Pittards PLC 2021 Annual Report Page 1 of 81 www.pittards.com
Annual Report 2021
Company number: 102384
Pittards plc
Pittards PLC 2021 Annual Report Page 2 of 81 www.pittards.com
Pittards leather has provided optimum
feel, grip, exceptional moisture
management and long-lasting softness in
in FootJoy gloves for more than 30 years.
In 2021 its heritage StaSof golf glove
launched in a range of covetable limited-
edition colours.
Pittards PLC 2021 Annual Report Page 3 of 81 www.pittards.com
Contents
Reports
Background and highlights - page 5
•
Principal activities - page 5
•
Strategic objectives statement and highlights - page 5
Chairman’s statement - page 7
Strategic report - pages 9 to 23
•
Chief Executive Officer’s report - pages 9 to 23
• Section 172 report - pages 17 to 18
•
Chief Financial Officer’s report - pages 21 to 23
Directors, Officers and Advisers - pages 24 to 25
•
Corporate Governance report - pages 27 to 31
•
Directors’ report - pages 33 to 37
•
Carbon report - page 35
Statement of Directors’ responsibilities in respect of the financial statements - pages 38 to 39
Independent Auditor’s report - pages 41 to 45
Financial statements and notes
•
Consolidated income statement - page 46
•
Consolidated statement of comprehensive income - page 47
•
Consolidated and company Balance sheets - page 48
•
Consolidated statement of changes in equity - page 49
•
Company statement of changes in equity - page 50
•
Statement of cash flows - page 51
•
Accounting policies - pages 52 to 56
•
Notes to the consolidated accounts - pages 57 to 75
Dates and AGM
•
Seven-year financial summary - page 76
•
Financial calendar – page 77
•
Notice of Annual General Meeting - pages 78 to 80
Pittards PLC 2021 Annual Report Page 4 of 81 www.pittards.com
FootJoy partnered with west-coast street
fashion icon, Jon Buscemi, in its Premiere
Series shoe. Made using premium Pittards
leather for one-year guaranteed waterproof
protection and the style features distinctive
gold accents and multi-direction traction.
Pittards PLC 2021 Annual Report Page 5 of 81 www.pittards.com
Background and highlights
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 retailing of leather and leather goods. The principal activities of its
subsidiaries are the production of leather, leather goods, gloves and shoes.
Strategic aims
•
Manufacturing and supplying performance leathers and finished products, standing out for their superior performance in sport,
automotive, aviation, interior, fashion, gloves, workwear, apparel and leather goods.
•
Diversifying sales within a range of recently entered markets, developing market share in each of these new sectors.
•
Optimising production facilities in Ethiopia by diversifying business operations to utilise lower operating costs together with
established expertise in Ethiopia.
•
Grow our people, place and market position, supporting staff, customers and shareholders developing a sustainable model
that attracts and retains the best talents.
•
Maintaining and enhancing leading technical competence and best practice through investment in R&D, approach to the
environment, our people, our customers and the wider community thereby attracting and retaining customers.
•
Working responsibly, respecting the environment, employee welfare and quality to the customer, delivering world class
products and brand.
2021 Highlights – sales up 29%
•
Sales revenues of £19.7m, up 29% on 2020 (2020: £15.2m)
•
Return to profitability with profit before tax for the year of £0.5m (2020: £2.3m loss)
•
Return to the Dividend List after 16 years with 0.5p interim paid and a further proposed final dividend of 0.5p (2020: Nil)
•
Capital investment of £0.8m (2020: £0.2m)
•
Successful apprentice and Kickstart programmes, with the long term employment of 10 Kickstart staff
•
Order book opening 2022 at a 3-year high and 20% up on 2021
Pittards PLC 2021 Annual Report Page 6 of 81 www.pittards.com
Pittards automotive leather made with WR100
water resistant technology is the exclusive
leather option in the new Morgan Super 3. The
Super 3 is a car synonymous with the dawn of
motor sport and we were proud to be able to
engineer a bespoke leather solution for it launch.
Pittards PLC 2021 Annual Report Page 7 of 81 www.pittards.com
Chairman’s statement for the year ended 31 December 2021
I can report that Pittards has acquitted itself robustly against the strategies that we have in place, with a return to full year profit.
The resilience of the Group was particularly evidenced by an increased sales revenue to £19.7m resulting in a positive EBITDA of £1.4m and profit
before tax of £0.5m, with returns on capital employed exceeding our weighted average cost of capital.
Sales increased by 29%, reflecting recovery in our core business and further development of our new business sectors, including interiors and
shoes. The second half financial performance was affected by challenges in the supply chain, together with general inflationary pressures.
Throughout the year we have managed our inventory prudently, particularly in the light of unrest in Ethiopia and delays in reliability of shipping. As
a result, we intentionally increased our raw material stocks in the UK to ensure reliable supply for our customers.
A remarkable contribution has been made by all our staff once again during this year. We are pleased that our staff headcount has remained broadly
the same, and reflects a well-balanced, diverse team, both in Ethiopia and UK, capable of meeting the challenges facing the business. I thank them
all for their considerable efforts.
The Board is confident in the Group’s business strategy and is committed to its future success, with Board members increasing their shareholding
in Pittards. The Board’s collective shareholding rose to 7.6% at the end of 2021 (2020: 6.4%).
There were no changes to the Board during the year. As previously announced, Richard Briere (CFO), will be stepping down in April 2022 after 3
years and we thank him for his contribution.
In Q3, 2021 we undertook a further modest share buyback of 40,000 shares, resulting in 974,210 shares now being held in treasury. Also, in Q4
2021, we returned to the dividend list with a payment of 0.5p per share. A final dividend of 0.5p per share is being proposed for 2021 making the
total dividend for the year 1.0p per share (2020: £ nil). Subject to the approval of shareholders at the AGM, to be held on 17 May 2022, the final
dividend will be paid on 5 August 2022 to shareholders on the register at the close of business on 1 July 2022. The shares will go ex-dividend on 30
June 2022.
Outlook
In accordance with our strategic priorities, we are delivering a broader range (including finished shoes and packs for automotive) of products to more
market segments ( including outdoor endurance, interiors and automotive) therefore creating a more balanced portfolio. We continue to invest in
new leading-edge technology, investing £0.8m in 2021, and we have planned further capital investments in 2022/23. Our focus continues, on growth,
driven by innovation and sustainable development.
We have entered 2022 with a much stronger order book than the previous year. It remains too early to judge how strong the recovery will be, given
the heightened uncertainty caused by the conflict in Ukraine, inflationary pressures, and continued supply chain challenges.
However, we remain cautiously optimistic that the group will see continued growth in the year.
Stephen Yapp
Chairman
23 March 2022
Pittards PLC 2021 Annual Report Page 8 of 81 www.pittards.com
Outdoor Research specialises in
performance apparel and gear for
outdoor sports. Its Super Couloir
Sensor glove incorporates Pittards
Oiltac and Armortan technologies to
deliver durability and outstanding grip
in extreme conditions.
Pittards PLC 2021 Annual Report Page 9 of 81 www.pittards.com
Strategic report
for the year ended 31 December 2021
Chief Executive Officer’s report
Key performance indicators
2021
Full year
2021
2020
£m
£m
Revenue
19.66
15.23
Gross profit
5.46
3.17
Gross margin
28%
21%
Profit / (Loss) before tax
0.46
(2.28)
EBITDA
1.42
(1.16)
Net assets
13.07
13.86
Inventory
15.32
15.02
Net debt
10.69
10.10
Net debt adjusted for treasury shares held
10.29
9.80
CAPEX spend
0.78
0.25
Gearing
81.8%
73.2%
Staff numbers
1,108
1,096
Basic earnings / (loss) per share (in
pence)
2.12
(17.67)
Net Asset per share (in pence)
101.92
107.00
CEO Highlights
•
Profit before tax of £0.46m (£2.38m loss: 2020), a satisfactory recovery given the wider macro pressures in the second half
•
EBITDA £1.4m (2020: negative £1.1m)
•
Sales order book opened 2022 stronger than the start of each of the previous three years
•
Inventory increased by £0.3m, due to buffer stock from Ethiopia to mitigate supply chain risk
•
Q4-2021 sales orders resuming from both interiors and big shoe markets
•
Reduced risk in Ethiopia, whilst growing full shoe production as a key development business
•
Developing relationship with Vivobarefoot, a key shoe customer for our Ethiopian business
COVID-19 response
During the first quarter of 2021, together with many other businesses, we were challenged with the renewed impact of a third lock down due to
COVID-19. As the global pandemic unfolded, this unusual situation continued to affect our people, our customers and supply chains.
We continued with our responsive approach from 2020 to the challenges we faced and reviewed this on a weekly basis. The key pillars of our plan
focused on:
•
Safety of people - Implementing best practice in line with government advice
•
Customer support - Continued to supply and ongoing dialogue
•
Cash management – Strict daily control
•
Cost control – Realignment of all costs
Pittards PLC 2021 Annual Report Page 10 of 81 www.pittards.com
Chief Executive Officer’s report
Performance review
Sales demand for leather and related goods continued to improve throughout the year with full year revenue at £19.7m (2020: £15.2m).
The changing shape of the business is aligned with our strategic priorities to achieve a more balanced customer and product portfolio, in particular
the inroads made via Ethiopia in shoe production and sales, together with UK interiors and key shoe accounts. These remain priority development
markets for the Group with volumes increasing by 12%. We expanded our design and production management functions to support a broader
product offering.
Over the last two years we have established a more resilient business that is more profitable at lower levels of activity than in 2019, and 2021 built
on this. Whilst costs overall rose as a result of increased production, administrative costs reduced.
We continued to operate COVID safe working procedures in line with government guidance throughout the year. We are fortunate in having relatively
large production facilities in both the UK and Ethiopia which enabled us to implement socially distanced working practices.
Gross margin was 28% (2020: 21%) with EBITDA recovering to £1.4m (2020: negative £1.1m) and PBT of £0.46m (2020: £2.3m loss). Headcount
rose modestly to 1,108 (2020: 1,096) with the increase being centered on production and technical staff.
In Ethiopia, the development of the COVID pandemic lags the UK. This coupled with wider instability in the country, during 2021, meant we had a
raised level of supply chain risk. Although the Ethiopian factories remained open throughout the period the board decided it was prudent to mitigate
this risk further through acquiring additional buffer stock of the unique sheepskins that are used to make our technical glove leathers.
Overall inventories rose to £15.3m (2020: £15.0m) due to the increase in raw materials explained above and offset by a reduction in older inventory
of approximately £1.0m.
Raw material prices have broadly stabilized, having peaked in Q3 2021. We have successfully broadened our procurement strategy to achieve a
more consistent supply and purchase price from a broader supply base, reducing supply chain risks.
Net debt at 31 December increased £0.58m, to £10.69m (2020: £10.11m), mostly as a consequence of more bufffer material held in Yeovil.
US dollar rates moved slightly against us during 2021, although average exchange rates were broadly unchanged on 2020. The Group has hedged
between 40% and 60% of requirements, resulting in an average exchange rate of $1.355 through to June 2023. The average rate in 2021 for the
Group was $1.37, broadly unchanged on 2020.
During 2021, we invested £0.8m in machinery to improve our efficiency and expand our capability and capacity.
Pittards PLC 2021 Annual Report Page 11 of 81 www.pittards.com
Chief Executive Officer’s report continued
Market view
We adapted our approach to customer engagement through the broader use of virtual meetings, as the obvious travel inhibiting factors of the
pandemic remained throughout the year.
During the last two years, the overall demand for leather has been affected by numerous global factors, principally COVID-19 lockdowns, China/US
tariffs and overall weakness in the global economy. Although Brexit had little impact on the Group there have been some complications around
logistics and administration.
Given the increase in consumers’ appetite for outdoor pursuits, including golf and endurance sports, we have started to see some recovery in
demand in these market segments as social restrictions ease globally. Some of our other market segments have been harder hit by the pandemic,
most notably the aviation and automotive industry, where global sales are down significantly since 2019 levels, albeit we continued to sell into these
segments. Notwithstanding the challenges faced by these industries, we have 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.
We continue to develop our direct-to-consumer digital sales channels in the UK and Ethiopia.
Operations
2021 was a challenging year for the Operations team as we increased sales by 29%, whilst managing efficiency and costs, together with training
additional new young members of our workforce to allow for further growth in the future.
Ben Johnson joined in December 2020 as the UK Director of Production. He and his team have made substantial progress and have successfully
installed a high level of capital equipment during his first full year. The extra sheepskin stocks from Ethiopia required additional processing in the
UK, which added to the complexity but benefitted from our investment in new machinery which delivered improved quality and yield.
Investing in the next generation is an important part of our business. We were approved for the UK Government’s Kickstart scheme for 16–24-year-
olds, we finished the year with a good outcome creating permanent jobs for over 10 Kickstart members. We also continue to recruit Apprentices
into the business, by adding two during the year.
The reliability of logistics, in particular, shipping, and transport, but also stock shortages in the supply chains has meant continually replanning of the
production. Freight costs have increased dramatically adding £0.3m on a like for like basis. The team continue to work on finding innovative solutions
to these challenges. These rising costs also apply to our competitors offering some new opportunities as new supply chains develop.
In Ethiopia we have continued to broaden our manufacturing capability in finished products and have increased sales in footwear alongside the
production of shoe leather. This has so far been focused upon producing leather and shoes for Vivobarefoot and the local market.
During the year we responded to higher volumes by challenging how we work. Processing is split between Ethiopia and the UK, and the UK has
taken on a higher proportion of the processing of our technical performance finished leather.
Technical
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, last year we reported the following developments.
•
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.
This past year we have been focusing on process improvements to bring us closer to achieving our sustainable development objectives. A
primary focus being our carbon footprint which was reduced by 24%, achieving this objective well in advance of our 2025 target as our energy use
relative to output fell compared to 2019, which is out base year for comparison. We now look to achieve further reductions in this area. In
addition, we have been working to develop leathers with an increased natural content, giving a lower impact leather.
Pittards PLC 2021 Annual Report Page 12 of 81 www.pittards.com
Pittards is the exclusive manufacturer of Vivobarefoot
shoes in Ethiopia with a vertically integrated service
that makes both leather and footwear. Above, (left)
Galahad Clark, CEO & founder, Vivobarefoot and Reg
Hankey (right) CEO, Pittards sign an understanding
that underlines the partnership and looks to increasing
production in the country.
Pittards PLC 2021 Annual Report Page 13 of 81 www.pittards.com
Chief Executive Officer’s report continued
Technical continued
We remain dedicated to developing and building our technical team. We continue to invest in capital equipment targeting improved production
efficiencies and reduced energy and water usage. In 2021 we installed and commissioned our new vacuum drier (£0.4m of investment), together
with three dye drum vessels, a whole hide splitting machine and two shaving machines. Alongside this, our technical team routinely review our
manufacturing processes to improve overall efficiency in line with our sustainable development approach to operations in general.
The world is being adversely affected by increased greenhouse gas emissions, deforestation and increased pollution and it is widely 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 and ISO 9001:2015 compliant. We are also Bronze Medal rated in the UK under the protocol 7.1 of the Leather Working
Group (LWG). We have many years’ experience with Restricted Substance Lists (RSL) and Material Restricted Substance Lists (MRSL) and working
within the ZDHC framework. We work with responsible chemical partners who take a strategic approach to environmental impact such as adherence
to ZDHC and the increased use of renewable carbon in their products.
Sustainable development highlights
•
Carbon decrease of 10% by 2025 objective achieved in 2021 with a 24% reduction from our base year (2019), as our proportional use of
energy relative to our output fell (see page 35).
•
Several capital investment projects completed to reduce process water and energy usage.
•
100% of packaging is now recyclable.
•
Adoption of UK Government Kickstart Scheme to provide equal opportunity for local 16–24-yearolds at risk of long-term unemployment.
•
The newly installed machines in 2022, are expected to deliver labour efficiencies during 2022, as the new equipment and operators bed
in.
Sustainable development strategy
Pittards is a long established and leading authority on the manufacturer of performance leathers, with operations in the UK and Ethiopia. We are
committed to creating value for our stakeholders, our employees, and the communities in which we operate, while delivering on a promise of
ongoing environmental and social improvement.
Established in rural Somerset in 1826, integrity of operation is written through our 200-year heritage, and a commitment to responsible
manufacturing, independent certification and community engagement is at the heart of everything we do.
Pittards only uses hides and skins that are a by-product of the food industry and through versatile manufacturing turns them into leathers that can
be used in a wide range of products, from gloves and footwear to apparel and upholstery. It is estimated that over 700m tonnes of waste from the
global food industry could go to landfill if the leather industry did not upcycle hides and skins into leather. Source: Leather Naturally.
We have embraced the following quote as our understanding of sustainable development:
“Sustainable development is development that meets the needs of the present without compromising the ability of future generations to
meet their own needs.”
Brundtland Commission of the United Nations in 1987.
Pittards PLC 2021 Annual Report Page 14 of 81 www.pittards.com
Community is at the heart of Pittards, our Ethiopian tannery grows
its own mangoes and coffee from planting that marked the
millennium there. The same grounds host multiple beehives that
also supply honey. Support extends to our team members’
families through the on-site clinic and a programme of new
classroom builds at the local school.
Pittards PLC 2021 Annual Report Page 15 of 81 www.pittards.com
Chief Executive Officer’s report continued
Sustainable development strategy road map
A road map to sustainable development cannot be routed via one initiative, rather our strategy mimics nature’s constant striving for equilibrium and
is built on a balanced portfolio across the whole business. In line with this thinking our strategy focuses on several key areas:
•
Ethical sourcing
•
Efficient use of resources
•
Responsible manufacturing
•
A reduced carbon footprint
Sustainable development objectives
•
Carbon decrease of 10% by 2025 – Achieved
•
A further reduction of 10% in Carbon emissions by 2025
•
Waste generation and water consumption decreases by 20% by 2025
•
Establish self-generated renewable energy
•
Develop a Repurposed Leather range of leather goods
•
Develop a leather goods repair facility in the UK
In addition, we continue with our apprenticeship programme, building more classrooms in Ethiopia and planting trees, having planted 12,000
trees already.
Pittards PLC 2021 Annual Report Page 16 of 81 www.pittards.com
In 2021 we rolled out our Footwear Services
operation, an operation that links technical
and account management expertise in the UK
with volume manufacturing options in
Ethiopia. The investment in sampling
machinery in the UK allows brands to select
bespoke support from sampling and short
runs through to complete development and
supply chain management.
Pittards PLC 2021 Annual Report Page 17 of 81 www.pittards.com
Stakeholder engagement shaping our decisions in 2021 (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.
As the group recovered from the initial impact of COVID, the Board resumed a more normal periodic review, although maintained a balance of virtual
and physical meetings due to the ongoing need for social distancing during the year. The Board plans to maintain a hybrid approach to meetings.
Our shareholders were unable to attend the AGM in 2021 due once more to COVID-19 restrictions, however we provided them with a means to
update the Board with any questions ahead of the AGM via a digital platform.
We actively sought to communicate more regularly with suppliers, with average days to pay suppliers rising by 7 days to 65 days (2020: 58 days).
The dialogue and decision making tries to balance the competing pressures, so we are fairly balanced to suppliers, customers, and shareholders.
We took a positive approach to UK government initiatives, particularly the schemes initiated by the Department for Work and Pensions, to protect
jobs and get business starting back stronger. Two such initiatives were the apprentice programme and Kickstart. We believe they have both been
positive initiatives to develop a broader more diverse team, improve succession planning, whilst at the same time addressing broader economic
aims.
Sustainability strategy development
The company has always been committed to continuous improvement of sustainability and a key member of the internationally recognised Leather
Working Group and also a founder member of Leather Naturally. The board agreed that further leadership, resources, and effort should be planned
and deployed to develop a broader sustainability strategy, the group’s Chief Technical Officer is leading this with a package of initiatives to support
our evolving sustainability strategy. An example of this was the technical support provided to Vivobarefoot, a new customer of the Ethiopian
subsidiary, on their goals to develop a more sustainable product and address a broader coverage of sustainability.
Employee development 2021
Our team has developed through investment in apprentice and kickstart staff, whilst also introducing management trainee programs, and direct
recruitment. The objective is maintaining a balanced, diverse workforce, that is both agile and cost effective. We are pleased to have delivered a
more balanced team through an extensive recruitment drive to bring in both experienced and less experienced operatives to support our production
cycle. This has met both national and local government objectives to reduce unemployment, whilst benefiting the community and business.
Pittards business apprentices, Caitlin, Ollie and Ryan; part of our investment in future skills.
Pittards PLC 2021 Annual Report Page 18 of 81 www.pittards.com
Stakeholder engagement shaping our decisions in 2021 (Section 172) - continued
Management remuneration 2021
Directors and senior staff supported the business as it recovered from the initial impact of Covid by agreeing to a pay freeze for 2021 with any bonus
dependent on both profit and cash generation. This decision was designed to balance stakeholder interest, including shareholders, bank, and staff
(job protection). We would like to thank our staff for their support and commitment.
Returns to shareholders
The Board implemented a modest Q3-2022 share buyback. In arriving at this decision, the Board considered the financial performance of H1-2021
and wider shareholder views. It may consider further buybacks as and when appropriate.
The board recognised the majority opinion of shareholders and reintroduced dividend payments as the Group returned to profitability, following a
sixteen-year absence from the dividend list. The Board plans a progressive dividend policy subject to satisfactory trading performance.
Sheep skin strategic holding Q4 2021
We took the decision during 2021 to increase purchasing, and production, of the unique sheep skins that we source through our Ethiopian subsidiary.
The decision, to increase the supply of skins, was taken in the light of the unrest and COVID19 in Ethiopia and the much-publicised issues with
global logistics. This had an adverse effect on cash and inventory, in the short term, but was a prudent strategic decision and has put the Group in
a strong position to supply this unique leather to its customers in 2022.
Long term funding
We have not sought any new, long-term loans during 2021, and our CBILS 6 year £1m term loan reverted to commercial terms in June 2021. The
Group’s bankers, Lloyds Bank plc, continue to be supportive of our strategy. We are not actively looking at new funding lines, as progressively
reducing debt remains a strategic objective.
Pittards PLC 2021 Annual Report Page 19 of 81 www.pittards.com
Chief Executive Officer’s report (continued)
Outlook for 2022
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.
Looking forward to 2022, we have started the year with a better order book than each of the last three years and we believe that this higher level of
demand is sustainable. In addition to our traditional markets, which have recovered well, we are also well placed to respond to our new strategic
market sectors of interiors (automotive, aviation and mass transit), larger shoe brands and shoe production in Ethiopia which are set for faster growth
than 2021.
We have during March 2022 signed a letter of intent with Vivobarefoot with planned sales in excess of $2m USD. We aim to manufacturer and sell
over 50% more shoes to this customer compared to 2021, which assists in underpinning our confidence to continue to grow back sales.
With a more efficient cost base we will also be able to respond more positively to recovering demand in the global marketplace, and new capital
projects implemented during 2021 will allow us to grow capacity in a more efficient way during 2022. Recruitment is expected to be significantly
lower in 2022 than 2021, given that the newly shaped team, is now established.
Our commitment to our sustainable and responsible supply chains are well established and we will continue to build upon our continuous
improvement culture which is consistent with the aspirations of our growth customers.
Our employees have come through many challenges during 2021. By working together and evolving our working practices we will continue to
develop our flexible approach allowing agile responses to our customers’ needs.
Although there are still some unpredictable macro-economic factors, specifically the instability in Europe, and inflationary cost pressures, our
confidence is growing as we build a better-balanced business with a broader range of customers. We are conscious of the unstable situation in
Ukraine and Russia, and specifically the sanctions environment. Our direct exposure to those territories is not material. We do anticipate that there
will be some challenges arising in global markets more generally.
Whilst the reliability of global supply chains remains a doubt, we will continue to focus on inventory levels and efficient use of working capital.
We remain committed to a more balanced, agile business and we continue to believe that opportunities outweigh risks to build on our 2021 full year
performance.
Reg Hankey
Chief Executive Officer
23 March 2022
Pittards Ethiopia team members with finished Vivobarefoot shoes
Pittards PLC 2021 Annual Report Page 20 of 81 www.pittards.com
Investment in new machinery underlines a
drive for improved efficiencies and our
commitment to meeting sustainability targets.
The Fast & Furious vacuum drier, (pictured)
helps reduce throughput times by cutting the
time required for drying leather.
Pittards PLC 2021 Annual Report Page 21 of 81 www.pittards.com
Chief Financial Officer’s report
Financial review
Sales revenue increased to £19.7m (2020: £15.2m), despite periods of substantial disruption, with gross profit rising strongly to £5.5m (2020: £3.2m).
We achieved improved gross margins, underpinned by the low-cost facility in Ethiopia, greater operational efficiency through lower labour cost per
output and a broader product range with better margin contribution.
Cost savings remained a key feature of 2021, with annual cost savings of £2m heading into 2021 compared to 2019 , whilst 2020 benefitted from
furlough support of £0.6m reducing our costs (2021: Nil). We are not reliant on any form of cash deferment or subsidy during or at the end of the
financial year. We did claim £185k of kick start grant funds, to support the kick start program, which reduced staff costs.
Overall inventory levels rose to £15.3m (2020: £15.0m) reflecting the strategic increased purchases of raw material in the second half in the light of
challenging logistics, and unrest in Ethiopia, this was offset by a £1m reduction in older slow-moving stock. We are confident we will build on the
progress made in 2021 and 2020, as our newly aligned capacity plan and reprocessing of existing stock to broaden utilisation of slower moving
stock, continues to take effect.
Working capital has also been adversely affected by the changing shape of the business. Credit terms to new markets and customer mix have
resulted in a modest increase in debtor terms and similarly to balance working capital creditors days which grew by 7 days .
Net debt was £10.69m ( £10.12m: 2020).
One of the Group’s key financial measures is gearing. Our gearing rose to 81% at the end of 2021 (2020: 73%) we remain committed to progressively
reducing gearing.
End of year financial position and commitments
Total net debt (including lease obligations and overdrafts) increased to £10.69m as of 31 December 2021. Headroom on Group facilities was £2.6m
(£3.1m: 2020). The UK business achieved positive free cashflow being cashflow from operations and after working capital excluding capital
expenditure for the year, despite rising inventory.
Net assets decreased from £13.9m to £13.1m, due to entirely to the devaluation of the Ethiopian BIRR on Ethiopian held assets. The net assets of
the group include £2.4m of net assets that are held in Ethiopia.
The Group is actively seeking to mitigate foreign exchange risk as far as practical, and US dollar remains a key risk which is managed. Due to
economic uncertainty, we eased the hedging strategy in 2021 by lowering US$ cover to 40% and extending it to June 2023.
We plan modest capital expenditure in 2022, of circa £0.4m across the Group after a significant spend in 2021 of £0.8m, but these spends will be
carefully targeted with short payback, operational efficiencies and growth prospects. We have not yet formally committed to this spend.
With the reduction in transit stock likely to materially reduce by the end of the first half of 2022, we anticipate a modest fall in inventory levels and
improving cash headroom, as our purchasing commitment for inventory is expected to be lower during the first half of 2022.
Gross margins
Gross margin increased to 28% (2020: 21%).
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 39 countries over 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.
Pittards PLC 2021 Annual Report Page 22 of 81 www.pittards.com
Chief Financial Officer’s report (continued)
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. We have not traded with Russian
companies during recent years, including the full year 2021 or so far in 2022.
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. The uncertainty of a
lock down appears more predictable now. The lockdown enforced in January 2021 did not materially impede 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 the US dollar and Euro. In 2021, the Group entered foreign forward currency contracts to hedge
against movements in the US dollar, adopting a cash flow hedging strategy, in response to the anticipated continued volatile currency markets. The
Group has moderate forward cover of 40% through to June 2023 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 2021. We view this as short term in nature, and it has not impeded business operations.
Despite the unrest in Ethiopia during 2021 we continued to trade as normal with no disruption to 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 supply driven, with some of its purchases
derived from Europe. The global situation has a less optimistic tone at the start of 2022, which has naturally created uncertainty for all businesses,
and ours is no exception, although in the near-term we have not experienced any material impact to our staff, business, or customers.
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.
Energy cost 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.
Pittards PLC 2021 Annual Report Page 23 of 81 www.pittards.com
Chief Financial Officer’s report (continued)
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 sufficient
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.
Share buybacks and dividends
During November 2021, the company paid a dividend to all shareholders of 0.5p per share, excluding ordinary shares held in treasury, and a final
dividend has been proposed of 0.5p per ordinary share and, if approved, will be recorded within the financial statements for the year ended 31
December 2022. The company purchased a further 40,000 of its own ordinary shares during Q3-2021, with treasury shares rising to 974,210,
representing 7% of the issued share capital.
Richard Briere
Chief Financial Officer
23 March 2022
Pittards PLC 2021 Annual Report Page 24 of 81 www.pittards.com
Directors, officers, and advisers
Non-Executive directors
S Yapp FCMA MBA, Chairman, non-executive B C
Stephen Yapp (64) 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 (73) joined the Group in February 2014. He is non-executive Chairman of Mulberry Group plc, and a directorship of Hestercombe
Gardens 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 of experience.
L M Cretton BA (Hons), non-executive A B
Louise Cretton (64) 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 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 , Company Secretary
Reg Hankey (66) 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 (resigned 9th April 2022)
Richard Briere (48) 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 2021 Annual Report Page 25 of 81 www.pittards.com
Directors, officers, and advisers (continued)
Associate Directors
J Loxston BA(Hons), FSLTC, Chief Technical Officer
Jon (53), 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 (44) 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
Investor communications: Wallbrook PR, 75 King William St, London EC4N 7BE
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 formally registered as statutory directors
Pittards PLC 2021 Annual Report Page 26 of 81 www.pittards.com
Pittards leather features on-stage in Frozen in
both London and Sydney. The leather for Elsa’s
gloves was custom dyed before being handmade
into this intricately embroidered style by our
skilled development team.
Photo credit: Trevor Leighton © Disney
Pittards PLC 2021 Annual Report Page 27 of 81 www.pittards.com
Corporate Governance report
for the year ended 31 December 2021
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 two executive members and three non-executive directors whose
biographies are on pages 24 and 25, and further includes 2 executive associated directors as key senior management 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 2021 Annual Report Page 28 of 81 www.pittards.com
Corporate Governance report
for the year ended 31 December 2021 (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 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. 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 Group’s 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 two 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 2021 Annual Report Page 29 of 81 www.pittards.com
Corporate Governance report
for the year ended 31 December 2021 (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 its strategies and
initiatives to balance the Group’s risks.
Pittards PLC 2021 Annual Report Page 30 of 81 www.pittards.com
Corporate Governance report
for the year ended 31 December 2021 (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 2021, 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
Attended
Eligible
Attended
Eligible
Attended
Eligible
Attended
Eligible
R Briere 1
6
6
2
-
-
-
-
-
L Cretton
6
6
2
2
1
1
-
-
G Davis
6
6
2
2
1
1
-
-
R Hankey
6
6
-
-
-
-
-
-
S Yapp
6
6
-
-
1
1
-
-
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 2021 the Board’s activities included
•
Consider and approve a dividend policy and payment of dividend both interim and proposed final dividend
•
Approve and consider approach to share buybacks
•
Approval of the Annual Accounts and Reports 2021 to release to market and present to AGM
•
Set the Group’s 2022 budget, business plan and endorse the plan to maintain headcount
•
Set out a new brand proposition and new name for the group
•
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
•
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 2021 Annual Report Page 31 of 81 www.pittards.com
Corporate Governance report for the year ended 31 December 2021 (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 grant funding (Kickstart)
•
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
•
Closure of the ESOP scheme during 2021
•
Decide on purchase of strategic stock to mitigate macro environment instability in Ethiopia
•
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 9.
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 2022
Pittards PLC 2021 Annual Report Page 32 of 81 www.pittards.com
Our Yeovil finished product operation can flex from
start-up to volume production for brands looking to
make in the UK. This agility helped Pets Corner to
meet the high demand premium accessories
generated by post-pandemic dog ownership.
Pittards PLC 2021 Annual Report Page 33 of 81 www.pittards.com
Directors’ report
for the year ended 31 December 2021
The directors submit their report together with the audited consolidated financial statements of the Group and the Company for the year ended 31
December 2021.
Dividends
An interim dividend of 0.5p per share was paid in respect of 2021 (2020: £nil) and the directors are recommending the payment of a final dividend
of 0.5p (2020: £nil) per share at the May AGM, if approved will be included in the 2022 financial statements, making a total payment of 1p per
ordinary share for the year. The ex-dividend date will be 30th June 2022.
Going concern
Whilst the pandemic created an initial shock for the business, the trading environment during the pandemic did not unduly affect the business. Our
assumptions for going concern include no further government support or accessible cost reductions. Sensitivity analysis has been performed on
forecasts prepared including scenarios with reduced 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 2021, with consistent delivery against internal forecasts. Since the year end our expiring banking facilities have been
subject to discussions on their revision and renewal; agreement has been reached to renew facilities, although formal paper work will be completed
at the end of March 2022, renewing facilities until March 2023.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.
Research and development
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 2021 Annual Report Page 34 of 81 www.pittards.com
Directors’ report
for the year ended 31 December 2021 (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.
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 2021, 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 period 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 with, 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.
Banking facilities
As disclosed in Note 1b of the financial statements, our expiring banking facilities have been subject to discussions on their revision and renewal;
agreement has been reached and formalised, renewing facilities until March 2023. Headroom on our facilities at the year end was £2.6m, down from
£3.1m 2020, due mostly due to repayments on term loans, including Coronavirus Business Interruption Loan (CBILS), which has a 5 year term
remaining, being repaid in full in 2026.
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 EOM payment terms.
Trade payables at the year-end represented 65 days’ purchases (2020: 58 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 2021 Annual Report Page 35 of 81 www.pittards.com
Directors’ report
for the year ended 31 December 2021 (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 significant 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 numerous 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 18.
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.
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 2021. 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 and older process
equipment being replaced with newer more efficient items. 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, improving plant effectiveness and efficient planning to closely matching our capacity requirements.
GHG emissions and energy use data for the period 1st January 2021 to 31st December 2021
2021
2020
Combustion of fuel and operation of facilities (kg
CO2e)
1,467,396
1,186,397
Electricity, heat, steam, and cooling purchase for
own use (kg CO2e)
625,721
539,560
Total gross emissions (kg CO2e)
2,093,118
1,725,957
Energy consumption in kWh used to calculate above
emissions
10,929,285
8,713,434
Intensity measure of kg of CO2e gross emissions
per m2 leather manufactured
1.59
2.09
Pittards PLC 2021 Annual Report Page 36 of 81 www.pittards.com
Directors’ report
for the year ended 31 December 2021 (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 8th March 2022
shown in the table below. No significant movements impacting the profile of the key shareholders have been noted since 31 December 2021.
Shareholder
Holding 50p
share
%
holding
Mr John A Rendell
3,215,000
24.83%
Downing Corporate Finance
1,771,814
13.68%
Ruffer
1,131,250
8.74%
Pension Protection Fund
790,747
6.11%
Rath Dhu
550,000
4.25%
Armstrong Investments Limited
475,000
3.67%
Denton Pension Mgt
433,333
3.35%
Mr Reginald Hankey
380,848
2.94%
Hargreaves
Lansdown
Asset
management
296,886
2.29%
Pittards PLC 2021 Annual Report Page 37 of 81 www.pittards.com
Directors’ report
for the year ended 31 December 2021 (continued)
Directors
The persons named on pages 24 and 25 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 974,210 in treasury (2020: 934,210) ). Previously the scheme was uncapped.
Richard Briere, the CFO, served throughout the financial year but leaves the business in April 2022, with interest in 135,000 ordinary shares, and
retains growth shares within the LTIP scheme having fully matured and therefore also retains his LTIP interest in the business.
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
R Briere
LM Cretton
20%
5%
GP Davis
5%
RH Hankey
40%
S Yapp
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 2023 (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 2022 and signed on its behalf by:
Richard Briere
Chief Financial Officer
Pittards PLC 2021 Annual Report Page 38 of 81 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 UK and parent Company financial
statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the UK.
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 UK have been followed for the Group financial statements and IFRSs as adopted by
the UK 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 page 24 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 UK, 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 UK, 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 2021 Annual Report Page 39 of 81 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 2022
Pittards PLC 2021 Annual Report Page 40 of 81 www.pittards.com
The Guardian article that explored the future of British fashion
through a lens of domestic manufacturing featured Pittards at
its heart. Our flexible volume offering combined with vertically
integrated solutions from leather to final stitch provides third-
party brands with supply-chain visibility and real options when
considering rising shipping and import costs.
Pittards PLC 2021 Annual Report Page 41 of 81 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 2021 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 UK adopted international accounting standards
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 2021 and of the
group’s profit for the year then ended;
▪
the group and parent company’s financial statements have been properly prepared in accordance with UK adopted
international accounting standards; 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.
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.
KEY AUDIT MATTERS
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the
current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) we identified, including those
which had the greatest effect on the overall audit strategy, the allocation of resources in the audit; and directing the efforts of the engagement team.
These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not
provide a separate opinion on these matters.
Pittards PLC 2021 Annual Report Page 42 of 81 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
we
understand
that
inventory
is
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.
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
and
confirmed
they
had
been
appropriately applied.
▪
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 largely
been applied consistently with the prior year. The
methodology for provisioning is broadly in line with the prior
year. We noted that certain default provision calculations
were overridden where more relevant information was
available.
▪
We reviewed the relevant accounting policies, key
judgements and estimation uncertainty as stated in
the accounts to assess their appropriateness and
clarity.
▪
We reviewed and reperformed consolidation journals
for losses held in inventory, whereby the parent
company acquired inventory from loss making
subsidiaries.
From our work performed, we did not identify any material
issues.
Pittards PLC 2021 Annual Report Page 43 of 81 www.pittards.com
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
£196,000 (2020: £215,000)
£178,000 (2020: £193,000)
Performance materiality
75% of financial statement
materiality
75% of financial statement
materiality
Basis for determination
1% of revenue
(2020: Composite approach
between gross assets (1%) and
turnover (1%))
1% of revenue
(2020: Composite approach
between gross assets (1%) and
turnover (1%))
Misstatements reported to the
audit committee
£6,000 (2020: £6,600)
£5,000 (2020: £6,600)
The range of materiality at the three significant components, excluding the parent company, subject to full scope audits: £23,000 -
£57,000.
Rationale for the benchmark applied: Based on the benchmarks 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 and is a generally accepted auditing benchmark.
This differs to the approach adopted in the prior year whereby the advent of COVID in 2020 had a disproportionate impact on turnover
compared to gross assets. As such in the prior year a composite of 1% of turnover and 1% of gross assets was used.
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 continued impact of Covid-19 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
OTHER INFORMATION
Pittards PLC 2021 Annual Report Page 44 of 81 www.pittards.com
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;
Responsibilities of directors
As explained more fully in the directors’ responsibilities statement set out on pages 38 and 49, 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.
Pittards PLC 2021 Annual Report Page 45 of 81 www.pittards.com
Firstly, there are laws and regulations that directly affect the financial statements, including financial reporting legislation (including related companies
legislation), distributable profits legislation and taxation legislation. We assessed the extent of compliance with these laws and regulations as part
of our procedures on the related financial statement items. We also evaluated management’s incentives and opportunities for fraudulent manipulation
of the financial statements and determined that the principal risks related to the misstatement of the result for the year and inventory provisioning.
We audited the risk of management override of controls, including through substantively testing journal entries and other adjustments for
appropriateness, and evaluating the business rationale of significant transactions outside the normal course of business.
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 inventory and debtor provisioning and property valuations.
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.
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
23rd March 2022
Pittards PLC 2021 Annual Report Page 46 of 81 www.pittards.com
Consolidated Income Statement
For the year ended 31 December 2021
2021
2020
Note
£'000
£'000
Revenue
3
19,655
15,233
Cost of sales
(14,198)
(12,059)
Gross profit
5,457
3,174
Distribution costs
(1,631)
(1,632)
Currency gains / (losses) expensed
266
(48)
Administrative expenses
(3,176)
(3,268)
Profit/(Loss) before operations and finance costs
916
(1,774)
Finance costs
8
(459)
(508)
Profit/(Loss) before taxation
4
457
(2,282)
Taxation
9
(182)
(144)
Profit / (Loss) after taxation
275
(2,426)
Earnings / (Loss) per share
Basic (pence per share)
10
2.12
(17.67)
Diluted (pence per share)
10
2.12
(17.67)
Pittards PLC 2021 Annual Report Page 47 of 81 www.pittards.com
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2021
2021
2020
£'000
£'000
Profit / (Loss) for the period after taxation
275
(2,426)
Other comprehensive income / (expense)
Revaluation of land and buildings
11
453
508
Revaluation of land and buildings – unrealised exchange (loss)
(517)
(575)
(64)
(67)
Unrealised exchange (loss) on translation of overseas subsidiaries
(551)
(860)
Fair value (loss) / gain on foreign currency cash flow hedges
(381)
6
(932)
(854)
Other comprehensive (loss)
(996)
(921)
Total comprehensive (loss) for the period
(721)
(3,347)
Pittards PLC 2021 Annual Report Page 48 of 81 www.pittards.com
Balance sheets
Group
Company
As at 30 December 2021
2021
2020
2021
2020
Note
£'000
£'000
£'000
£'000
Assets
Non-current assets
Property, plant and equipment
11
9,700
9,599
5,950
5,530
Intangible assets
12
63
75
63
75
Investment in Subsidiary
undertakings
27
-
-
378
378
Loans receivable
25
-
-
1,607
1,765
Deferred income tax asset
19
100
100
100
100
Total non-current assets
9,863
9,774
8,098
7,848
Current assets
Inventories
13
15,316
15,021
12,454
10,916
Trade and other receivables
14
3,304
2,848
8,778
5,995
Cash and cash equivalents
51
85
8
8
Total current assets
18,671
17,954
21,240
16,919
Total assets
28,534
27,728
29,338
24,767
Liabilities
Current liabilities
Trade and other payables
15
3,830
2,863
6,289
2,730
Interest bearing loans, borrowings and overdrafts
16
7,783
6,909
6,226
4,881
Total current liabilities
11,613
9,772
12,515
7,611
Non-current liabilities
Deferred income tax liability
19
900
804
-
-
Interest bearing loans, borrowings and overdrafts
17
2,955
3,294
2,338
2,391
Total non-current liabilities
3,855
4,098
2,338
2,391
Total liabilities
15,468
13,870
14,853
10,002
Net assets
13,066
13,858
14,485
14,765
Equity
Share capital
20
6,944
6,944
6,944
6,944
Share premium
21
2,984
2,984
2,984
2,984
Capital reserve
21
6,475
6,475
-
-
Own shares reserve
21
(375)
(850)
(375)
(850)
Share based payment reserve
21
56
47
56
47
Cash flow hedge reserve
21
(88)
293
(88)
293
Translation reserve
21
(5,473)
(4,922)
-
-
Revaluation reserve
21
1,035
1,099
179
179
Retained earnings
21
1,508
1,788
4,785
5,168
Total equity
13,066
13,858
14,485
14,765
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 profit of £0.2m (2020: loss of £1.5m).
The financial statements on pages 46 to 75 were approved and authorised for issue by the Board of directors on 23 March 2022 and signed on its behalf by:
Richard Briere - Chief Financial Officer
Company
Number -
0102384
Pittards PLC 2021 Annual Report Page 49 of 81 www.pittards.com
Consolidated Statement of Changes in Equity
For the year ended 31 December 2021
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 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
-
-
-
-
-
-
-
-
(2,426)
(2,426)
Other comprehensive (loss):
Gain on the revaluation of buildings
-
-
-
-
-
-
-
522
-
522
Unrealised exchange gain/(loss) on
translation of foreign subsidiaries
-
-
-
-
-
-
(860)
(589)
-
(1,449)
Fair value losses on foreign
currency cash flow hedges
-
-
-
-
-
6
-
-
-
6
Total other comprehensive (loss)
-
-
-
-
-
6
(860)
(67)
-
(921)
Total comprehensive income/(loss) for the
year
-
-
-
-
-
6
(860)
(67)
(2,426)
(3,347)
Share-based payment expense
-
-
-
-
40
-
-
-
-
40
Lapse of LTIP
-
-
-
-
(288)
-
-
-
288
-
Purchase of own ordinary shares
20
-
-
-
(355)
-
-
-
-
-
(355)
As at 1 January 2021
6,944
2,984
6,475
(850)
47
293
(4,922)
1,099
1,788
13,858
Comprehensive income/(loss) for
the year:
Profit for the period after
taxation
-
-
-
-
-
-
-
-
275
275
Other comprehensive
income/(loss):
Gain on the revaluation of buildings
-
-
-
-
-
-
-
453
-
453
Unrealised exchange gain/(loss) on
translation of foreign subsidiaries
-
-
-
-
-
-
(551)
(517)
-
(1,068)
Fair value losses on foreign
currency cash flow hedges
-
-
-
-
-
(381)
-
-
-
(381)
Total other comprehensive
(loss)
-
-
-
-
-
(381)
(551)
(64)
-
(996)
Total comprehensive
income/(loss) for the period
-
-
-
-
-
(381)
(551)
(64)
275
(721)
Share-based payment expense
-
-
-
-
9
-
-
-
-
9
Purchase of own ordinary shares
-
-
-
(20)
-
-
-
-
(4)
(24)
Dividends paid to equity holders
10b
-
-
-
-
-
-
-
-
(65)
(65)
ESOP scheme closed
21
-
-
-
495
-
-
-
-
(486)
9
As at 30 December 2021
6,944
2,984
6,475
(375)
56
(88)
(5,473)
1,035
1,508
13,066
Pittards PLC 2021 Annual Report Page 50 of 81 www.pittards.com
Company Statement of Changes in Equity
For the year ended 31 December 2021
Share
capital
Share
premium
Capital
Reserve
Own
share
reserve
Share
based
payment
reserve
Cash
flow
hedge
reserve
Revaluation
reserve
Retained
Earnings
Total
Equity
Note
£'000
£'000
£'000
£'000
£'000
£'000
£'000
£'000
£'000
As at 1 January 2020
6,944
2,984
-
(495)
295
287
-
6,340
16,355
Comprehensive income/(loss) for
the year:
Loss for the period after taxation
-
-
-
-
-
-
-
(1,460)
(1,460)
Other comprehensive
income/(loss):
Gain on the revaluation of buildings
-
-
-
-
-
-
179
-
179
Fair value losses on foreign
currency cash flow hedges
-
-
-
-
-
6
-
-
6
Total other comprehensive income
-
-
-
-
-
6
179
-
185
Total comprehensive income/(loss)
for the period
-
-
-
-
-
6
179
(1,460)
(1,275)
Share-based payment expense
-
-
-
-
40
-
-
-
40
Purchase of own shares
20
-
-
-
(355)
(288)
-
-
288
(355)
As at 1 January 2021
6,944
2,984
-
(850)
47
293
179
5,168
14,765
Comprehensive income/(loss) for
the year:
Profit for the period after taxation
-
-
-
-
-
-
-
172
172
Other comprehensive income:
Fair value losses on foreign
currency cash flow hedges
-
-
-
-
-
(381)
-
-
(381)
Total other comprehensive income
-
-
-
-
-
(381)
-
-
(381)
Total comprehensive (loss)
/income for the period
-
-
-
-
-
(381)
-
172
(209)
Share-based payment expense
-
-
-
-
9
-
-
-
9
Purchase of own shares
20
-
-
-
(20)
-
-
-
(4)
(24)
Dividends paid to equity holders
10b
-
-
-
-
-
-
-
(65)
(65)
ESOP scheme closed
21
-
-
-
495
-
-
-
(486)
9
As at 30 December 2021
6,944
2,984
-
(375)
56
(88)
179
4,785
14,485
Pittards PLC 2021 Annual Report Page 51 of 81 www.pittards.com
Statement of cashflows
For the year ended 31 December 2021
Group
Company
2021
2020
2021
2020
Note
£'000
£'000
£'000
£'000
Cash flows from operating activities
Cash generated from operations
22
181
549
(139)
218
Tax paid
(83)
16
-
-
Interest paid
(447)
(489)
(194)
(159)
Net cash (used in) from operating activities
(349)
76
(333)
59
Cash flows from investing activities
Purchases of property, plant and equipment
(372)
(252)
(325)
(191)
Purchases of intangible assets
(11)
(12)
(11)
(12)
Proceeds from sale of plant
42
-
42
-
Net cash (used) in investing activities
(341)
(264)
(294)
(203)
Cash flows from financing activities
Proceeds from borrowings
-
3,334
-
2,750
Repayment of bank loans
(733)
(1,951)
(391)
(1,209)
Repayment of obligations under finance leases
(21)
(71)
(15)
(71)
Payment of equity dividends
10b
(65)
-
(65)
-
Purchase of own ordinary shares
20
(20)
(355)
(20)
(355)
Net cash (used) / generated in financing activities
(839)
957
(491)
1,115
(Decrease) / Increase in cash and cash equivalents
(1,529)
769
(1,118)
971
Cash and cash equivalents at beginning of year
(5,077)
(6,131)
(4,586)
(5,563)
Exchange gains/(losses) on cash and cash equivalents
238
285
(45)
6
Cash and cash equivalents at end of
year
(6,368)
(5,077)
(5,749)
(4,586)
Pittards PLC 2021 Annual Report Page 52 of 81 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 2021 and 31 December 2020 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. Lloyds have confirmed their commitment to the business and renewal of the facilities through to 31 March 2023 and although a
formal agreement has yet to be signed, Lloyds have written a letter to confirm the facility has been agreed with credit committee and will be in place
by the end of March 2022
In light of the ongoing geopolitical and 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 reduction in sales from 2021 levels of 10% with no associated cost savings. This represents a
discount of 25% to our ongoing order book. This analysis shows that there is adequate cash headroom in bank facilities for the next 12 months. The
Board consider there are no material doubts in respect of the going concern status of the Group. 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 2021 Annual Report Page 53 of 81 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 accruals 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 47 and 49).
(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
2%
Building improvements
7-20%
Plant, machinery, and motor vehicles
6-33%
Pittards PLC 2021 Annual Report Page 54 of 81 www.pittards.com
1. Statement of accounting policies (continued)
The Group and Company adopt a revaluation policy in respect of Land and Buildings.
The Company 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 at the end of 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. Having considered comparable local property sales during the year the directors do not consider
the valuation of the Yeovil site to have materially changed since December 2020. Buildings in Ethiopia were revalued at December 2021 and
December 2020 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.
The devaluation of the Ethiopian Birr has since translation losses to also be processed through 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 cost methods. 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 2021 Annual Report Page 55 of 81 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 2021 Annual Report Page 56 of 81 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.
(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.
(u) Dividends
Final and interim dividends are recognised in the Group’s financial statements in the period in which the dividends are paid.
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 December 2020, on the UK’s Yeovil site which is our principal place of production and head office, the directors believe it is
appropriate to maintain this value as the current market value in 2021. The Ethiopian building assets were valued on 31 December 2021.
Pittards PLC 2021 Annual Report Page 57 of 81 www.pittards.com
3. Business segments information
2021
UK
Ethiopia
Consolidation
Division
Division
adj
Total
£'000
£'000
£'000
£'000
Revenue from customers
18,227
4,956
(3,528)
19,655
Inter-segmental trading
-
(3,528)
3,528
-
18,227
1,428
-
19,655
Gross profit
4,528
902
27
5,457
Profit/ (Loss) before tax
367
(536)
626
457
Assets
29,426
8,460
(9,352)
28,534
Liabilities
(14,941)
(6,071)
5,544
(15,468)
Net assets
14,485
2,389
(3,808)
13,066
2020
UK
Ethiopia
Consolidation
Total
Division
Division
adj
Total
£'000
£'000
£'000
£'000
Revenue from customers
13,622
4,062
(2,451)
15,233
Inter-segmental trading
(171)
(2,280)
2,451
-
13,451
1,782
-
15,233
Gross profit
3,023
413
(262)
3,174
(Loss) before tax
(955)
(1,327)
-
(2,282)
Assets
31,506
9,219
(12,997)
27,728
Liabilities
(14,894)
(6,703)
7,727
(13,870)
Net assets
16,612
2,516
(5,270)
13,858
Geographical analysis of revenue (based on the customer's country of domicile)
2021
UK
Ethiopia
Division
Division
Total
£'000
£'000
£'000
UK
2,422
361
2,783
Europe
450
313
763
North America
126
-
126
Far East and Rest of World
15,229
754
15,983
18,227
1,428
19,655
2020
UK
Ethiopia
Total
Division
Division
Total
£'000
£'000
£'000
UK
1,995
141
2,136
Europe
1,172
458
1,630
North America
97
34
131
Far East and Rest of World
10,187
1,149
11,336
13,451
1,782
15,233
There are 3 customer who each represent more than 10% of the revenue of the group. (2020:3)
Pittards PLC 2021 Annual Report Page 58 of 81 www.pittards.com
4. Profit before taxation
Group
2021
2020
£'000
£'000
Depreciation of property, plant and equipment ( Note 11 )
475
616
Amortisation of intangible assets ( Note 12 )
23
51
Low value asset lease expense
-
16
Staff costs ( Note 5)
7,027
6,390
Employee benefits expense (life and health insurances)
92
72
Research and development expenditure
67
63
Net (gain) / loss on foreign currency translation
(266)
48
Group
2021
2020
Auditors remuneration
£'000
£'000
The analysis of fees payable to the Group's auditor are as follows:-
Fees payable to the Company’s auditor in respect of the audit of the parent company and
consolidated financial statements (PKF Francis Clark)
52
50
Fees payable to the Company's auditor in respect of the audit of subsidiaries in Ethiopia (HST)
3
3
Fees payable to the Group's auditor in respect of assistance review of unaudited interims
4
4
Total fees payable to the Company's auditors
59
57
5. Staff costs
The average number of employees of the Group and Company (including directors), on an average monthly basis was:
Group
Company
2021
2020
2021
2020
No.
No.
No.
No.
Production
836
848
125
105
Sales, distribution and administration
267
243
61
58
Directors
5
5
5
5
1,108
1,096
191
168
Their aggregate remuneration comprised:
Wages and salaries
6,227
5,656
5,569
4,607
Social security costs
488
455
488
455
Other pension costs
312
279
155
157
7,027
6,390
6,212
5,219
Staff costs are shown net of government grants received of £0.186m (Kick start Scheme) (2020: £0.65m - furlough scheme)
Pittards PLC 2021 Annual Report Page 59 of 81 www.pittards.com
6. Directors' remuneration
Salary &
fees
Profit
related
pay
Benefits
Pension
contributions
2021
2020
£'000
£'000
£'000
£'000
£'000
£'000
Executive
RH Hankey
210
-
6
11
227
208
R Briere
127
-
3
6
136
125
Non-Executive
LM Cretton
40
-
-
-
40
36
GP Davis
40
-
-
-
40
36
S Yapp
70
-
-
-
70
65
487
-
9
17
513
470
Key management compensation
Key management represents the directors of the Internal Executive Board, this does not include Executive Directors outlined above.
The compensation paid or payable to key management for employee services is shown below:
2021
2020
£'000
£'000
Salaries, bonus and other short-term
benefits
208
210
Pension contributions
11
11
219
221
Nil options (2020: Nil), remain outstanding for key management personnel in relation to 2017 Save As You Earn scheme which ceased 30th June 2020.
The company no longer operates a SAYE scheme.
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. There are currently no SAYE schemes in operation or planned for 2022.
Details of the share-based payment cost recognised during the year are:
2021
2020
£'000
£'000
At 1 January
-
45
Share-based payment expense
-
2
At 31 December
-
47
Details of the SAYE share options
extant during the year are:
2021
2021
2020 2020
No of
options
Exercise
price
No of
options
Exercis
e price
Outstanding at the beginning of the
year
-
-
131,249
65.6
Lapsed during the year
-
-
(131,249)
65.6
Outstanding at the end of the year
-
-
-
65.6
Pittards PLC 2021 Annual Report Page 60 of 81 www.pittards.com
2016 Long term Incentive Plan (LTIP)
On 26 September 2016, a Long Term Incentive Plan (LTIP) was granted to certain members of the Board. The vesting period is four years and is dependent upon
the attainment of a minimum specific share price at the exercise date. The directors are entitled to shares to the value of specific percentages granted, based on
the excess value generated at the exercise date. Richard Briere our Chief Finance Officer was added to the scheme during 2019.
Details of the share-based payment costs recognised during the year are:-
£'000
£'000
2021
2020
At 1 January
-
250
Share-based payment expense
9
40
LTIP lapsed to reserves
-
(290)
At 31 December
9
-
Assumptions
Grant date
14/12/2020
Share price at grant date
47.5
Exercise price
70.0
Vesting period
2.5 years
Expected volatility
0.454
Risk-free rate
0.1%
Dividend yield
0.0%
100 growth shares are registered as subsidiary shares within Daines & Hathaway Limited a 100% wholly owned subsidiary; and are held by the board directors in
the following proportions, as follows: R Hankey 40 shares, S Yapp 30 shares, R Briere 20 shares, G Davis 10 shares and L Cretton 10 shares.
8. Finance costs
2021
2020
£'000
£'000
(a) Finance costs
Interest on bank loans and overdrafts
457
500
Interest on obligations under finance lease and hire purchase contracts
2
8
459
508
Pittards PLC 2021 Annual Report Page 61 of 81 www.pittards.com
9. Taxation
2021
2020
£'000
£'000
(a) Analysis of the credit)/charge in the year
The (credit)/charge based on the (loss)/profit for the year comprises:
Corporation tax on profit for the year
-
-
Foreign tax on profit for the year
10
79
Foreign tax related to prior years
148
65
Total current tax
158
144
Deferred tax
Origination and reversal of temporary differences
24
-
Total deferred tax
24
-
Income tax (credit)/charge
182
144
The Group's profits/losses for the year are taxed at the standard rate of corporation tax in the UK of 19% (2020: 19%) and Ethiopia of 30% (2020:
30%). The tax assessed in each year differs from the standard rate of corporation tax for the relevant year. The group retains taxable losses in the UK
of £13.8m to utilise in future periods. The differences are explained below:
2021
2020
£'000
£'000
(b) Factors affecting the tax charge for the year
(Loss)/profit on ordinary activities before tax
457
(2,282)
Tax calculated at domestic tax rates applicable to profits in the respective countries
13
(579)
Impact of tax losses not recognised
160
575
Foreign tax related to prior years1
148
64
Expenses not deductible for tax purposes2
77
102
Allowable tax deductions3
(207)
(81)
Foreign tax paid
13
88
Double tax relief
(22)
(15)
Deferred tax impact of property valuation
-
(10)
Total tax charge /(credit) for the year ( Note 9(a) )
182
144
1 Foreign tax in prior years relates to a historic tax charge imposed on PPM and withholding tax paid.
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 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.
Pittards PLC 2021 Annual Report Page 62 of 81 www.pittards.com
10a. 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 held in treasury under own share reserve, by the company not carry voting or dividend rights.
Earnings per share
2021
2020
Weighted average number of ordinary shares in issue
Basic
000s
12,946
13,733
Weighted average number of ordinary shares in issue
Diluted
000s
12,946
13,789
Basic earnings / (loss) per ordinary 50p share
pence
2.12
(17.67)
Diluted earnings / (loss)per ordinary 50p share
pence
2.12
(17.67)
10b. Dividends
2021
2020
£'000
£'000
Ordinary dividends paid during the year
Interim dividends of 0.5p per share
65
-
The Directors are proposing a final dividend for the 2021 year of 0.5pence per share, (2020:
£nil) in respect of the financial period ended 30 December 2021.
Pittards PLC 2021 Annual Report Page 63 of 81 www.pittards.com
11. Property, plant and equipment
Group
Company
Plant
Assets
Plant
Assets
Land
and
Machinery
&
under
Land
and
Machinery
&
under
Buildings
motor
vehicles
construction
Total
Buildings
motor
vehicles
construction
Total
£'000
£'000
£'000
£'000
£'000
£'000
£'000
£'000
Cost or valuation
At 1 January 2020
6,748
18,164
479
25,391
4,015
13,301
-
17,316
Exchange differences
(585)
(942)
(57)
(1,584)
-
-
-
-
Additions
-
249
3
252
-
191
-
191
Transfers
(14)
14
-
-
(14)
14
-
-
Disposals
(152)
(3)
-
(155)
(152)
-
-
(152)
Revaluation
500
-
44
544
11
-
-
11
At 1 January 2021
6,497
17,482
469
24,448
3,860
13,506
-
17,366
Exchange differences
(560)
(846)
(132)
(1,538)
-
-
-
-
Additions
-
787
-
787
-
740
-
740
Disposals
-
(107)
-
(107)
-
(107)
-
(107)
Revaluation
535
-
56
591
-
-
-
-
As at 30 December 2021
6,472
17,316
393
24,181
3,860
14,139
-
17,999
Accumulated depreciation
At 1 January 2020
289
14,862
-
15,151
260
11,549
-
11,809
Exchange differences
(2)
(588)
-
(590)
-
-
-
-
Charge for the year
97
519
-
616
79
262
-
341
Disposals
(153)
-
-
(153)
(146)
-
-
(146)
Transfers
(9)
9
-
-
(7)
7
-
-
Revaluation
(175)
-
-
(175)
(168)
-
-
(168)
At 1 January 2021
47
14,802
-
14,849
18
11,818
-
11,836
Exchange differences
(21)
(715)
-
(736)
-
-
-
-
Charge for the year
66
433
-
499
42
278
-
320
Disposals
-
(107)
-
(107)
-
(107)
-
(107)
Revaluation
(24)
-
-
(24)
-
-
-
-
As at 30 December 2021
68
14,413
-
14,481
60
11,989
-
12,049
Net book value
At 31 December 2020
6,450
2,680
469
9,599
3,842
1,688
-
5,530
As at 30 December 2021
6,404
2,903
393
9,700
3,800
2,150
-
5,950
Pittards PLC 2021 Annual Report Page 64 of 81 www.pittards.com
11. Property, plant, and equipment (continued)
Depreciation of £0.44m (2020: £0.52m) has been charged to cost of sales, £0.03m (2020: £0.05m) to administrative expenses and £0.00m (2020: £0.05m) to
distribution expenses in the Income Statement. The Group's buildings in Ethiopia were revalued to fair value as at 31 December 2021. 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 (2020: £4.1m). The Yeovil site, belonging to the company was revalued in 2020 by an independent valuer, and the board accessed
the value as unchanged at the end of 2021.
Included in the Group's and Company's plant, machinery and motor vehicles are right of use assets as follows:
2021
2020
£'000
£'000
Right of use assets plant and equipment as at 1 January
117
578
Depreciation charged
(36)
(121)
Asset no longer subject to lease
(78)
(340)
Additions to right of use assets
556
-
Right of use assets as at 31
December
559
117
12. Intangible
Group
Company
Computer
Computer
Website
Software
Total
Website
Software
Total
£'000
£'000
£'000
£'000
£'000
£'000
Cost or valuation
At 1 January 2020
141
1,781
1,922
141
1,774
1,915
Additions
12
-
12
11
-
11
At 1 January 2021
153
1,781
1,934
152
1,774
1,926
Additions
11
-
11
11
-
11
At 31 December 2021
164
1,781
1,945
163
1,774
1,937
Accumulated amortisation
At 1 January 2020
63
1,745
1,808
63
1,738
1,801
Charge for the year
16
35
51
16
34
50
At 1 January 2021
79
1,780
1,859
79
1,772
1,851
Charge for the year
22
1
23
21
2
23
As at 30 December 2021
101
1,781
1,882
100
1,774
1,874
Net book value
At 31 December 2020
74
1
75
73
2
75
As at 30 December 2021
63
-
63
63
-
63
Pittards PLC 2021 Annual Report Page 65 of 81 www.pittards.com
13. Inventories
Group
Company
2021
2020
2021
2020
£'000
£'000
£'000
£'000
Raw Materials
6,711
5,342
5,444
4,234
Work in progress
2,940
3,803
1,806
1,489
Finished Goods
5,665
5,876
5,204
5,193
15,316
15,021
12,454
10,916
The movement in provision was as
follows:
Group
Company
£'000
£'000
As at 1 January 2020
2,085
1,883
(Utilisation)
(764)
(788)
Charge
130
71
As at 30 December 2021
1,451
1,166
Inventory charged to income statement during the year as part of cost of sales totalled £14.5m (2020: £12.0m).
14. Current Financial Assets
Group
Company
2021
2020
2021
2020
£'000
£'000
£'000
£'000
Trade receivables
3,151
2,644
2,857
2,178
Less provision for impairment of trade receivables
(266)
(279)
(264)
(277)
Trade receivables net
2,885
2,365
2,593
1,901
Other receivables
121
125
28
42
Prepayments and accrued income
298
263
258
251
Financial derivatives
-
95
-
95
Amounts owed by Group undertakings
-
-
5,899
3,706
3,304
2,848
8,778
5,995
Pittards PLC 2021 Annual Report Page 66 of 81 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. The expected credit loss is 0.3% of sales
(2020:0.3%)
Group
Company
2021
2020
2021
2020
£'000
£'000
£'000
£'000
Up to 60 days
983
259
759
253
60-90 days
68
27
68
27
More than 90 days
247
452
177
311
1,298
738
1,004
591
There are £1.6m ( 2020: £1.6m) trade receivables which are not due and not impaired as at 31 December 2021. There are no concerns regarding the
recoverability of these amounts.
As at 31 December the provision against trade receivables was £0.3m (2020: £0.3m) for the Group and £0.3m (£0.3m: 2020) for the Company. The ageing of the
receivables impaired against which part provisions have been made is as follows:-
Group
Company
2021
2020
2021
2020
£'000
£'000
£'000
£'000
Not overdue
-
106
-
106
Up to 60 days
59
32
59
32
60-90 days
-
4
-
4
More than 90 days
237
211
237
211
296
353
296
353
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).
15. Trade and other payables
Group
Company
2021
2020
2021
2020
£'000
£'000
£'000
£'000
Trade payables
3,005
1,969
2,568
1,463
Corporation tax payable
1
-
-
-
Other taxes and social security costs
162
170
137
136
Accruals and deferred income
471
669
353
530
Other payables
79
55
72
27
Financial derivatives
112
-
112
-
Amounts owed to Group undertakings
-
-
3,047
574
3,830
2,863
6,289
2,730
Pittards PLC 2021 Annual Report Page 67 of 81 www.pittards.com
16. Interest-bearing loans, borrowings and overdrafts - current
Group
Company
2021
2020
2021
2020
£'000
£'000
£'000
£'000
Secured:
Overdrafts
6,419
5,162
5,757
4,594
Loans
1,263
1,698
375
275
Obligations under leases
101
49
94
12
7,783
6,909
6,226
4,881
The Company's overdraft and loan facilities are provided by Lloyds Bank. During the year, £0.4m of new hire purchases from Lloyds Bank was drawn
down.
17. Interest-bearing loans, borrowings and overdrafts - non current
Group
Company
2021
2020
2021
2020
£'000
£'000
£'000
£'000
Secured:
Loans
2,647
3,288
2,030
2,388
Obligations under leases
308
6
308
3
2,955
3,294
2,338
2,391
Repayable as follows:-
1-5 Years
2,955
3,194
2,338
2,291
After more than 5 years
-
100
-
100
2,955
3,294
2,338
2,391
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
Group
Company
2021
2020
2021
2020
£'000
£'000
£'000
£'000
Lease obligations
Not later than one year
101
43
94
12
After one year but not more than five years
308
6
308
3
409
49
402
15
Plus, finance charges allocated to future periods
31
3
31
-
Total lease payments
440
52
433
15
Total minimum lease payments are analysed as follows:
Not later than one year
108
46
101
12
After one year but not more than five
years
332
6
332
3
440
52
433
15
Pittards PLC 2021 Annual Report Page 68 of 81 www.pittards.com
19. Deferred taxation
In accordance with the requirements of IAS12, the directors considered the potential utilisation of the deferred tax asset in relation to historic losses and in
2021, took a prudent view to continue to recognise an asset of £0.1m at 31 December 2021. The remaining deferred tax liabilities have been calculated
using prevailing rate in the jurisdiction that they have arisen in.
Group
Company
2021
2020
2021
2020
£'000
£'000
£'000
£'000
Deferred tax asset
100
100
100
100
Deferred tax liability
(900)
(804)
-
-
Deferred tax liability (net)
(800)
(704)
100
100
The movement on the net deferred tax account during the year is as
follows:
Group
Company
2021
2020
2021
2020
£'000
£'000
£'000
£'000
At 1 January
(704)
(630)
100
100
Income Statement/Statement of Comprehensive Income
(debit)/credit
(230)
(227)
-
-
Exchange differences
134
153
-
-
At 31 December
(800)
(704)
100
100
20. Share capital
2021
2020
£'000
£'000
Issued fully paid
At 31 December
6,944
6,944
2021
2020
Shares
Shares
Number of ordinary shares of 50p each
Opening number of shares fully paid and in
issue
12,952,390
13,886,600
Purchase of own shares into treasury in
year
(40,000)
(934,210)
At 31 December
12,912,390
12,952,390
The company has one class of ordinary shares which carry no right to fixed income. The company holds 974,210 of own shares in treasury which it
intends to hold to satisfy existing LTIP schemes when they vest in 2022.
Pittards PLC 2021 Annual Report Page 69 of 81 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 held Pittards' plc ordinary shares to meet potential obligations under the restricted share plan scheme.
Shares were 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 2021, the trust held nil, 50p shares (2020: 19,026) with a market value at that
date of £Nil (2020: £8,942).
Own shares reserve comprises
Group
Company
2021
2020
2021
2020
£'000
£'000
£'000
£'000
Own share reserve comprises
ESOP
-
495
-
495
Ordinary own shares held in treasury
375
355
375
355
375
850
375
850
During the year the ESOP trust scheme was dissolved and remaining assets disbursed by the trustees, which amount to cash of £1,320 and 19,126 of
ordinary shares.
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
Group
Company
2021
2020
2021
2020
£'000
£'000
£'000
£'000
Profit / (Loss) before taxation
457
(2,282)
172
(1,460)
Adjustments for:
Depreciation of property, plant and equipment
475
616
320
341
Amortisation of intangibles
23
51
23
51
Bank and other interest charges
447
489
233
174
Share based payment expense
9
40
9
40
Other non-cash items in Income Statement
(556)
1,302
122
370
Operating cash flows before movement in working capital
855
216
879
(484)
Movements in working capital (excluding exchange differences on consolidation):
(Increase) / Decrease in inventories
(1,100)
513
(1,538)
451
(Increase) / Decrease in receivables
(507)
501
(2,858)
293
Increase / (Decrease) in payables
933
(681)
3,382
(42)
Cash generated /(used in) from operations
181
549
(135)
218
Pittards PLC 2021 Annual Report Page 70 of 81 www.pittards.com
23. Analysis of the changes in cash and cash equivalents
Group
As at 1
January
Cashflow
Exchange
movements
As at 31
December
2021
2021
2021
2021
£'000
£'000
£'000
£'000
Cash at bank and in hand
85
(34)
-
51
Bank overdraft
(5,162)
(1,495)
238
(6,419)
(5,077)
(1,529)
238
(6,368)
Company
As at 1
January
Cashflow
Exchange
movements
As at 31
December
2021
2021
2021
2021
£'000
£'000
£'000
£'000
Cash at bank and in hand
8
-
-
8
Bank overdraft
(4,594)
(1,163)
-
(5,757)
(4,586)
(1,163)
-
(5,749)
24. Analysis of the changes in liabilities from financing activities
As at
Loan
Non cash
Exchange
As at
1 Jan
re-
payments
movements
movements
31
December
£'000
£'000
£'000
£'000
£'000
Group
Long term borrowings
3,288
(464)
(382)
(259)
2,647
Short term borrowings
1,698
(733)
382
(84)
1,263
Lease Liabilities
55
(21)
402
(27)
409
5,041
(662)
402
(370)
4,319
Company
Long term borrowings
2,388
(8)
(350)
-
2,030
Short term borrowings
275
(250)
350
-
375
Lease Liabilities
15
(15)
402
-
402
2,678
(273)
402
-
2,807
Non cash movements represent movements in categories between short and long term
Pittards PLC 2021 Annual Report Page 71 of 81 www.pittards.com
25. Related party transactions
(a) Related party trading
Group
The following transactions with related parties took place during the year:
Group
2021
2020
Transactions with related parties
£'000
£'000
Purchases from related parties
25
27
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
2021
2020
Year end balances arising from purchases
£'000
£'000
Payables to related parties
5
5
Company
The following transactions with other Group undertakings took place during the
year:
Company
2021
2020
Transactions with subsidiaries
£'000
£'000
Purchases from subsidiaries
3,528
2,278
Sales to subsidiaries
258
366
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.
Company
2021
2020
Amounts due from Subsidiaries -
current
£'000
£'000
Pittard Garnar Services Limited
5,146
3,230
Ethiopia Tannery Share Company
338
242
Pittards Global Sourcing Private Limited
Company
2
2
Pittards Products Manufacturing Share
Company
413
232
5,899
3,706
Amounts due to Subsidiaries
Pittard Group Limited
(30)
(30)
Ethiopia Tannery Share Company
(1,147)
(528)
Pittard Garnar Services Limited
(1,846)
-
Pittards Global Sourcing Private Limited
Company
-
-
Pittards Products Manufacturing Share
Company
(24)
(16)
(3,047)
(574)
(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.
Pittards PLC 2021 Annual Report Page 72 of 81 www.pittards.com
Company
2021
2020
Amounts due from Subsidiaries -
current
£'000
£'000
Pittard Garnar Services Limited
5,146
3,230
Ethiopia Tannery Share Company
338
242
Pittards Global Sourcing Private Limited
Company
2
2
Pittards Products Manufacturing Share
Company
413
232
5,899
3,706
Amounts due to Subsidiaries
Pittard Group Limited
(30)
(30)
Ethiopia Tannery Share Company
(1,147)
(528)
Pittard Garnar Services Limited
(1,846)
-
Pittards Global Sourcing Private Limited
Company
-
-
Pittards Products Manufacturing Share
Company
(24)
(16)
(3,047)
(574)
(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
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 89% (2020: 79%) of the Group's revenue is from sales outside the UK, with 81% (2020: 77%) in US
dollars. US dollar based raw material purchases amounted to 17% in 2021 (2020: 28%).
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. However, during 2021, forward exchange contracts have
additionally 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 34for 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.
Pittards PLC 2021 Annual Report Page 73 of 81 www.pittards.com
- Credit risk
The group is exposed to credit risk to the extent of non-payment by its customers. The group utilises credit insurance policies to mitigate its risk from
its trading exposure or seeks secure terms or payment in advance.
(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.
(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:
Assets
Liabilities
Cash
2021
2020
2021
2020
2021
2020
£'000
£'000
£'000
£'000
£'000
£'000
US Dollar
2,403
1,679
(534)
(211)
(2,738)
(1,220)
Euro
199
144
(981)
(513)
(56)
(109)
Ethiopian Birr
165
247
(1,864)
(3,235)
136
(516)
Other
6
23
(2)
-
8
(53)
2,773
2,093
(3,381)
(3,959)
(2,650)
(1,898)
GBP
378
551
(4,105)
(3,221)
(3,718)
(3,179)
Total
3,151
2,644
(7,486)
(7,180)
(6,368)
(5,077)
(d) Foreign currency sensitivity
As 77% (2020: 79%) 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 40% and 80% of future currency exposure in US dollars but enjoys some natural hedging due to its purchase of material
in US dollars. It estimates that currency exposure is reduced by approximately 65% through these two mechanisms. 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.
Group
2021
2020
£'000
£'000
Loss1
(409)
(338)
1. This is mainly attributable to the exposure on revenue and outstanding US dollar receivables, payables and cash at the year-end in the Group.
(e) Forward foreign exchange
contracts
It is the policy of the Group to sell surplus 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 2021, 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 50% and 80% of the anticipated risk.
(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.
Pittards PLC 2021 Annual Report Page 74 of 81 www.pittards.com
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 £10.68m 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 2021 and at 31 December
2020 are as follows:
Group
Less
than 3
months
3
months
to 1
year
1-2
years
2-5 years
Over 5
years
Total
As at 31 December 2021
£'000
£'000
£'000
£'000
£'000
£'000
Fixed rate:
Lease obligations
25
76
101
207
-
409
Variable rate:
Bank overdrafts and loans
6,735
947
1,263
1,384
-
10,329
Trade and other payables
3,246
-
-
-
-
3,246
At 31 December 2020
Fixed rate:
Lease obligations
12
37
6
-
-
55
Variable rate:
Bank overdrafts and loans
6,427
433
621
2,567
100
10,148
Trade and other payables
1,969
-
-
-
-
1,969
The Group has the following undrawn borrowing facilities:
Group
2021
2020
£'000
£'000
Variable rate:
Expiring within one year
2,650
3,282
2,650
3,282
The facilities expiring within one year are subject to review at various dates in 2022. However, Lloyds have confirmed their commitment to the business
and renewal of the facilities for 2023 and although a formal agreement has yet to be signed, Lloyds have written a letter to confirm the facility has been
agreed with credit committee and will be in place by the end of March 2023.
(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 2021, 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 2021 and 2020 were as follows:
Group
2021
2020
£'000
£'000
Total borrowings
10,738
10,203
Less cash at bank and in hand
(51)
(85)
Net debt
10,687
10,118
Total equity
13,066
13,858
Gearing ratio
81.8%
73.0%
Pittards PLC 2021 Annual Report Page 75 of 81 www.pittards.com
27. Investments
Company
2021
2020
£'000
£'000
At 1 January and 31 December
378
378
The subsidiary undertakings whose results or financial position affect the figures in the consolidated financial statements are:
Principal activities
Country of
incorporation
Functional currency
Pittards Group Limited
Dormant
United Kingdom
£ sterling
Pittard Garnar Services Limited
Consultancy and other related services to the
leather industry
United Kingdom
£ sterling
Daines & Hathaway Limited
Holding company
United Kingdom
£ sterling
Pittards Global Sourcing Private Limited
Company
Production of quality leather garments
Ethiopia
Ethiopian Birr
Ethiopia Tannery Share Company
Leather production
Ethiopia
Ethiopian Birr
Pittards Products Manufacturing Share Company
Production of quality leather gloves and
leather goods
Ethiopia
Ethiopian Birr
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
P.O. Box 5628, Kirkos Sub City, Kebele 16, Addis Ababa, Ethiopia
Pittards Products Manufacturing Share Company
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.
Other Reserves (Own shares)
Group
Company
2021
2020
2021
2020
£'000
£'000
£'000
£'000
Own share reserve comprises
ESOP
-
495
-
495
Ordinary shares held in treasury
375
-
375
-
375
495
375
495
During Q3-2021 a further, £20,000 of shares were acquired into treasury.
Pittards PLC 2021 Annual Report Page 76 of 81 www.pittards.com
Summary Financials - 7 Year Review
2021
2020
2019
2018
2017
2016
2015
£'000
£'000
£'000
£'000
£'000
£'000
£'000
Revenue
19,655
15,233
22,301
28,469
30,287
27,009
30,523
Percentage sold outside UK
89%
79%
90%
90%
91%
92%
90%
Profit / (Loss) from operations before finance costs
916
(1,774)
1,177
992
934
(3,591)
1,115
Profit / (Loss) on ordinary activities before taxation
457
(2,282)
579
354
413
(4,071)
655
Profit / (Loss) on ordinary activities after taxation
275
(2,426)
406
(1,929)
497
(4,146)
471
Net assets
13,066
13,991
17,520
17,881
19,764
21,274
24,150
Inventory
15,316
15,021
17,341
16,306
15,332
17,353
18,872
Inventory days of sale
394
462
411
279
241
308
288
Net debt
10,687
10,118
9,895
7,724
7,990
10,109
6,458
Gearing
81.8%
72.3%
54.7%
43.2%
40.0%
48.0%
27.0%
Earnings / (Loss) per 50p ordinary share in pence
2.12
(17.67)
2.93
(13.91)
3.58
(29.89)
3.98
Dividends per ordinary share in pence
0.50
-
-
-
-
-
-
Financial calendar
Pittards PLC 2021 Annual Report Page 77 of 81 www.pittards.com
Annual General Meeting (Planned at Yeovil site, subject to COVID-19 and government restrictions permitting)
17 May 2022
Announcement of half year results for 2022
30 September 2022
Announcement of 2022 results
22 March 2023
Pittards PLC 2021 Annual Report Page 78 of 81 www.pittards.com
Notice of Annual General Meeting
Notice is hereby given that the 113th 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 17 May 2022 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.
To receive the annual statement of accounts of the Company for the year ended 31 December 2021, and the directors’ and auditors' reports thereon.
2.
To re-elect Reg Hankey as a director of the Company, who is retiring by rotation.
3.
To re-elect Godfrey Davis as a director of the Company, who is retiring by rotation.
4.
To re-appoint PKF Francis Clark LLP as the Company's auditors and to authorise the directors to determine their remuneration.
5.
To declare a final dividend for the financial year ended 31 December 2021 of 0.5 pence per ordinary share in the capital of the Company, to be paid on
5th August 2022 to shareholders whose names appear on the register at the close of business on 20 June 2022.
6.
Share buybacks – to renew authority to buy back up to 15% of share capital
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, this to include any pre-existing ordinary shares held in treasury
(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
Alan Burgess
Company Secretary
Pittards Plc
Sherborne Road
Yeovil, Somerset
BA21 5BA
Date: 28 March 2022
Pittards PLC 2021 Annual Report Page 79 of 81 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. 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. A proxy shall, unless directed otherwise by the appointing member, vote, or abstain from voting as the proxy sees
fit at the AGM.
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 Group, 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 Group, on 0371 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 2022 ("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 Group, 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 Group, by post to PXS1, 10th Floor, Central Square, 29 Wellington Street, Leeds, LS1 4DL 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 2021 Annual Report Page 80 of 81 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 Group, PXS1,
10th Floor, Central Square, 29 Wellington Street, Leeds, LS1 4DL 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 Group, 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).
Pittards PLC 2021 Annual Report Page 81 of 81 www.pittards.com
For more information visit corporate.pittards.com