Governance report
for the year ended 31 December 2020 (continued)
Nominations Committee
The Nominations Committee consists of one Executive and one Non-Executive Director and is chaired by Stephen Yapp. The Nominations
Committee did not meet during this year. The Nominations Committee is responsible for evaluating the Board and determining the skills and
characteristics that are needed in new Board candidates when required.
Internal Controls
The Board is responsible for the Group’s system of internal controls and for reviewing its effectiveness. Such a system is designed to manage rather
than eliminate the risk of failure to achieve business objectives and can only provide reasonable and not absolute assurance against material
misstatement or loss. A risk register is maintained by the Group containing both potential financial and non-financial risks which may impact the
business.
The Board confirms that there are ongoing processes for identifying, evaluating, and mitigating the significant risks faced by the Group. The Group’s
internal financial control and monitoring procedures include:
• Clear responsibility on the part of line and financial management for the maintenance of good financial controls and the production of
accurate and timely financial management information.
The control of key financial risks through appropriate authorisation levels and segregation of accounting duties.
•
• Detailed budgeting and reporting of trading results, balance sheets and cash flows, with regular review by management of variances from
budget.
• Reporting on any non-compliance with internal financial controls and procedures; and
• Audit Committee review reports issued by the external auditors and presented to the Board via the Chair of the Audit Committee.
Internal Audit
The Group does not have an Internal Audit function as the Board considers that the size and nature of the business does not currently require it.
The Audit Committee, on behalf of the Board, reviews report from the external auditors together with management’s response regarding proposed
actions. In this manner, the Board comments on internal controls, as directed by the Executive Directors, and they also make independent enquiries
on the function and scope of the controls. These discussions are recorded in minutes and actions, where necessary, are agreed.
Risk management
The Board is responsible for risk management and maintaining an appropriate system of internal controls to safeguard the shareholders’ investment
and Group assets. The Directors continue to review the financial reporting procedures and internal controls of the Group companies to ensure they
are robust enough to deliver timely, detailed reporting that will allow accurate monitoring of the Group’s performance.
The Board receives regular feedback from the Audit Committee on any internal control issues raised by its external auditors. In the context of the
Group’s overall strategy, the Board undertakes risk assessments as well as the review of internal controls. The Group has established a risk register
which involves risks being identified, recorded, monitored, and addressed at division and Group level and subject to regular review. A top-down risk
review is combined with a complementary bottom-up approach to ensure that risks are fully considered.
The Board determines the extent and nature of the risks it is prepared to take to achieve the Group’s strategic objectives. The Board has overall
responsibility for the Group’s risk appetite and challenges the Executive directors to consider a broad scope of risks when devising it’s strategies
and initiatives to balance the groups risks.
Pittards PLC 2020 Annual Report Page 31 of 84 www.pittards.com
Corporate Governance report
for the year ended 31 December 2020 (continued)
Significant risk areas
The significant areas of risk and judgement in relation to the Group’s financial statements for the year ended 31 December 2020, as discussed at
the Audit Committee, are as follows:
• COVID-19
Considering the COVID-19 pandemic, the Board has had ongoing discussions regarding its impact on the assessment of going concern.
See note 1b of the financial statements for further detail. The directors believe the Group is unlikely to suffer a materially adverse impact
because of the long-term effects of COVID-19.
• Revenue recognition
As with most companies, there is a risk that to achieve planned results, revenue may not be recognised in accordance with the Group’s
policy. The systems of internal control deployed within the Group are designed to mitigate this risk and the adequacy and effectiveness
of these controls is regularly reviewed by management.
•
Inventory valuation
Inventory remains a significant item in the Group’s balance sheet and a key area of estimation and judgement. Inventory policies are
reviewed on a regular basis, with provisions made where required to ensure that the inventory is held at an appropriate value.
Board attendance and activities
The Board normally meets six times per year in person to review and discuss strategy, financial results, business planning, sales, operations, and
HR matters. The Directors are required to invest the necessary time to execute their role properly. Directors’ attendance at Board and Committee
meetings during the year was as follows: -
Board
Meetings
Audit
Committee
Remuneration
Committee
Nominations
Committee
R Briere 1
L Cretton
G Davis
R Hankey
S Yapp
Attended Eligible Attended Eligible Attended Eligible Attended
6
6
6
6
6
-
1
1
-
1
6
6
6
6
6
-
2
2
-
-
-
1
1
-
1
2
2
2
-
-
-
-
-
-
-
Eligible
-
-
-
-
-
See pages 26 and 27 for more details about the Board.
1 The Chief Financial Officer attends audit committee meetings by invitation which are not included in the above attendance.
During 2020 the Board’s activities included
Informal meetings weekly during much of 2020, to agree recovery plan and key actions re, COVID-19
•
• Consider and approve a share buyback
• Agree parameters for the future parameters for dividend payments
• Approval of the Annual Accounts and Reports 2019
• Set the Group’s 2020 budget and business plan and endorse the plan to reduce headcount by 128 staff
• Received detailed reports on the Group’s operating and financial performance and safety performance
• Received updates on progress against strategic programmes and tested the overall strategy against the delivery of shareholders’ long-
term objectives
Frequently considered the evolving economic, political and market conditions relative to Brexit
•
• Considered competitor behaviour, including the impact of failing contractors and the resulting impact on the industry as a whole
• Considered and agreed in principle a set of targets for the acceptable level of resilience, liquidity, and headroom
Pittards PLC 2020 Annual Report Page 32 of 84 www.pittards.com
Corporate Governance report for the year ended 31 December 2020 (continued)
• Reviewed the Group’s forecast funding requirements, debt capacity and potential financing options that would enable achievement of
the desired resilience targets
• Agree new debt facility (CBILS), government backed, also new grant funding (Kickstart) which starts Feb-2021
• Reviewed cash forecasts and cash management key risks, together with the adequacy of mitigation controls
• Approved the building of more classrooms near the Ethiopian Tannery site
• Received regular reports from the Chairs of the Audit, Remuneration and Sustainability Committees on activities and recommendations
of the Committees
• Considered the continued personal development of the Executive Committee
•
Implemented senior management incentive arrangements ensuring alignment with shareholders and approving an amendment to the
Growth share scheme which was introduced in 2019.
• Evaluated the short and long-term trends in sustainability that would help to inform the wider business strategy and the Group’s long-
term planning process.
Board performance
The Company undertakes regular monitoring of personal and corporate performance using agreed key performance indicators and detailed financial
reports. Responsibility for assessing and monitoring the performance of the Executive Directors lies with the independent Non-Executive Directors.
Key performance indicators are detailed on page 7.
The performance of individual Executive Directors is reviewed not less than once a year by the Remuneration Committee and has both formal and
informal mechanisms for evaluating and giving feedback on an ad-hoc basis. This year the Board undertook a 360-degree assessment of the Board
directors with recommended improvements to the functioning of the Board.
All Directors can undertake relevant training and attend relevant seminars and forums. The Board is confident that all its members have the
knowledge, ability, and experience to perform the functions required of a director of an AIM listed company.
Corporate culture
The Board is committed to embodying and promoting a corporate culture of excellent service delivery across the Group, whereby a customer need
can be fulfilled whilst maintaining the Group’s margins. It has endorsed various policies to achieve this, which also require ethical behaviour of staff
and relevant counterparties. Operating in a fragmented global industry, the Group’s marketing strategy is to be selective and targeted towards trade
shows, events and through social media. The Group is proud of its existing long-term customer relationships and will continue to invest in those as
well as potential new customers. Staff throughout the business are regularly updated on key developments both formally and informally and staff
feedback is always encouraged.
Stephen Yapp
Chairman
23 March 2021
Pittards PLC 2020 Annual Report Page 33 of 84 www.pittards.com
Directors’ report
for the year ended 31 December 2020
The directors submit their report together with the audited consolidated financial statements of the Group and the Company for the year ended 31
December 2020.
Dividends
No interim dividend was paid in respect of 2020 (2019: £nil) and the directors are not recommending the payment of a final dividend (2019: £nil).
Going concern
Whilst the pandemic created an initial shock for the business, the trading environment during the pandemic is such that whilst it remains and indeed
when it is resolved, we do not see any reason to expect the business model to be unduly affected. Our assumptions for going concern include no
further government support, no further accessible cost reductions, and the risk of a downturn in activity. We retain adequate facilities to weather a
range of outcomes, leading the Board to believe there are no doubts on the Group being able to continue as a going concern.
The Group and Company meet their day to day working capital requirements through their bank facilities. The banking relationship with Lloyds Bank
has remained strong during 2020, with consistent delivery against internal forecasts and improving cashflow. Since the year end our expiring banking
facilities have been subject to discussions on their revision and renewal; agreement has been reached and formalised, renewing facilities until March
2022.The bank has formally waived our covenant breach to 31 December 2021. Further information on going concern can be found in Note 1(b) of
the accounts.
Brexit
There has been no material impact to date and the Group does not envisage any going forward.
Research and development
We have appointed a dedicated CTO to enhance our offering. The Group recognises the importance of continuous product and process development
in 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 to reflect current trends in more fashion orientated
products, holds consumer focus groups and attends relevant trade shows to better understand its potential consumers.
Pittards PLC 2020 Annual Report Page 34 of 84 www.pittards.com
Directors’ report
for the year ended 31 December 2020 (continued)
Treasury policies
The Group finances its activities with a combination of bank loans, overdrafts, finance leases and hire purchase contracts, as disclosed in Note 26.
Other financial assets and liabilities, such as trade receivables and trade payables, arise directly from the Group’s operating activities. The Group
has traded in financial instruments during the year.
Overall, some 79% of Group revenue is in US dollars, 14% in Sterling, 2% in Ethiopian Birr, 3% in Euros and 2% other. Where possible, a natural
hedge is maintained against the Group’s currency exposure. During 2020, a review of the Group’s foreign currency risk management policy has
been performed, resulting in the adoption of a cash flow hedging strategy with the use of forward foreign currency contracts for US dollars.
Given current currency market conditions the level of cover was reduced, but the Group policy was revised to hold for a longer duration, covering
up to 18 months, to protect future cash flows and reduce the level of uncertainty. This time frame is considered appropriate for the cost base of the
business to be amended, should a significant, prolonged shift in exchange rates be noted.
The Group’s principal borrowings are in Sterling, US dollars and Ethiopian Birr (for Ethiopia Tannery Share Company (ETSC), Pittards Product
Manufacturing Share Company (PPM) and Pittards Global Sourcing Private Limited Company (GS)) which are used to manage timing differences
in cash flows arising from trading activities as set out in Note 26. The debt is a combination of variable and fixed rate.
The Group’s objective is to maintain a balance between continuity of funding and flexibility, using overdrafts, bank loans and finance leases, with
short and medium-term variable rate debt favoured. No specific policy exists regarding liquidity.
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, working closely
with its suppliers, and committing to purchase on the basis of anticipated and actual forward sales orders. The ownership of ETSC enables 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. Our policy is to attract and retain the best supply chain that can offer comparable terms to customers being 60-day payment terms.
Trade payables at the year-end represented 58 days’ purchases (2019: 59 days).
Equal Opportunities
Pittards is committed to ensuring that colleagues are treated equally, regardless of gender, sexual orientation, religion or belief, age, mental status,
social class, colour, race, ethnic origin, creed, disability, political or philosophical beliefs, or marital or civil partnership status.
Through the Group’s equal opportunities policy, it aims to create an environment that offers all colleagues the chance to use their skills and talent.
Decisions on recruitment, training, promotion, and employment conditions are based solely on objective, job-related criteria, and personal
competence and performance.
The Group seeks wherever possible to make reasonable adjustments to ensure that a colleague who becomes disabled during his or her employment
is able to continue working effectively.
Pittards PLC 2020 Annual Report Page 35 of 84 www.pittards.com
Directors’ report
for the year ended 31 December 2020 (continued)
The Group is confident that all employees, regardless of gender, are paid equally for doing equivalent jobs across the business and have an equal
opportunity to participate in and earn incentives. The current recruitment, progression, performance, reward and benefit policies and practices are
not gender biased and the business will continue to monitor them to ensure they remain fair and equitable.
Pittards is committed to ensuring that the rights of all individuals are respected throughout the business and its supply chain.
Employee consultation and involvement
The Group places great importance on the involvement of its employees and has continued its previous practice of keeping them informed on matters
affecting them as employees and on the various factors affecting the performance of the Group, through special briefing meetings which include an
interim and full year address to staff on the business presented by the CEO, following market announcement of results.
Stakeholder engagement is covered in the s172 statement on pages 17 to 19.
Carbon Reporting
As a public limited company, incorporated in the UK, we comply with all mandatory carbon reporting regulations. We have reported on all the
emission sources required under the Companies (Directors’ Report) and Limited Liability Partnerships (Energy and Carbon Report) Regulations
2018. We have employed the Financial Control definition to outline our carbon footprint boundary. The reporting period is consistent with our 12-
month financial reporting period and we have reported on emissions for the UK only, with limited scope as permitted for an AIM listed business.
We have followed the UK Government Environmental Reporting Guidelines (March 2019) including streamlined energy and carbon reporting
guidance published by the UK’s Department for Business, Energy & Industrial Strategy (BEIS). Emission factors were sourced from the UK
Government’s GHG Conversion Factors for Company Reporting 2020. Gas and electricity are considered the principal energy sources and usage
figures were obtained from our current provider.
We are committed to reducing our carbon footprint through working to reduce energy usage and our impact on the environment. In Ethiopia we
utilise borehole water and we have extended our manufacturing ability in both UK and Ethiopia, vertically integrating our operations to reduce
transportation costs between leather manufacture and finished article manufacture.
We aim to increase the percentage of our electricity derived from renewable sources, whether from external sources or self-generated. Our capital
project to continuously replace less efficient electric items progresses with older light fittings being replaced with LED fittings. We have reviewed
our working practices such as our travel policy, encouraging increased use of video conferencing, non-motorised transport, and car sharing
(COVID-19 restrictions compliant). We have been careful to optimise factory operational time, closely matching it to our capacity requirements.
GHG emissions and energy use data for the period 1st January 2020 to 31st December 2020
2020
Combustion of fuel and operation of facilities (kg CO2e)
1,186,397
Electricity, heat, steam, and cooling purchase for own use
(kg CO2e)
Total gross emissions (kg CO2e)
Energy consumption in kWh used to calculate above
emissions
Intensity measure of kg of CO2e gross emissions per
m2 leather manufactured
539,560
1,725,957
8,713,434
2.09
Pittards PLC 2020 Annual Report Page 36 of 84 www.pittards.com
Directors’ report
for the year ended 31 December 2020 (continued)
Substantial interests
In addition to those disclosed under directors’ interests, the Company has been notified of the interests under section 793
Companies Act 2006 as of 12 February 2021 shown in the table below. No significant movements impacting the profile
of the key shareholders have been noted since 31 December 2020.
Shareholders
Mr John A Rendell
Downing Corporate Finance
Artemis Investments
Ruffer
Pension Protection Fund
Rath Dhu
Hargreaves Lansdown Asset
Management
Armstrong Investments Limited
Denton Pension Mgt
Total held by above group of shareholders
PLC Board share-holding and treasury shares held
Treasury shares held (non-voting rights)
Pittards PLC Board members (aggregate) carrying voting rights
Holding 50p
share
2,775,000
1,811,107
1,033,122
1,131,250
790,747
550,000
476,514
475,000
433,333
9,476,073
Holding 50p
share
934,210
870,182
%
holding
21.42%
13.98%
7.98%
8.73%
6.10%
4.25%
3.68%
3.67%
3.35%
73.1%
%
holding
7.21%
6.72%
Total holding by PLC board and held in treasury
1,804,392
13.93%
Directors’ interests
The directors at the end of the year and their interests in the shares of the Company were as shown in the table below. And does not include holdings
by associate directors.
Directors’ interests
R Briere
L M Cretton
G P Davis
R H Hankey
S Yapp
Fully paid
50p
shares
100,000
27,353
153,882
342,822
207,759
Total held PLC board (excludes associate directors)
831,816
At end of
year
Share
Options
-
-
-
-
-
-
Fully
paid
At end
of year
Share
Options
-
-
-
-
-
50p
shares
20,000
14,203
87,567
247,333
112,517
481,620
Pittards PLC 2020 Annual Report Page 37 of 84 www.pittards.com
Directors’ report
for the year ended 31 December 2020 (continued)
Directors
The persons named on pages 29 and 30 are the directors during the year and up to the date of approval of the Annual Report. S Yapp and L Cretton
retire by rotation and offer themselves for re-election at the forthcoming AGM.
Directors’ interests
On 26 September 2016, a Long-Term Incentive Plan (LTIP) was granted to Board directors detailed below except for Richard Briere who joined the
scheme in October 2019 on the same terms.
The Scheme continues to vest in March 2022; however, the scheme has been modified. The exercise period has been extended to April 2023,
formerly August 2022, taking into the impact of COVID-19.
The base price has been set at 51p, with two new conditions. Firstly, that no award will be made unless the share price reaches or exceeds 70p,
and finally that the aggregate award to management will not exceed 10% of the issued share capital, being 1,388,860 shares (the company already
holds 934,210 in treasury). Previously the scheme was uncapped.
The directors are entitled to shares from the vesting date, based on the excess value generated at the exercise date, with the total value generated
split based on the following percentages:
% entitlement
Richard Briere
LM Cretton
GP Davis
RH Hankey
S Yapp
20%
5%
5%
40%
30%
Annual General Meeting
A special resolution (number 5) will be proposed to enable the Company to make further market purchases of its own shares.
The authority for all the above resolutions expires on the date falling 15 months after the passing of the resolutions or the conclusion of the Annual
General Meeting in 2022 (whichever is earlier).
Independent auditors
A resolution to re-appoint PKF Francis Clark as the Company’s auditors will be proposed at the forthcoming Annual General Meeting.
This report was approved by the Board on 23 March 2021 and signed on its behalf by:
Richard Briere
Chief Financial Officer
Pittards PLC 2020 Annual Report Page 38 of 84 www.pittards.com
Statement of Directors’ responsibilities in respect of the financial statements
The directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulation.
Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have prepared the Group
financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union 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 parent Company and of the profit or loss of the Group and parent Company for that period. In preparing the financial
statements, the directors are required to:
• Select suitable accounting policies and then apply them consistently.
• State whether applicable IFRSs as adopted by the European Union have been followed for the Group financial statements and IFRSs
as adopted by the European Union have been followed for the Company financial statements, subject to any material departures
disclosed and explained in the financial statements.
• Make judgements and accounting estimates that are reasonable and prudent; and
• Prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group and parent Company
will continue in business.
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group and parent Company's
transactions and disclose with reasonable accuracy at any time the financial position of the Group and parent Company and enable them to
ensure that the financial statements comply with the Companies Act 2006 and as regards the Group financial statements, Article 4 of the IAS
Regulation.
The directors are also responsible for safeguarding the assets of the Group and parent Company and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
The directors are responsible for the maintenance and integrity of the parent Company’s website. Legislation in the United Kingdom governing the
preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
The directors consider that the annual report, taken as a whole, is fair, balanced, and understandable and provides the information necessary for
shareholders to assess the Group and parent Company’s performance, business model and strategy.
Each of the directors, whose names and functions are listed in the Directors’ and officers’ section on pages 29 and 30 confirm that, to the best of
their knowledge:
•
•
•
the parent Company financial statements, which have been prepared in accordance with IFRSs as adopted by the European Union, give a
true and fair view of the assets, liabilities, financial position, and loss of the Company.
the Group financial statements, which have been prepared in accordance with IFRSs as adopted by the European Union, give a true and fair
view of the assets, liabilities, financial position, and loss of the Group; and
the Annual Report includes a fair review of the development and performance of the business and the position of the Group and parent
Company, together with a description of the principal risks and uncertainties that it faces.
Pittards PLC 2020 Annual Report Page 39 of 84 www.pittards.com
Technical leathers offer real in-wear benefits for the
consumer electronics sector. The luxury Focal for
Bentley Radiance headphones feature premium
Pittards leather on the ear pads and headband.
Pittards PLC 2020 Annual Report Page 40 of 84 www.pittards.com
Statement of Directors’ responsibilities in respect of the financial statements (continued)
In the case of each director in office at the date the Directors’ Report is approved:
•
•
so far as the director is aware, there is no relevant audit information of which the Group and parent Company’s auditors are unaware; and
they have taken all the steps that they ought to have taken as a director to make themselves aware of any relevant audit information and
to establish that the Group and parent Company’s auditors are aware of that information.
On behalf of the Board:
Reg Hankey
Chief Executive Officer
23 March 2021
Pittards PLC 2020 Annual Report Page 41 of 84 www.pittards.com
Pittards Automotive leathers meet the exacting technical
standards of the sector without compromising the natural
handle and aesthetic qualities.
Pittards PLC 2020 Annual Report Page 42 of 84 www.pittards.com
INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF PITTARDS PLC
OPINION
We have audited the financial statements of Pittards plc (the ‘parent company’) and its subsidiaries (the ‘group’) for the year ended 31
December 2020 which comprise the consolidated income statement, consolidated statement of comprehensive income, consolidated
statement of changes in equity, company statement of changes in equity, group and company balance sheets, group and company
statements of cash flows and the notes to the financial statements, including a summary of significant accounting policies. The financial
reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs)
as adopted by the European Union.
In our opinion, the financial statements:
give a true and fair view of the state of the group’s and of the parent company’s affairs as at 31 December 2020 and of the
group’s loss for the year then ended;
the group and parent company’s financial statements have been properly prepared in accordance with IFRSs as adopted by
the European Union; and as regards the parent company’s financial statements, as applied in accordance with the provisions
of the Companies Act 2006; and
have been prepared in accordance with the requirements of the Companies Act 2006.
BASIS FOR OPINION
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our
responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial statements
section of our report.
We are independent of the group in accordance with the ethical requirements that are relevant to our audit of the financial statements
in the UK, including the FRC’s Ethical Standard as applied to listed entities, and we have fulfilled our other ethical responsibilities in
accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a
basis for our opinion.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the director's use of the going concern basis of accounting in the
preparation of the financial statements is appropriate. Our evaluation of the directors assessment of the entity’s ability to continue to
adopt the going concern basis of accounting included:
Understanding the impact of Covid-19 on the group.
Understanding the impact of Brexit on the group.
Reviewing and challenging management’s assessment of going concern (including assessment at the planning stage of the
audit process). Our work included assessing the timing and amount of turnover and related cashflows in the models. We also
tested the integrity and mathematical accuracy of the models used.
Reviewing management’s sensitivity analysis including changes in turnover and related cashflows.
Reviewing the bank covenant waiver issued pre year end to ensure presentation and disclosures in the financial statements
is correct.
Assessing the amount of facilities and expected headroom based on the forecast over the next 12 months.
Evaluating the reliability of the forecast through discussion with management, review of post year end trading and from
considering the historic reliability of forecasts compared to actual results.
Reviewing going concern related disclosures in the financial statements to ensure they are appropriate.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually
or collectively, may cast significant doubt on the group or parent company’s ability to continue as a going concern for a period of at
least twelve months from when the financial statements are authorised for issue.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this
report
Pittards PLC 2020 Annual Report Page 43 of 84 www.pittards.com
KEY AUDIT MATTER
RESPONSE AND CONCLUSION
INVENTORY VALUATION
The group and parent company hold a significant level of
inventory, especially when compared to key metrics such
as turnover and profitability. The risk is that inventory is
overvalued if production costs are overstated or if stock
provisions are understated.
Inventory is valued on a cost-plus basis using a defined
cost matrix (raw materials plus an allocation of labour and
overheads) which involves some estimation.
Whilst
is
understand
non-perishable, there is a risk that changing consumer
preferences and commodity prices could lead to inventory
being carried at an amount greater than net realisable
value. As such, the inventory provision is a key calculation
and area of judgement in the financial statements. See
notes 1 and 2a to the financial statements for the directors’
disclosures of the related accounting policies and key
judgements and estimation uncertainty.
inventory
that
we
In planning our audit work, we considered the extent of
complexity and subjectivity in the valuation of inventory and the
estimation uncertainty associated with stock provisioning. Our
audit work included:
Testing the costing of stock by agreeing a sample of
raw materials and direct production overheads to
supporting invoices. Further to this we reviewed and
challenged
the underlying assumptions and
methodology used in the absorption of indirect
overheads
been
confirmed
appropriately applied.
they
had
and
We reviewed and tested the utilisation of the
previously held stock provision, comparing amounts
of stock written off in the current year to the provision
previously held. We considered historic trends such
as inventory turn, provision as a percentage of total
inventory holding and inventory countbacks to look for
inconstancies.
Testing management’s methodology for calculating
closing inventory provisions. This included analysing
inventory based on age and comparing average sales
prices achieved to the carrying value of inventory. We
noted the methodology for provisioning has been
applied consistently with the prior year.
We reviewed the relevant accounting policies, key
judgements and estimation uncertainty as stated in
the accounts to assess their appropriateness and
clarity.
From our work performed, we did not identify any material
issues.
OUR APPLICATION OF MATERIALITY
Misstatements, including omissions, are considered to be material if individually or in the aggregate, they could reasonably be expected
to influence the economic decisions of users taken on the basis of the financial statements. We use quantitative thresholds of
materiality, together with qualitative assessments in planning the scope of our audit, determining the nature, timing and extent of our
audit procedures and in evaluating the results of our work.
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
MATERIALITY MEASURE
GROUP
PARENT COMPANY
Overall materiality
£215,000 (2019: £221,000)
£193,000 (2019: £220,000)
Performance materiality
75% of financial statement
materiality
75% of financial statement
materiality
Basis for determination
Misstatements reported to the
audit committee
Composite approach between
gross assets and turnover (2019:
1% of revenue)
£6,600 (2019: £6,600)
Composite approach between
gross assets and turnover (2019:
1% of revenue)
£6,000 (2019: £6,600)
The range of materiality at the four significant components subject to full scope audits: £6,500 - £45,000.
Pittards PLC 2020 Annual Report Page 44 of 84 www.pittards.com
OUR APPLICATION OF MATERIALITY (Continued)
Rationale for the benchmark applied: Based on key metrics used in the annual report and our assessment of the group and parent
company operating in a low margin industry, revenue is a primary measure used by the shareholders in assessing the performance of
the group. It is also a generally accepted benchmark for determining materiality and was the basis adopted in previous years. However,
having taken into account the advent of COVID in 2020 and the disproportionate impact it had on the profit and loss account compared
to gross assets, we decided it would be more appropriate to adopt a hybrid approach this year. We therefore determined materiality
using a composite of 1% of turnover and 1% of gross assets.
AN OVERVIEW OF THE SCOPE OF OUR AUDIT
We planned and performed our audit by obtaining an understanding of the group and its environment, including the accounting
processes and controls, and the industry in which it operates. The group comprises the following active companies:
1 UK trading parent company (Pittards plc);
1 UK wholly owned trading subsidiary company (Pittard Garnar Services Limited); and
3 wholly owned Ethiopian based trading subsidiaries (Pittards Products Manufacturing Share Company, Ethiopia Tannery
Share Company and Pittards Global Sourcing Private Limited Company)
Of the group’s five trading components four are considered significant reporting units and 1 component (Pittards Global Sourcing
Private Limited Company) is considered a non-significant reporting unit.
The 2 UK - based trading companies (Pittards plc and Pittard Garnar Services Limited) were subject to full scope audits performed by
the group audit team. The two significant Ethiopian subsidiaries (Pittards Products Manufacturing Share Company and Ethiopia
Tannery Share Company) were audited by HST Consulting as a component auditor operating under our instruction and review.
Those components subject to audit cover 100% of the group’s revenue and 100% of the group’s consolidated profit after tax. Audit
work at the component level is executed at levels of materiality appropriate for such components.
OTHER INFORMATION
The other information comprises the information included in the annual report other than the financial statements and our auditor’s
report thereon. The directors are responsible for the other information contained within the annual report. Our opinion on the financial
statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express
any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the
other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit, or
otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are
required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work
we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of the audit:
the information given in the strategic report and the directors’ report for the financial year for which the financial statements
are prepared is consistent with the financial statements; and
the strategic report and the directors’ report have been prepared in accordance with applicable legal requirements
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the company and its environment obtained in the course of the audit, we have not
identified material misstatements in the strategic report or the directors’ report.
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you
if, in our opinion:
adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been
received from branches not visited by us; or
the parent company financial statements are not in agreement with the accounting records and returns; or
certain disclosures of directors’ remuneration specified by law are not made; or
we have not received all the information and explanations we require for our audit;
Pittards PLC 2020 Annual Report Page 45 of 84 www.pittards.com
Responsibilities of directors
As explained more fully in the directors’ responsibilities statement set out on pages 39 and 40, the directors are responsible for the
preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the
directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether
due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the group’s and the parent company’s ability to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of
accounting unless the directors either intend to liquidate the group or the parent company or to cease operations, or have no realistic
alternative but to do so.
Auditor’s Responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high
level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate,
they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
Irregularities, including fraud, are instances of non-compliance with laws and regulations.
We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities,
including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below:
We identified areas of laws and regulations that could reasonably be expected to have a material effect on the financial statements
from our general commercial experience, through discussion with the directors and other management (as required by auditing
standards).
We discussed the policies and procedures regarding compliance with laws and regulations with the directors and other management.
The potential effect of these laws and regulations on the financial statements varies considerably.
Firstly, there are laws and regulations that directly affect the financial statements, including financial reporting legislation (including
related companies legislation), distributable profits legislation, taxation legislation and Coronavirus Job Retention Scheme (CJRS)
legislation. We assessed the extent of compliance with these laws and regulations as part of our procedures on the related financial
statement items. Our CJRS work included a review of managements calculations and supporting paperwork
Secondly, the group is subject to other laws and regulations where the consequences of non-compliance could have a material effect
on amounts or disclosures in the financial statements, for instance through the imposition of fines or litigation. We identified the
following areas as those most likely to have such an effect:
Health and Safety legislation and standards
Reporting of Injuries, Diseases and Dangerous Occurrences Regulations
The Control of Substances Hazardous to Health Regulations
We also evaluated the risk of misstatement of profit/loss, including management bias in accounting estimates.as part of our audit which
included substantive procedures around stock and debtor provisioning, property valuations and furlough claims.
Through our procedures, which included inspection of regulatory and legal correspondence, we did not become aware of any material
non-compliance at the balance sheet date.
Because of the inherent limitations of an audit, there is a risk that we will not detect all irregularities, including those leading to a material
misstatement in the financial statement. This risk increases the further removed non-compliance with laws and regulations is from the
events and transactions reflected in the financial statements as we are less likely to become aware of instances of non-compliance.
The risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud
may involve deliberate concealment, collusion, omission or misrepresentation.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s
website at www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
Pittards PLC 2020 Annual Report Page 46 of 84 www.pittards.com
USE OF OUR REPORT
This report is made solely to the company’s shareholders, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act
2006. Our audit work has been undertaken so that we might state to the company’s shareholders those matters we are required to
state to them in an audit report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the company and the company’s shareholders as a body for our audit work, for this report, or for
the opinions we have formed.
Glenn Nicol
(Senior Statutory Auditor)
PKF Francis Clark
Statutory Auditor
Centenary House
Peninsula Park
Rydon Lane
Exeter
EX2 7XE
23th March 2021
Pittards PLC 2020 Annual Report Page 47 of 84 www.pittards.com
Consolidated Income Statement
For the year ended 31 December 2020
Continuing operations
Revenue
Cost of sales
Gross profit
Distribution costs
Currency (losses)/gains expensed
Administrative expenses
(Loss)/profit before operations and finance costs
Finance costs
(Loss)/profit before taxation
Taxation
(Loss)/profit after taxation
Earnings per share
Basic
Diluted
Note
3
8
4
9
10
10
2020
£'000
2019
£'000
15,233
22,301
(12,059)
(15,404)
3,174
6,897
(1,632)
(2,264)
(48)
250
(3,268)
(3,706)
(1,774)
1,177
(508)
(2,282)
(144)
(2,426)
(598)
579
(173)
406
(17.67)p
(17.67)p
2.93p
2.90p
Pittards PLC 2020 Annual Report Page 48 of 84 www.pittards.com
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2020
(Loss)/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 - net of deferred tax
Retranslation of land and buildings – unrealised exchange (loss)
Items that may subsequently be reclassified to profit or loss
Unrealised exchange (loss) on translation of overseas subsidiaries
Fair value gain on foreign currency cash flow hedges
Other comprehensive (loss)
Total comprehensive (loss) for the year
11
2020
£'000
2019
£'000
(2,426)
406
508
(575)
(67)
(860)
6
(854)
139
(406)
(267)
(931)
339
(592)
(921)
(859)
(3,347)
(453)
Pittards PLC 2020 Annual Report Page 49 of 84 www.pittards.com
Balance sheets
As at 31 December 2020
Assets
Non-current assets
Property, plant, and equipment
Intangible assets
Investment in Subsidiary undertakings
Loans receivable
Deferred income tax asset
Total non-current assets
Current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Total current assets
Total assets
Liabilities
Current liabilities
Trade and other payables
Interest bearing loans, borrowings, and overdrafts
Total current liabilities
Non-current liabilities
Deferred income tax liability
Interest bearing loans, borrowings, and overdrafts
Total non-current liabilities
Total liabilities
Net assets
Equity
Share capital
Share premium
Capital reserve
Own shares reserve
Share based payment reserve
Cash flow hedge reserve
Translation reserve
Revaluation reserve
Retained earnings
Total equity
Group
2020
£'000
2019
£'000
Note
Company
2020
£'000
2019
£'000
9,599
10,240
5,530
5,507
11
12
27
25
19
75
-
-
114
-
-
100
100
9,774
10,454
13
14
15,021
17,341
2,848
3,462
85
180
17,954
20,983
75
378
1,765
100
7,848
114
378
1,872
100
7,971
10,916
11,600
5,995
6,288
8
11
16,919
17,899
27,728
31,437
24,767
25,870
15
16
19
17
20
21
21
21
21
21
21
21
21
2,863
6,909
9,772
3,430
9,381
12,811
804
3,294
4,098
730
376
1,106
2,730
4,881
7,611
-
2,391
2,391
2,626
6,871
9,497
-
18
18
13,870
13,917
10,002
9,515
13,858
17,520
14,765
16,355
6,944
2,984
6,475
(850)
47
293
6,944
2,984
6,475
(495)
295
287
(4,922)
1,099
(4,062)
1,166
1,788
3,926
13,858
17,520
6,944
2,984
-
6,944
2,984
-
(850)
(495)
47
293
-
179
295
287
-
-
5,168
6,340
14,765
16,355
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 made a loss of £1.5m (2019: loss of £0.3m).
The financial statements on pages 48 to 77 were approved and authorised for issue by the Board of directors on 23 March 2021 and signed on its behalf by:
Richard Briere - Chief Financial Officer
Company Number - 0102384
Pittards PLC 2020 Annual Report Page 50 of 84 www.pittards.com
-
-
-
-
Consolidated Statement of Changes in Equity
For the year ended 31 December 2020
Share
capital
Share
premium
Capital
reserve
Own
share
reserve
Share
based
payment
reserve
Cash
flow
hedge
reserve
Translation
reserve
Revaluation
reserve
Retained
Earnings
Note
£'000
£'000
£'000
£'000
£'000
£'000
£'000
£'000
£'000
Total
Equity
£'000
As at 1 January 2019
6,944
2,984
6,475
(495)
203
(52)
(3,131)
1,433
3,520
17,881
Comprehensive income/(loss) for the
year:
Profit for the year after taxation
Other comprehensive income/(loss):
Gain on the revaluation of buildings
Unrealised exchange gain/(loss) on
translation of foreign subsidiaries
Fair value losses on foreign currency
cash flow hedges
Total other comprehensive
income/(loss)
Total comprehensive income/(loss) for the
year
Share-based payment expense
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
92
-
-
-
339
339
339
-
-
406
406
139
(931)
(406)
-
-
(931)
(267)
-
-
-
-
139
(1,337)
339
(859)
(931)
(267)
406
(453)
-
-
-
92
As at 1 January 2020
6,944
2,984
6,475
(495)
295
287
(4,062)
1,166
3,926
17,520
Comprehensive income/(loss) for
the year:
Loss for the year after taxation
Other comprehensive income/(loss):
Gain on the revaluation of buildings
Unrealised exchange gain/(loss) on
translation of foreign subsidiaries
Fair value losses on foreign currency
cash flow hedges
Total other comprehensive
income/(loss)
Total comprehensive income/(loss) for
the year
Share-based payment expense
Purchase of own ordinary shares
20
LTIP lapsed transferred to reserves
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(355)
-
-
-
-
-
-
40
-
-
(288)
-
-
-
6
6
6
-
-
-
-
(2,426)
(2,426)
508
(860)
(575)
-
-
(860)
(67)
-
-
-
-
508
(1,435)
6
(921)
(860)
(67)
(2,426)
(3,347)
-
-
-
-
-
-
-
-
288
40
(355)
-
As at 31 December 2020
6,944
2,984
6,475
(850)
47
293
(4,922)
1,099
1,788
13,858
Pittards PLC 2020 Annual Report Page 51 of 84 www.pittards.com
Company Statement of Changes in Equity
For the year ended 31 December 2020
Share
capital
Share
premium
Capital
reserve
Own
share
reserve
Share
based
payment
reserve
Cash
flow
hedge
reserve
Translation
reserve
Revaluation
reserve
Retained
Earnings
Total
Equity
Note
£'000
£'000
£'000
£'000
£'000
£'000
£'000
£'000
£'000
£'000
As at 1 January 2019
6,944
2,984
-
(495)
203
(52)
Comprehensive income/(loss) for
the year:
Loss for the year after taxation
Other comprehensive income/(loss):
Fair value losses on foreign
currency cash flow hedges
Total other comprehensive
income/(loss)
Total comprehensive
income/(loss) for the year
Share-based payment expense
-
-
-
-
-
-
-
-
-
-
As at 1 January 2020
6,944
2,984
Comprehensive income/(loss) for
the year:
Loss for the year after taxation
Other comprehensive income:
Gain on the revaluation of buildings
Fair value losses on foreign
currency cash flow hedges
Total other comprehensive
income
Total comprehensive (loss)
/income for the year
Share-based payment expense
Purchase of own ordinary shares
20
LTIP lapsed transferred to reserves
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
As at 31 December 2020
6,944
2,984
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(495)
-
-
-
-
-
-
(355)
-
-
-
-
92
295
-
-
-
-
-
40
-
-
(288)
-
339
339
339
-
287
-
-
6
6
6
-
-
-
(850)
47
293
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
6,651
16,235
-
-
-
-
-
-
(311)
(311)
-
-
(311)
-
339
339
28
92
6,340
16,355
-
(1,460)
(1,460)
179
-
179
-
-
-
179
6
185
179
(1,460)
(1,275)
-
-
-
-
-
288
40
(355)
-
179
5,168
14,765
Pittards PLC 2020 Annual Report Page 52 of 84 www.pittards.com
Statement of cashflows
For the year ended 31 December 2020
Cash flows from operating activities
Cash generated from operations
Tax paid
Interest paid
Net cash generated/(used in) from operating activities
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
New finance lease obligations
Repayment of obligations under finance leases
Purchase of own ordinary shares
Net cash generated/(used) in financing activities
Increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Exchange gains/(losses) on cash and cash equivalents
Cash and cash equivalents at end of year
Group
2020
£'000
2019
£'000
Note
22
549
16
(489)
(492)
(466)
(566)
76
(1,524)
(252)
(12)
(264)
(635)
(30)
(665)
3,334
804
(1,951)
(1,061)
-
(71)
(355)
957
769
200
(171)
-
(228)
(2,417)
(6,131)
(3,695)
285
(19)
(5,077)
(6,131)
20
Company
2020
£'000
2019
£'000
218
(1,001)
-
-
(159)
(218)
59
(1,219)
(191)
(12)
(203)
2,750
(1,209)
-
(71)
(355)
1,115
(242)
(30)
(272)
-
(210)
114
(147)
-
(243)
971
(1,734)
(5,563)
(3,829)
6
-
(4,586)
(5,563)
Pittards PLC 2020 Annual Report Page 53 of 84 www.pittards.com
1. Statement of accounting policies
General information
Pittards plc is a public limited company incorporated and domiciled under the Companies Act 2006 in England, United Kingdom and is quoted on
the Alternative Investment Market (AIM). The address of the registered office, which is also the principal place of business, is given on page 25. The
nature of the Group’s operations and its principal activities are set out on page 5.
(a) Basis of preparation
The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) including
International Accounting Standards (“IAS”) and IFRS Interpretations Committee (“IFRS IC”) interpretations and with those parts of the Companies
Act 2006 applicable to companies reporting under accounting standards as adopted for use in the EU. The consolidated financial statements for the
years ended 31 December 2020 and 31 December 2019 have been prepared under the historical cost convention, as modified by the revaluation of
land and buildings.
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 Company only disclosures have been prepared in accordance with the above.
The accounting policies outlined below have been consistently applied across all companies within the Group.
(b) Going concern
The Group and Company meet their day to day working capital requirements through their bank facilities. The banking relationship with Lloyds Bank
remains strong. Since the year end our expiring banking facilities have been subject to discussions on their revision and renewal; agreement has
been reached and formalised, renewing facilities until March 2022. In light of the ongoing COVID-19 challenges the Board has sensitised its forecasts
and projections for the next 12 months to take account of possible changes in trading performance in order to determine when and to what extent,
additional measures may be necessary. Sensitivity analysis has been performed to reflect a further reduction in sales from 2020 levels of 20% with
no associated cost savings.
The sensitivity analysis shows that there is adequate cash headroom in bank facilities for the foreseeable future and at least the next 12 months,
and in light of a satisfactory start to the year, there are no material doubts on going concern irrespective of the length of the restrictions and pandemic.
The Board acknowledges, should it be necessary, we will revaluate this if conditions change.
Based on the above, and information available to the Board at the date of approval, the Group and Company continue to adopt the going concern
basis in preparing these financial statements.
(c) New and amended standards
There are no new or amended standards or interpretations that impact on the Group’s financial statements this year.
At the date of authorization of these financial statements, certain new standards, amendments, and interpretations to existing standards have been
published by the IASB but are not yet effective and have not been adopted early by the Group. Management anticipates that all the relevant
standards, amendments and interpretations will be adopted in the Group’s accounting policies for the first period beginning after their effective dates.
No new standards in issue but not yet effective are expected to have a material impact on 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.
Pittards PLC 2020 Annual Report Page 54 of 84 www.pittards.com
1. Statement of accounting policies (continued)
(e) Revenue recognition
Revenue is measured at fair value of the consideration received or receivable and represents amounts receivable for goods and services provided
in the normal course of business, net of discounts, value added tax and other sales related taxes. Revenue is also shown net of prompt payment
discount included within the customer terms. Revenue is recognised to the extent that the performance obligations have been met and the revenue
can be reliably measured.
- Sales of goods
Revenue from the sale of skins, hides and retail leather goods is recognised when the performance obligations have been met and the amount of
revenue can be measured reliably, usually on despatch.
- Sales of services
Where services are provided, revenue is recognised on an accrual basis in the accounting period in which the service is rendered.
(f) Finance income
Finance income comprises interest receivable in respect of overdue debtors.
(g) Finance expenses
Finance expenses comprises interest payable on interest-bearing loans and borrowings. Finance expenses are recognised using the effective
interest method.
(h) Foreign currency translation
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 pounds sterling which is the Company’s
functional and the Group’s presentational 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, except where foreign currency has been hedged. 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 on the face of the income statement.
On consolidation, the assets and liabilities of the Group’s overseas operations are translated into the Group’s presentational 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 (pages 51 and 53).
(i) 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 (up to 7 years). Costs associated with the development of the
Group’s website are also recognised as intangible assets and carried at cost less accumulated amortisation.
Expenditure on research activities is recognised as an expense in the period in which it is incurred.
(j) Property, plant, and equipment
Property, plant, and equipment (other than land and 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 (excluding land) to write off the cost or valuation of assets on a straight-line basis over their
estimated useful lives, as follows:
Land and buildings
Building improvements
Plant, machinery, and motor vehicles
2%
7-20%
6-33%
Pittards PLC 2020 Annual Report Page 55 of 84 www.pittards.com
1. Statement of accounting policies (continued)
The Group revaluation policy is to perform a formal revaluation every 5 years, with director assessment in the intervening period, except where a
material movement in property valuations is expected. In the UK, the Board instructed an independent RICS Registered Valuer, who concluded that
the valuation for the Yeovil site was £3.86m (a rise of £0.18m on net book value). Accordingly, the gain was recognised through the statement of
comprehensive income, and assets stated at fair value as at 31 December 2020. In order to arrive at the Fair value, the valuer applied a rate of
£30.00psf overall, reflecting a value of £3,860,000, looking at comparable local property sales.
Buildings in Ethiopia were revalued at December 2020 and December 2019 based on the fair value (their depreciated replacement cost) as
determined by an independent licensed loss assessor qualified to value buildings in Ethiopia. The increase in value has also been reflected via a
revaluation of land and buildings in other comprehensive income. No depreciation has been charged on the building being constructed by Pittards
Global Sourcing Limited in Ethiopia as it remains 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.
(k) 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.
Inventory held at Ethiopia Tannery Share Company 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 the Group’s 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.
(l) Leases
The Group enters into lease agreements for the use of buildings, plant, and office equipment.
The Group assesses whether a contract is or contains a lease, at inception of the contract and then accounts for the lease by recognizing a right of
use asset and a lease liability.
The lease liability is initially measured at the present value of fixed payments under the lease. IFRS 16 requires payments to be discounted using
the interest rate implicit in the lease. Where that rate cannot be readily determined, the Group uses its incremental borrowing rate, being the rate
that the Group would have to pay to borrow the funds necessary to obtain an asset of similar value to the right of use asset in a similar economic
environment with similar terms, security, and conditions.
The initial value of the right of use asset is the present value of the fixed payments under the lease and any initial direct costs. Depreciation of the
right of use asset is recognised in the income statement on a straight-line basis over the term of the lease. An asset’s carrying amount is written
down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount.
The lease liability is subsequently measured by increasing the carrying amount to reflect interest on the lease liability (using the effective interest
method) and by reducing the carrying amount to reflect the lease payments made.
The lease liability is presented within Interest bearing loans, borrowings, and overdrafts in the consolidated Balance Sheet.
The right-of-use assets are presented within Property, plant and equipment in the consolidated Balance sheet and separately disclosed in note
11.
The Group has taken advantage of the exemptions available under IFRS 16 not to apply the recognition and requirements of the standard to leases
with a term of 12 months or less, or leases for which the underlying asset value is low. For these leases, a charge is recognized in the income
statement based on straight-line recognition of the lease payments payable on each lease.
(m) Government grants
Government grants are not recognised until there is a reasonable assurance that the Group will comply with the conditions attaching to them and
that the grants will be received.
Government grants are recognised in profit or loss on a systematic basis over the periods in which the Group recognises as expenses the related
costs for which the grants are intended to compensate. Government grants that are receivable as compensation for expenses or losses already
incurred or for the purpose of giving immediate financial support to the Group with no future related costs, are recognised in profit or loss in the
period in which they become receivable.
Pittards PLC 2020 Annual Report Page 56 of 84 www.pittards.com
1. Statement of accounting policies (continued)
The benefit of a commercial loan which has initial interest settled by the Government, is treated as commercial and the interest saved, disclosed
separately.
(n) 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.
(o) Retirement benefit costs
An Auto Enrolment scheme was introduced in May 2014 under which matching contributions are made by the employer in line with scheme rules.
Pension contributions are made for employees in Ethiopia under the Ethiopian Social Security Agency scheme.
(p) Financial instruments
Financial assets and financial liabilities are recognised in the Group’s balance sheet when the Group becomes a party to the contractual provisions
of the instrument.
-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. Following the adoption of IFRS 9 in 2018, additional provisions are held on an expected credit
loss basis against debt that is more than 90 days old. 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. Loans and
other forms of longer-term debt instruments repayable in more than 90 days are not included in cash where there is no immediate demand to repay.
This includes term loans and pre-shipment loans.
- 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.
- Derivative financial instruments and hedging activities
The Group uses derivative financial instruments to reduce exposure to foreign currency risk, by hedging against highly probable forecast cash flows.
The instruments are initially recognised at fair value on the date on which a derivative contract is entered into and then subsequently remeasured at
fair value. The Group recognises the effective part of any gain or loss on the derivative financial instrument in equity within the cash flow hedge
reserve. Any ineffective portion is recognised immediately in the income statement, if the underlying relationship cannot be rebalanced. The amounts
accumulated
Pittards PLC 2020 Annual Report Page 57 of 84 www.pittards.com
1. Statement of accounting policies (continued)
in equity are reclassified to the income statement when the hedged item is recognised, or the hedging relationship ends.
- Holiday pay accrual
The Group accrues for all underutilised holiday at the end of the financial year where a liability to employees exists. In prior years, there was no
accrual for holiday pay, as this was not considered material. For the 2020 year an accrual was introduced in the light of a material underutilisation
of holidays by staff during the pandemic. This amounted to £0.1m and is included in staff costs for the year.
(q) Share-based payments
Equity settled share-based payments to employees are measured at the fair value of the equity instruments at the grant date, using an appropriate
valuation model. Details regarding the determination of the fair value of equity settled share-based transactions, including all key assumptions, are
set out in note 7.
The fair value determined is expensed on a straight-line basis over the vesting period, based on the Group’s estimate of the shares that will eventually
vest, with a corresponding increase in equity. For share schemes held with non-market performance and service conditions, the Group assesses its
estimate of the number of equity instruments expected to vest at the end of each reporting period. Any revision to the original estimate is recognised
in the Income Statement, with a corresponding adjustment to equity.
(r) Employee share ownership trust (ESOT)
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 from a previous bonus scheme which
is no longer in existence.
(s) 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.
(t) 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 on an ongoing basis. Variations in production levels will impact the value of
direct costs not absorbed into inventory. Estimates are revised periodically through the year to ensure that absorption of labour and overheads is
materially correct as at the end of the year.
The Group reviews its 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 as well as strategic assessments of potential new markets. Market performance is
reviewed periodically throughout the year and the impact on the provision assessed.
(b) Property valuations
The Group policy is to perform a formal revaluation every 5 years, with a director assessment in the intervening period. An independent valuation
was carried out during November 2020, on the UK’s Yeovil site which is our principal place of production and head office, which supports the current
value. The Ethiopian building assets were valued on 31 December 2020.
Pittards PLC 2020 Annual Report Page 58 of 84 www.pittards.com
3. Business segments information
2020
Revenue from customers
Inter-segmental trading
Gross profit (a)
(Loss) before tax
Assets
Total non-current assets included in
assets
Liabilities
Net assets
UK Ethiopia
Consolidation
Division Division
£'000
£'000
adj
£'000
Total
Total
£'000
13,622
4,062
(171)
(2,280)
13,451
1,782
3,023
413
(955)
(1,327)
31,506
9,219
7,748
3,686
(14,894)
(6,703)
16,612
2,516
(2,451)
15,233
2,451
-
-
15,233
(262)
3,174
-
(2,282)
(12,997)
27,728
(103)
11,331
7,727
(13,870)
(5,270)
13,858
All revenue from contracts with customers is recognised at the point in time that the invoice is raised. Rental income is recognised over the period in which
the service is performed.
2019
UK
Ethiopia
Consolidation
Revenue from customers
Income from other sources
Inter-segmental trading
Gross profit (a)
Profit before tax
Assets
Total non-current assets included in
assets
Liabilities
Division
Division
£'000
£'000
20,689
10,080
46
-
(885)
(7,628)
19,850
2,452
4,731
2,733
344
235
30,524
12,533
7,971
2,545
(12,798)
(7,766)
Total
Total
£'000
30,769
46
(8,513)
22,302
adj
£'000
-
-
-
(567)
6,897
-
579
(11,620)
31,437
(62)
10,454
6,647
(13,917)
Pittards PLC 2020 Annual Report Page 59 of 84 www.pittards.com
3. Business segments information (continued)
Geographical analysis of revenue (based on the customer's country of domicile)
2020
UK
Europe
North America
Far East and Rest of World
2019
UK
Europe
North America
Far East and Rest of World
4. Profit before taxation
Depreciation of property, plant, and equipment (note 11)
Amortisation of intangible assets (note 12)
Low value asset lease expense
Staff costs (note 5)
Employee benefits expense (life and health insurances)
Research and development expenditure
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 financial statements (PKF Francis Clark)
Fees payable to the Company's auditors in respect of the audit of subsidiaries (HST) in Ethiopia
Fees payable to the Company’s auditors in respect of assistance review of unaudited interims
Total fees payable to the Company's auditors
UK
Ethiopia
Division
Division
£'000
1,995
1,172
97
10,187
13,451
UK
Division
£'000
1,842
1,879
165
15,964
19,850
£'000
141
458
34
1,149
1,782
Ethiopia
Division
£'000
295
-
989
1,167
2,451
Total
Total
£'000
2,136
1,630
131
11,336
15,233
Total
Total
£'000
2,137
1,879
1,154
17,131
22,301
Group
2020
£'000
616
51
16
2019
£'000
780
63
24
6,390
7,798
72
63
137
57
Group
2020
£'000
2019
£'000
50
3
4
57
49
3
-
52
Pittards PLC 2020 Annual Report Page 60 of 84 www.pittards.com
5. Staff costs
The average number of employees of the Group and Company (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
Compensation for loss of office
Group
2020
No.
2019
No.
848
243
5
987
232
5
1,096
1,224
Company
2020
No.
2019
No.
105
58
5
168
134
33
5
172
5,656
6,914
4,607
5,449
455
279
-
513
294
77
455
157
-
513
153
-
6,390
7,798
5,219
6,115
During the year, the Company took advantage of the UK Government's COVID-19 furlough scheme. The amount of grant received was £0.652m which
has been offset against the Wages and salaries costs shown above.
6. Directors' remuneration
Executive
RH Hankey
R Briere
Non-Executive
LM Cretton
GP Davis
S Yapp
Salary &
fees
£'000
Profit
related
pay
£'000
Benefits
£'000
Pension
contributions
£'000
2020
£'000
2019
£'000
196
119
-
36
36
65
452
-
-
-
-
-
-
2
-
-
-
-
2
10
6
-
-
-
16
208
125
36
36
65
470
220
99
39
39
83
480
Key management compensation
Key management represents the directors of the Internal Executive Board and does not include Executive Directors outlined above.
The compensation paid or payable to key management for employee services is shown below:
Salaries, bonus, and other short-term
benefits
Pension contributions
2020
£'000
2019
£'000
210
11
221
274
28
302
Nil options (2019: 5,487), remain outstanding for key management personnel in relation to the 2017 Save As You Earn scheme which ceased 30 June
2020. The company no longer operates a SAYE scheme.
Pittards PLC 2020 Annual Report Page 61 of 84 www.pittards.com
7. Share options
2017 Save As You Earn Scheme (SAYE)
On 16 May 2017, a Save As You Earn (SAYE) share option scheme was granted to employees. The options under the SAYE scheme lapsed on 1 July
2020. No new SAYE scheme has been opened due to the uncertainty surrounding COVID-19, this will be reassessed later in the year.
Details of the share-based payment cost recognised during the year are:
At 1 January
Share-based payment expense
At 31 December
Assumptions
Grant date
Share price at grant date
Exercise price
Vesting period
Expected volatility
Risk-free rate
Dividend yield
Details of the SAYE share options extant during the year are:
Outstanding at the beginning of the year
Lapsed during the year
Outstanding at the end of the year
2016 Long term Incentive Plan (LTIP)
2020
No of
options
131,249
(131,249)
-
Exercise
price
65.6
65.6
65.6
2020
£'000
45
2
47
2019
£'000
30
15
45
16/5/17
86
65.6
3.0 years
0.31
0.2%
0.0%
16/5/17
86
65.6
3.0 years
0.31
0.2%
0.0%
2019
No of
options
Exercise
price
154,571
(23,322)
131,249
65.6
65.6
65.6
On 26 September 2016, a Long Term Incentive Plan (LTIP) was granted to certain members of the Board. During 2019 a new Growth share scheme was put in place
to replace the existing scheme rules, preserving the same basis of the scheme that was established on 26th September 2016. The LTIP growth share scheme was
modified in December 2020, due to the impact of COVID-19, when the excise period was extended to April 2023, formerly August 2022, and the excise price reduced
to 70p, capping awards at not more than 10% of issued capital for achieving a share price above 100p. The annual profit and loss expense for this LTIP is £20k.
Further details are shown below.
Details of the share-based payment costs recognised during the year are:-
At 1 January
Share-based payment expense
LTIP lapsed transferred to reserves
At 31 December
Assumptions
Grant date
Share price at grant date
Exercise price
Vesting period
Expected volatility
Risk-free rate
Dividend yield
£'000
2020
250
40
(290)
-
£'000
2019
173
77
0
250
14/12/2020
26/09/2016
47.5
70.00
94.5
120.0
2.5 years
5.5 years
0.454
0.1%
0.0%
0.395
0.1%
0.0%
Pittards PLC 2020 Annual Report Page 62 of 84 www.pittards.com
8. Finance costs
Interest on bank loans and overdrafts
Interest on obligations under finance lease and hire purchase contracts
Other finance costs
2020
£'000
2019
£'000
500
8
-
508
566
17
15
598
During the year, the Company took out a loan under the Coronavirus Business Interruption Loan Scheme (CBILS). Interest for the first year of the loan is
paid direct to the bank by the Government. The amount of interest due on the loan for the year ended 31 December 2020 but not borne by the Company
was £18k.
9. Taxation
(a) Analysis of the credit)/charge in the year
The (credit)/charge based on the (loss)/profit for the year comprises:
Corporation tax on (loss)/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
Total deferred tax
Income tax (credit)/charge
2020
£'000
2019
£'000
-
79
65
144
200
41
144
385
-
-
(212)
(212)
144
173
The Company’s (losses)/profits for the year are taxed at the standard rate of corporation tax in the UK of 19% (2019: 19%) and Ethiopia of 30% (2019: 30%). The
tax assessed in each year differs from the standard rate of corporation tax for the relevant year. The Group expects a more normalised split of profits between the
UK and Ethiopia in 2021 and retains taxable losses in the UK of £13.4m to utilise in future periods. The differences are explained below:
Pittards PLC 2020 Annual Report Page 63 of 84 www.pittards.com
9. Taxation (continued)
(b) Factors affecting the tax charge for the year
(Loss)/profit on ordinary activities before tax
Tax calculated at domestic tax rates applicable to profits in the respective countries
Taxable losses not recognised
Deferred tax impact on property
valuation
Foreign tax related to prior years1
Expenses not deductible for tax
purposes2
Allowable tax deductions3
Profits/(losses) generated
Deferred tax impact on property
valuation
Foreign tax paid
Double tax relief
Utilisation of losses
Total tax charge for the year ( Note 9(a) )
2020
£'000
2019
£'000
(2,282)
(579)
575
64
102
(81)
579
137
-
-
159
283
(183)
-
(107)
(10)
88
(15)
-
45
(19)
-
144
(142)
173
1 Foreign tax in prior years relates to a historic tax charge imposed on ETSC.
2 Expenses not deductible for tax purposes largely relate to depreciation, for which capital allowances are received.
3 Allowable tax deductions relate to capital allowances received.
(c) Factors that may affect future tax charges
The Finance Act 2016 which was enacted on 15 September 2016 included legislation to reduce the main rate of corporation tax to 17% from 1 April 2020.
This change has since been cancelled and the main rate of corporation tax remains at 19%. All UK deferred tax assets have been measured using the
rate in place at the time they expect to be realised or settled.
10. Earnings per share
Basic earnings per share is calculated by dividing the profit attributable to equity holders of the company by the weighted average number of ordinary
shares in issue during the year excluding the shares owned by the Pittards employee share ownership trust, less also the shares not carrying voting or
dividend rights, held in treasury under own share reserve.
Earnings per share
2020
2019
Weighted average number of ordinary shares in issue
Weighted average number of ordinary shares in issue
Basic (loss)/earnings per ordinary 50p share
Diluted (loss)/earnings per ordinary 50p share
Basic
Diluted
000s
000s
pence
pence
13,733
13,789
(17.67)p
(17.67)p
13,870
14,001
2.93p
2.90p
Reconciliation of shares used as denominator for earnings per share
Shares in issue all year
Less weighted average own shares held in treasury for 2 of the 12 months of
2020
Average number of shares used to calculate earnings per share
13,870
13,870
(137)
-
13,733
13,870
Pittards PLC 2020 Annual Report Page 64 of 84 www.pittards.com
11. Property, plant, and equipment
Group
Plant
Assets
Company
Plant
Assets
Land
and
Buildings
Machinery
&
motor
vehicles
under
Land
and
construction
Total
Buildings
Machinery
&
motor
vehicles
under
construction
Total
£'000
£'000
£'000
£'000
£'000
£'000
£'000
£'000
Cost or valuation
At 1 January 2019
Exchange differences
Additions
Disposals
Transfers
Revaluation
At 1 January 2020
Exchange differences
Additions
Transfers
Disposals
Revaluation
3,903
13,045
126
17,074
6,924
(436)
198
-
-
62
18,351
(742)
437
(8)
126
-
685
25,960
(80)
(1,258)
-
-
(126)
-
635
(8)
-
62
-
112
-
-
-
-
130
-
126
-
6,748
18,164
479
25,391
4,015
13,301
(585)
-
(14)
(152)
500
(942)
249
14
(3)
-
(57)
(1,584)
3
-
-
44
252
-
(155)
544
-
-
(14)
(152)
11
-
191
14
-
-
At 31 December 2020
6,497
17,482
469
24,448
3,860
13,506
Accumulated depreciation
At 1 January 2019
Exchange differences
Charge for the year
Disposals
Revaluation
At 1 January 2020
Exchange differences
Charge for the year
Disposals
Transfers
Revaluation
168
14,786
-
198
-
(77)
289
(2)
97
(153)
(9)
(175)
(498)
582
(8)
-
14,862
(588)
519
-
9
-
At 31 December 2020
47
14,802
-
-
-
-
-
-
-
-
-
-
-
-
14,954
(498)
780
(8)
(77)
15,151
(590)
616
(153)
-
(175)
14,849
167
11,285
-
93
-
-
-
264
-
-
260
11,549
-
79
(146)
(7)
(168)
-
262
-
7
-
18
11,818
Net book value
At 31 December 2019
At 31 December 2020
6,459
6,450
3,302
2,680
479
10,240
469
9,599
3,755
3,842
1,752
1,688
Pittards PLC 2020 Annual Report Page 65 of 84 www.pittards.com
-
-
-
(126)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
242
-
-
-
17,316
-
191
-
(152)
11
17,366
11,452
-
357
-
-
11,809
-
341
(146)
-
(168)
11,836
5,507
5,530
11. Property, plant, and equipment (continued)
Depreciation of £0.52m (2019: £0.68m) has been charged to cost of sales, £0.05m (2019: £0.07m) to administrative expenses and £0.05m (2019: £0.03m) to
distribution expenses in the Income Statement. Land and buildings include an amount of £0.1m (2019: £0.1m) 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 in Ethiopia
were revalued to fair value as at 31 December 2020. Fair value was determined by Getachew Tesfaye, licensed loss assessor, who is an independent valuer. If
buildings across the Group were stated on historic cost basis the net book value would be £4.1m (2019: £4.1m). A new independent RICS valuation, prepared by
GTH, for the Yeovil site was completed November 2020, which concluded the book value of the Yeovil site was below fair market value by £0.18m. This upward
revelation has been recognised within Other comprehensive income. The Yeovil site is subject to a mortgage with first charge over title in favour of Lloyds bank
PLC.
Included in the Group's and Company's plant, machinery and motor vehicles are right of use assets as
follows:
Group
Company
Right of use assets plant and equipment as at 1 January
Depreciation charged
Asset no longer subject to lease
Disposal of right of use assets
Additions to right of use assets
Right of use assets as at 31 December
2020
£'000
578
(121)
(340)
-
-
117
2019
£'000
389
(61)
-
250
578
2020
£'000
520
(89)
(340)
-
-
91
2019
£'000
331
(51)
-
240
520
Leases for certain right of use assets expired during the year with the group retaining ownership of the assets. Leases for certain right of
use assets expired during the year within the group and company. The group and company retaining retained ownership of the assets and
they are included still in plant, machinery and motor vehicles.
12. Intangibles
Cost or valuation
At 1 January 2019
Additions
At 1 January 2020
Additions
At 31 December 2020
Accumulated amortisation
At 1 January 2019
Charge for the year
At 1 January 2020
Charge for the year
At 31 December 2020
Net book value
At 31 December 2019
At 31 December 2020
Group
Computer
Company
Computer
Website
Software
Total
£'000
£'000
£'000
Website
Software
£'000
£'000
Total
£'000
111
30
141
12
153
47
16
63
16
79
78
74
1,781
1,892
-
30
1,781
1,922
-
12
1,781
1,934
1,698
1,745
47
63
1,745
1,808
35
51
1,780
1,859
36
1
114
75
111
30
141
11
152
47
16
63
16
79
78
73
1,774
1,885
-
30
1,774
1,915
-
11
1,774
1,926
1,691
1,738
47
63
1,738
1,801
34
50
1,772
1,851
36
2
114
75
Pittards PLC 2020 Annual Report Page 66 of 84 www.pittards.com
13. Inventories
Raw Materials
Work in progress
Finished Goods
The movement in provision was as follows:
As at 1 January 2020 (restated)
(Utilisation)
Charge
Group
2020
2019
£'000
£'000
5,342
6,326
3,803
4,769
5,876
6,246
Company
2020
£'000
4,234
1,489
5,193
2019
£'000
4,681
1,683
5,236
15,021
17,341
10,916
11,600
Group Company
£'000
£'000
1,845
(30)
270
1,650
(17)
250
As at 31 December 2020
Inventory charged to the income statement during the year as part of cost of sales totalled £15.7m (2019: £16.7m) excluding consolidation adjustments.
Raw materials include £0.1m of goods in transit ( £0.3m: 2019). Inventory provisions at 1 January 2020 have been corrected compared in the above
disclosure as previously reported into the 2019 annual report financial statements. Amounts previously disclosed excluded certain provisions. There has
been no overall impact to the carrying value of inventory previously reported.
2,085
1,883
14. Current Financial Assets
Trade receivables
Less provision for impairment of trade receivables
Trade receivables net
Other receivables
Prepayments and accrued income
Financial derivatives
Amounts owed by Group undertakings
Group
2020
£'000
2019
£'000
2,644
(279)
2,365
125
263
95
-
2,848
3,296
(540)
2,756
323
270
113
-
3,462
Company
2020
£'000
2,178
(277)
1,901
42
251
95
3,706
5,995
2019
£'000
2,879
(536)
2,343
195
89
-
3,661
6,288
Pittards PLC 2020 Annual Report Page 67 of 84 www.pittards.com
14. Current Financial Assets (continued)
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
2020
£'000
259
27
452
738
2019
£'000
952
156
85
1,193
Company
2020
£'000
2019
£'000
253
27
311
591
934
157
82
1,173
There are £0.7m ( 2019: £1.2m) trade receivables which are past due and not impaired as at 31 December 2020. The directors consider there to be no
concerns regarding the recoverability of these amounts. Due to COVID-19 related disruption the group and company granted customers extended credit
terms, with 73% covered by insurance at the end of 2020.
As at 31 December the provision against trade receivables was £0.3m (2019: £0.5m) for the Group and £0.3m (£0.5m: 2019: £0.5m) 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
2020
£'000
106
32
4
211
353
2019
£'000
398
-
-
306
704
Company
2020
£'000
106
32
4
211
353
2019
£'000
398
-
-
299
697
Provisions against trade receivables not overdue and up to 90 days represent credit note provisions. Part provisions have been made against some
significantly overdue balances based on a recoverability assessment considering credit insurance held and ongoing discussions with customers. An
analysis of the currencies in which trade receivables are held is shown in Note 26(c).The expected loss rate used in calculating the provision
against trade receivables, excluding the specific credit note provisions, was 4.6% (2019: 4.1%).
15. Trade and other payables
Trade payables
Corporation tax payable
Other taxes and social security costs
Accruals and deferred income
Other payables
Amounts owed to Group undertakings
Group
2020
£'000
2019
£'000
Company
2020
£'000
2019
£'000
1,969
2,514
1,463
1,712
-
170
669
55
-
159
174
352
231
-
-
136
530
27
574
-
133
384
41
356
2,863
3,430
2,730
2,626
Pittards PLC 2020 Annual Report Page 68 of 84 www.pittards.com
16. Interest-bearing loans, borrowings, and overdrafts - current
Secured:
Overdrafts
Loans
Obligations under finance leases
Group
2020
2019
£'000
£'000
5,162
6,313
1,698
2,897
49
171
6,909
9,381
Company
2020
£'000
4,594
275
12
2019
£'000
5,574
1,155
142
4,881
6,871
The Company's overdraft and loan facilities are provided by Lloyds Bank. During the year, the mortgage facility of £1.1m was replaced with a new
facility of £1.75m, with annual repayments of £0.2m and full repayment in May 2025. In addition, a 6-year Coronavirus business interruption loan for
£1m was put in place with repayment not due for full repayment until 2026, with the first year interest free.
17. Interest-bearing loans, borrowings, and overdrafts - non-current
Secured:
Loans
Obligations under finance leases
Repayable as follows:-
1-5 Years
After more than 5 years
Group
2020
2019
£'000
£'000
3,288
6
3,294
326
50
376
3,194
376
100
-
3,294
376
Company
2020
£'000
2019
£'000
2,388
3
2,391
2,291
100
2,391
-
18
18
18
-
18
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.
18. Obligations under leases
Future minimum lease payments under lease obligations
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
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
2020
£'000
2019
£'000
Company
2020
£'000
2019
£'000
43
6
49
(3)
46
41
6
47
182
49
231
(10)
221
171
50
221
12
3
15
-
15
12
3
15
148
15
163
(3)
160
142
18
160
Pittards PLC 2020 Annual Report Page 69 of 84 www.pittards.com
19. Deferred taxation
Deferred tax asset
Deferred tax liability
Deferred tax liability (net)
The movement on the net deferred tax account during the year is as follows:
At 1 January
Income Statement/Statement of Comprehensive Income (debit)/credit
Exchange differences
At 31 December
Group
2020
£'000
100
(804)
(704)
2019
£'000
100
(730)
(630)
Group
2020
£'000
(630)
(227)
153
(704)
2019
£'000
(810)
180
-
(630)
Company
2020
£'000
2019
£'000
100
-
100
100
-
100
Company
2020
£'000
100
-
-
100
2019
£'000
(112)
212
-
100
The Group's deferred tax liability of £0.7m (2019: £0.6m) and the Company's deferred tax asset of £0.1m (2019: £0.1m) represent temporary timing
differences.
20. Share capital
Issued fully paid
At 31 December
Number of ordinary shares of 50p each
Opening number of shares fully paid and in
issue
Purchase of own shares into treasury
At 31 December
2020
£'000
2019
£'000
6,944
6,944
2020
Shares
2019
Shares
13,888,690
13,888,690
934,210
12,954,480
-
13,888,690
The company has one class of ordinary shares which carry no right to fixed income. The company holds 934,210 of own shares in treasury which were
acquired during November 2020 and which it intends to hold to satisfy existing LTIP schemes when they vest in 2022.
Pittards PLC 2020 Annual Report Page 70 of 84 www.pittards.com
21. Reserves
The share premium account represents the difference between the issue price and the nominal value of shares issued. The capital reserve relates to goodwill
arising on previous acquisitions written off directly to reserves.
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 2020, the trust held 19,026, 50p shares (2019 19,026) with a market value at that date of £8,942 (2019:
£13,604).
Own shares reserve comprises
ESOP
Ordinary own shares held in treasury
Group
2020
£'000
2019
£'000
495
355
850
495
-
495
Company
2020
£'000
2020
£'000
495
355
850
495
-
495
During November 2020, £355,000 of own ordinary shares (AIM:PTD) at 38p were acquired into treasury and are held under own share reserve.
The share-based payment reserve represents the fair value of the entitlement to shares awarded under the 2017 SAYE scheme and the 2016 Long Term
Incentive Plan. See note 7 for further details.
The cash flow hedge reserve represents the fair value of forward currency contracts held under hedge accounting at the end of the year. See note 26 for further
details.
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 Yeovil, ETSC, PPM and GS undertaken annually.
The retained earnings reserve represents all other net gains and losses, and transactions with owners including dividends, not recognised elsewhere.
22. Cash generated from / (used in) operations
(Loss)/ profit before taxation
Adjustments for:
Depreciation of property, plant, and equipment
Amortisation of intangibles
Bank and other interest charges
Share based payment expense
Other non-cash items in Income Statement
Operating cash flows before movement in working capital
Movements in working capital (excluding exchange differences on consolidation):
Decrease / (Increase) in inventories
Decrease / (Increase) in receivables
(Decrease) / Increase in payables
Cash generated /(used in) from operations
Group
2020
£'000
(2,282)
2019
£'000
579
616
51
489
40
780
63
596
92
1,302
(275)
216
1,835
-
(1,980)
(383)
36
513
501
(681)
549
(492)
Company
2020
£'000
(1,460)
2019
£'000
(311)
341
51
174
40
370
(484)
357
63
227
92
26
454
-
451
293
(42)
(1,739)
234
50
218
(1,001)
Pittards PLC 2020 Annual Report Page 71 of 84 www.pittards.com
23 Analysis of the changes in cash and cash equivalents
Group
Cash at bank and in hand
Bank overdraft
Company
Cash at bank and in hand
Bank overdraft
24. Analysis of the changes in liabilities from financing activities
Group
Long term borrowings
Short term borrowings
Lease liabilities
Company
Long term borrowings
Short term borrowings
Lease liabilities
As at 1
Jan Cashflow
Exchange
movements
As at 31
December
2020
£'000
180
(6,312)
(6,132)
2020
£'000
(95)
865
770
2020
£'000
-
285
285
2020
£'000
85
(5,162)
(5,077)
As at 1
Jan Cashflow
Exchange
movements
As at 31
December
2020
£'000
11
(5,574)
(5,563)
2020
£'000
(3)
980
977
2020
£'000
-
-
-
2020
£'000
8
(4,594)
(4,586)
As at
1 Jan
Loan
re-
payments
New
Loans
Reclassify-
action
Exchange
of Loans movements
As at
31
December
2020
£'000
£'000
£'000
£'000
£'000
£'000
326
2,897
221
-
2,802
(946)
(161)
348
-
3,444
(1,107)
3,150
-
1,155
160
1,315
-
1,648
(140)
(145)
-
-
(285)
1,648
204
(204)
-
-
740
(740)
-
-
(44)
(397)
(5)
(446)
-
-
-
-
3,288
1,698
55
5,041
2,388
275
15
2,678
25. 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
Group
2020
£'000
27
2019
£'000
26
Purchases and sales are disclosed with entities where a member of the Board holds a further directorship. Purchases and sales are made on
normal commercial terms and conditions.
Group
Pittards PLC 2020 Annual Report Page 72 of 84 www.pittards.com
Year end balances arising from
purchases
Payables to related parties
Company
The following transactions with other Group undertakings took place during
the year:
Transactions with subsidiaries
Purchases from subsidiaries
Sales to subsidiaries
2020
2019
£'000
5
£'000
18
Company
2020
£'000
2,278
366
2019
£'000
7,628
318
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 -
current
Pittards Garnar Services Limited
Ethiopia Tannery Share Company
Pittards Global Sourcing Private Limited
Company
Pittards Products Manufacturing Share
Company
Amounts due from Subsidiaries - non-
current
Ethiopia Tannery Share Company
Pittards Products Manufacturing Share
Company
Amounts due to Subsidiaries
Pittards Group Limited
Ethiopia Tannery Share Company
Pittards Global Sourcing Private Limited
Company
Pittards Products Manufacturing Share
Company
Company
2020
2019
£'000
3,230
242
£'000
3,266
296
2
2
232
3,706
97
3,661
1,378
1,489
387
1,765
383
1,872
(30)
(528)
(30)
(290)
-
(19)
(16)
(574)
(17)
(356)
(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.
26. Financial instruments
(a) Financial risk factors
The Group's activities expose it to a variety of financial risks; market (including currency, price, and interest rate), liquidity and credit. The Group's overall risk
management systems seek to minimise potential adverse effects on the Group's financial performance. 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.
- Currency risk
Pittards PLC 2020 Annual Report Page 73 of 84 www.pittards.com
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. Approximately 79% (2019: 89%) of the Group's revenue is from sales outside the UK, with some 77% (2019: 84%) in US dollars. US dollar based
raw material purchases amounted to 28% in 2020 (2019: 32%).
Foreign exchange risk arises from future commercial transactions, recognised assets and liabilities and net investments in foreign operations. Where possible, a
natural hedge is maintained against the Group's currency exposure. During 2020, forward2020, forward exchange contracts have additionally also been entered
into to manage the US dollar foreign exchange risk. Hedge accounting has been applied to these contracts. See the Treasury policy in the Directors' report on
page 23 to 26 for further details.
- Price risk
Price risk includes the variability in the purchase price 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 skins
sourced in Ethiopia.
- Interest rate risk
The Group mitigates its exposure to interest rate fluctuations by using fixed rates where possible. Management 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 borrowing 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 taken to improve cash flow where necessary.
- Credit risk
The group utilises credit insurance policies to mitigate its risk from its trading exposure or seeks secure terms or payment in advance and reports default to the
credit insurer to ensure insurance will respond. The group has residual exposure to credit risk where customers are not insured, it would define those as "doubtful
debts", and make a provision against them, unless recovery was certain or debt settled after the end of the financial year, or we had asset security to cover the
debt. Customers who present credit risk uninsured, we would supply on a cash basis to limit exposure, which we would define as "proforma sale". In determining
doubtful debts, we reflect on our loss experience which remains low and the prospects for the customer in the light of current trading environment. In the event we
have instigated any recovery proceedings through formal channels, debts are immediately provided in full, or in the event the customer ceases to trade. Once
recovery is deemed not possible, or the customers legal status has extinguished, debts are written off.
(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 instruments, are disclosed in Note 1 to the financial
statements.
Pittards PLC 2020 Annual Report Page 74 of 84 www.pittards.com
26. 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 follow:
US Dollar
Euro
Ethiopian Birr
Other
GBP
Total
Assets
Liabilities
2020
£'000
1,679
144
247
23
2,093
551
2,644
2019
restated*
£'000
2,164
233
646
23
3,066
230
3,296
2020
£'000
(211)
(513)
(3,235)
-
(3,959)
(3,221)
(7,180)
2019
restated*
£'000
(160)
(6)
(4,055)
-
(4,221)
(2,091)
(6,312)
Cash
2020
2019
£'000
(1,220)
(109)
(516)
(53)
(1,898)
(3,179)
(5,077)
£'000
(3,653)
(466)
(430)
(81)
(4,630)
(1,503)
(6,133)
(d) Foreign currency sensitivity
As 79% (2019: 84%) 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 strengthening of sterling against the US dollar. 10 US cents is considered to be a reasonable movement and also enables the
users of the accounts to calculate other percentage 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. A positive number indicates an increase in profit or loss whereas a negative number
indicates a loss which can occur if sterling strengthens to dollar.
As the Group hedges between 50% and 80% of currency effects and utilises some natural hedging due to its purchase of material in US dollars, it
estimates that currency effects are reduced by approximately 65%. For this reason, a 10c change in US$ has the following effect assuming the Group
is unable to pass on any of the currency impact to customers (in 2019, our exposure was £2m, compared to £0.3m in 2020).
*Restated - in the comparative period annual report the GBP liability relating to trade creditors of £1.7m was omitted.
Loss1
Group
2020
£'000
(338)
2019
£'000
(497)
¹ This is mainly attributable to the exposure to revenue in US dollars not hedged during the year for the Group, allowing for costs in dollars and hedging contracts.
(e) Forward foreign exchange contracts
It is the policy of the Group to sell surplus US dollars and to enter into forward foreign exchange contracts to manage the risk associated with anticipated
foreign currency sales and purchase transactions, where this is felt appropriate. In 2020, the Group has entered into forward foreign currency contracts
to manage the US dollar foreign exchange risk, hedging against forecast cash flows to the extent that those cash flows are deemed highly probable. The
Group currently holds contracts to cover the next 18 months and maintains cover on a rolling 12 to 18 months depending on conditions. The aim is to
cover between 40% and 60% of the anticipated risk.
Hedging contracts in place at year end comprised financial derivatives only
comprising:-
US dollar sell to GBP per month for between $300k to $500k from Jan 2021 to Dec 2021
US dollar sell to GBP per month for between $300k to $375k from Jan 2022 to Jun 2022
Note
14
Carrying
amount
£'000
63
32
95
Nominal
value
$m
4.50
2.25
6.75
Pittards PLC 2020 Annual Report Page 75 of 84 www.pittards.com
26. Financial instruments (continued)
(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 variable 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 financial year and held constant throughout. Given a 1% increase in interest rate on £10m debt, an increase in cost of £0.1m would
result. This is attributable to the Group's exposure to interest rates on its variable borrowings.
iii) Liquidity risk management
Ultimate responsibility for liquidity risk management rests with the Board, 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 through 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 2020 and at 31 December
2019 are as follows:
As at 31 December 2020
Fixed rate:
Lease obligations
Variable rate:
Bank overdrafts and loans
Trade and other payables
At 31 December 2019
Fixed rate:
Lease obligations
Variable rate:
Bank overdrafts and loans
Trade and other payables
The Group has the following undrawn borrowing facilities:
Variable rate:
Expiring within one year
Group
Less
than 3
months
3
months
to 1
year
£'000
£'000
1-2
years
£'000
2-5 years
£'000
Over 5
years
£'000
Total
£'000
12
37
6
-
-
55
6,427
1,969
433
-
621
-
2,567
-
100
-
10,148
1,969
-
111
21
8,148
2,514
1,508
-
375
-
89
345
-
-
-
-
221
10,376
2,514
Group
2020
£'000
3,282
3,282
2019
£'000
2,645
2,645
The facilities expiring within one year are subject to review at various dates in 2021. However, Lloyds have confirmed their commitment to the business
and renewal of the facilities through to 2022 and although a formal agreement has yet to be signed, Lloyds have written to confirm the facility has been
agreed with credit committee and will be in place until the end of March 2022.
Pittards PLC 2020 Annual Report Page 76 of 84 www.pittards.com
26. 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 2020, the Group's strategy was to maintain the gearing ratio at an acceptable level, which is considered to be between 50% and 70%. The
gearing ratios at 31 December 2020 and 2019 were as follows:
Total borrowings
Less cash at bank and in hand
Net debt
Total equity
Gearing ratio
27. Investments
At 1 January and 31 December
Group
2020
£'000
10,203
(85)
10,118
2019
£'000
9,757
(180)
9,577
13,858
17,520
73.0%
54.7%
Company
2020
£'000
378
2019
£'000
378
The subsidiary undertakings whose results or financial position affect the figures in the consolidated financial statements are:
Pittards Group Limited
Pittard Garnar Services Limited
Daines & Hathaway Limited
Principal activities
Dormant
Consultancy and other related services to
the leather industry
Holding company
United Kingdom
United Kingdom
Pittards Global Sourcing Private Limited Company
Ethiopia Tannery Share Company
Pittards Products Manufacturing Share
Company
Production of quality leather garments
Leather production
Production of quality leather gloves and
leather goods
Ethiopia
Ethiopia
Ethiopia
£ sterling
£ sterling
Ethiopian Birr
Ethiopian Birr
Ethiopian Birr
Country of
incorporation
Functional currency
United Kingdom
£ sterling
The registered office for all UK incorporated entities is Sherborne Road, Yeovil, Somerset BA21 5BA. The registered offices of the Ethiopian entities are
as follows:
Pittards Global Sourcing Private Limited Company
Nefas Silk Laphto Sub City, Saris Industry Zone, Addis Ababa, Ethiopia
Ethiopia Tannery Share Company
Pittards Products Manufacturing Share
Company
P.O. Box 5628, Kirkos Sub City, Kebele 16, Addis Ababa, Ethiopia
Nefas Silk Laphto Sub City, Saris Industry Zone, Addis Ababa, Ethiopia
The directors believe that the carrying value of the Group's investments is supported by their underlying net assets.
Pittards PLC 2020 Annual Report Page 77 of 84 www.pittards.com
Summary Financials - 6 Year Review
Revenue
Percentage sold outside UK
(Loss)/profit from operations before finance costs
(Loss)/profit on ordinary activities before taxation
(Loss)/profit on ordinary activities after taxation
Net assets
Inventory
Inventory days of sale
Net debt
Gearing
(Loss)/earnings per 50p ordinary share
Dividends per ordinary share
2020
£'000
2019
£'000
2018
£'000
2017
£'000
2016
£'000
2015
£'000
15,233
22,301
28,469
30,287
27,009
30,523
86%
(1,774)
(2,282)
(2,426)
90%
1,177
579
406
13,858
17,520
15,021
17,341
455
411
10,118
9,577
73.0%
54.7%
90%
992
354
(1,929)
17,881
16,306
279
7,724
43.2%
91%
934
413
497
92%
(3,591)
(4,071)
(4,146)
90%
1,115
655
471
19,764
21,274
24,150
15,332
17,353
18,872
241
308
288
7,990
10,109
6,458
40.0%
48.0%
27.0%
(17.67)
2.93
(13.91)
3.58
(29.89)
-
-
-
-
-
3.98
-
Pittards PLC 2020 Annual Report Page 78 of 84 www.pittards.com
Financial calendar
Annual General Meeting (Planned at Yeovil site, subject to COVID-19 and government restrictions permitting)
12 May 2021
Announcement of half year results for 2021
30 September 2021
Announcement of 2021 results
23 March 2022
Pittards PLC 2020 Annual Report Page 79 of 84 www.pittards.com
Notice of Annual General Meeting
Notice is hereby given that the 112th Annual General Meeting ("AGM") of Pittards Plc (the "Company") will be held at the Company's registered office situated at
Sherborne Road, Yeovil, Somerset, BA21 5BA at 12 noon on 12 May 2021 to consider and, if thought fit, pass the resolutions set out in this Notice.
All of the resolutions in this Notice, are proposed as ordinary resolutions.
Ordinary Resolutions
1.
2.
3.
4.
To receive the annual statement of accounts of the Company for the year ended 31 December 2020, and the directors’ and auditors' reports thereon.
To re-elect Stephen Yapp as a director of the Company, who is retiring by rotation.
To re-elect Louise Cretton as a director of the Company, who is retiring by rotation.
To re-appoint PKF Francis Clark LLP as the Company's auditors and to authorise the directors to determine their remuneration.
5. Revised Resolution 5 - Share buybacks - amended
That the Company be and is hereby granted general and unconditional authority, for the purposes of section 701 of the Companies Act 2006 (the “Act”)
to make one or more market purchases (as defined in section 693(4) of the Act) of any of its ordinary
shares of 50 pence each ("Ordinary Shares") on such terms and in such manner as the directors of the Company may from time to time determine,
provided that:
(a)
the maximum number of Ordinary Shares which may be purchased is 2,083,303;
(b)
the maximum price (exclusive of expenses) which may be paid per Ordinary Share is 5% above the average middle market quotation for an Ordinary
Share (as derived from the London Stock Exchange Daily Official List) for the five business' days immediately preceding the day on which such
Ordinary Share(s) are contracted to be purchased;
(c)
the minimum price (exclusive of expenses) which may be paid per Ordinary Share is 30p; and
(d) unless previously renewed, revoked or varied, this authority shall expire on the date falling 15 months after the passing of this resolution or the
conclusion of the next Annual General Meeting of the Company (whichever is the earlier), but during this period the Company may enter into a contract
to purchase Ordinary Shares, which would, or might, be completed or executed wholly or partly after the authority ends and the Company may purchase
Ordinary Shares pursuant to any such contract as if such authority had not ended.
By order of the Board
Richard Briere
CFO and Company Secretary
Pittards Plc
Sherborne Road
Yeovil, Somerset
BA21 5BA
Date: 23 March 2021
Pittards PLC 2020 Annual Report Page 80 of 84 www.pittards.com
Notes
1. Voting at the AGM will take place by means of a show of hands, unless a poll is demanded in accordance with the Company’s articles of association.
2. A member entitled to attend and vote at the AGM may appoint one or more proxies to exercise all or any of the member’s rights to attend, speak and vote
at the AGM. However, noting the current UK government restrictions on non-essential travel and public gatherings, we strongly encourage shareholders
to appoint a proxy in accordance with the procedures set out below in order to vote in advance of the AGM. A proxy need not be a member of the
Company, however, if you appoint the Chair of the AGM as your proxy, this will ensure that your votes are cast in accordance with your wishes given that,
as a result of the current UK government restrictions, any other person appointed as your proxy will not be able to attend the meeting to vote in your place
. A proxy shall, unless directed otherwise by the appointing member, vote, or abstain from voting as the proxy sees fit at the AGM . should this be permitted
under applicable COVID-19 restrictions
3. We strongly encourage you to appoint the Chair of the AGM as your proxy To be effective, the proxy vote must be submitted at www.signalshares.com
so as to have been received by the Company’s Registrars, Link Asset Services, not less than 48 hours before the time appointed for the AGM, or any
adjournment thereof (excluding weekends and public holidays). To register, members will need their Investor Code. Alternatively, a member may request
a Form of Proxy in paper form from the Company’s Registrars, Link Asset Services, on 0871 664 0300 (calls cost 12p per minute plus your operator’s
network access charge). If you are outside the United Kingdom, please call +44 371 664 0300 (calls will be charged at the applicable international rate).
Lines are open between 9.00 a.m. to 5.30 p.m., Monday to Friday, excluding public holidays in England and Wales.
4. Pursuant to Regulation 41(1) of the Uncertificated Securities Regulations 2001 (as amended), only those members entered on the Company’s register of
members at close of business on 10 May 2021 ("the "Specified Time") (or, if the AGM is adjourned to a time more than 48 hours after the Specified Time,
at close of business on the business day which is two days’ prior to the time of the adjourned meeting) shall be entitled to attend and vote or to appoint
one or more proxies to vote on their behalf at the AGM in respect of the number of ordinary shares registered in their name at that time. If the AGM is
adjourned to a time not more than 48 hours after the Specified Time, that time will also apply for the purpose of determining the entitlement of members
to attend and vote (and for the purposes of determining the number of votes they may cast) at the adjourned meeting. Changes to the register of members
of the Company after the relevant deadline shall be disregarded in determining the rights of any person to attend and vote at the AGM.
5.
If a member appoints more than one proxy to attend the AGM, each proxy must be appointed to exercise the rights attached to a different share(s) held
by the member should this be permitted under applicable COVID-19 restrictions. If a member wishes to appoint more than one proxy, they may do so at
www.signalshares.com or by a paper Form of Proxy available on request from the Company's Registrars, Link Asset Services, as set out in Note 3
above. The appointment of a proxy shall not preclude a member from attending and voting in person at the AGM should this be permitted under applicable
COVID-19 restrictions, or at any adjournment thereof. If a member has appointed a proxy but decides to attend the AGM, such proxy will not be able to
attend, speak or vote at the AGM on the member’s behalf/
6. Any power of attorney (duly certified) or other authority under which a Form of Proxy is submitted, and any Form of Proxy completed in paper form, must
be returned to the Company’s Registrars, Link Asset Services, by post to PXS1, 34 Beckenham Road, Beckenham, Kent, BR3 4ZF, so as to arrive not
less than 48 hours before the time appointed for the AGM or any adjournment thereof (excluding weekends and public holidays).
7. Subject to Note 5, if more than one valid proxy appointment is submitted by a member, the appointment received last before the latest time for receipt of
proxies will take precedence.
8. CREST members who wish to appoint a proxy or proxies through the CREST electronic proxy appointment service may do so for the AGM and any
adjournment(s) thereof by using the procedures described in the CREST Manual. CREST personal members or other CREST sponsored members, and
those CREST members who have appointed a voting service provider(s), should refer to their CREST sponsor or voting service provider(s), who will be
able to take the appropriate action on their behalf.
9.
In order for a proxy appointment or instruction made using the CREST service to be valid, the appropriate CREST message (a “CREST Proxy Instruction”)
must be properly authenticated in accordance with Euroclear UK & Ireland Limited’s specifications and must contain the information required for such
instruction, as described in the CREST Manual (available via www.euroclear.com/CREST). The message, regardless of whether it constitutes the
appointment of a proxy or is an amendment to an instruction given to a previously appointed proxy, must, in order to be valid, be transmitted so as to be
received by the Company's agent (ID: RA10) by the latest time(s) for receipt of proxy appointments specified in Note 3 above. For this purpose, the time
of receipt will be taken to be the time (as determined by the time stamp applied to the message by the CREST Application Host) from which the issuer's
agent is able to retrieve the message by enquiry to CREST in the manner prescribed by CREST. After this time, any change of instructions to proxies
appointed through CREST should be communicated to the appointee through other means.
Pittards PLC 2020 Annual Report Page 81 of 84 www.pittards.com
10. CREST members and, where applicable, their CREST sponsors or voting service providers should note that Euroclear UK & Ireland Limited does not
make available special procedures in CREST for any messages. Normal system timings and limitations will therefore apply in relation to the input of
CREST Proxy Instructions. It is the responsibility of the CREST member concerned to take (or, if the CREST member is a CREST personal member or
sponsored member or has appointed a voting service provider(s), to procure that his CREST sponsor or voting service provider(s) take(s)) such action
as shall be necessary to ensure that a message is transmitted by means of the CREST system by any particular time. In this connection, CREST members
and, where applicable, their CREST sponsors or voting service providers are referred, in particular, to those sections of the CREST Manual concerning
practical limitations of the CREST system and timings (www.euroclear.com/CREST).
11. The Company may treat as invalid a CREST Proxy Instruction in the circumstances set out in Regulation 35(5)(a) of the Uncertificated Securities
Regulations 2001 (as amended).
12. A member wishing to revoke his or her proxy appointment should do so by sending a notice to that effect to the Company’s Registrars, Link Asset
Services, PXS1, 34 Beckenham Road, Beckenham, Kent BR3 4ZF or electronically by means of the facilities described in Notes 3 and 9 above. The
revocation notice must be received by the Company's Registrars, Link Asset Services, by the time limit set out in Note 3. Any revocation notice received
after this time will not have effect.
13. Any corporation which is a member of the Company can appoint one or more corporate representatives who may exercise on its behalf all of its powers
as a member provided that they do not do so in relation to the same shares.
14. The Company's register of directors’ holdings and copies of directors’ contracts of service will be available for inspection at the registered office of the
Company during usual business hours from the date of this Notice until the date of the AGM, and from at least fifteen minutes prior to commencement,
and until the conclusion, of the AGM.
15. Members who have general queries about the AGM should contact the Company Secretary at the Company's registered address set out above. No other
methods of communication will be accepted. Any electronic address provided either in this Notice of AGM, or in any related documents, may not be used
to communicate with the Company for any purposes other than those expressly stated.
16.
In the case of joint holders, where more than one of the joint holders’ purports to appoint a proxy, only the appointment submitted by the most senior
holder will be accepted. Seniority is determined by the order in which the names of the joint holders appear in the register of members of the Company in
respect of the joint holders (the first named being the most senior).
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