More annual reports from Safeguard Scientifics:
2021 ReportP2 P3 P4 P5 P6 P7 P8 P9 P10 P11 P12 P13 P14 P15 P16 P17 P18 P19 P20 P21 P22 P23 P24 P25 P26 P27 P28 P29 P30 P31 P32 P33 P34 P35 P36 P37 P38 P39 Directors’ Remuneration Report (continued) P40 P41 Directors’ Remuneration Report (continued) P42 P43 Directors’ Remuneration Report (continued) P44 P45 Directors’ Remuneration Report (continued) 1 1 P46 P47 P48 P49 P50 P51 P52 P53 P54 P55 Revenue Cost of sales Gross profit Other operating expenses Operating profit EBITDA before non-recurring costs, share based payments, depreciation and amortisation Non-recurring costs Equity settled share based payments charges Depreciation and amortisation Operating profit Finance income Finance costs Profit before taxation Taxation Profit after taxation Other comprehensive income Note 2,5 6 6 31 11 2017 £000 Restated* 2016 £000 158,552 (107,133) 159,435 (103,826) 51,419 (37,630) 55,609 (36,362) 13,789 19,247 16,770 (830) (421) 21,602 - (1,187) (1,730) (1,168) 13,789 19,247 35 (10) 98 (11) 13,814 19,334 12 (2,986) (3,778) 10,828 15,556 - - Assets Intangible assets - Trademarks Intangible assets - Goodwill Intangible assets - Software Property, plant and equipment Deferred tax asset Non-current assets Inventories Trade and other receivables Cash and cash equivalents Current assets Total assets Equity Called up share capital Share premium account Profit and loss account Common control transaction reserve Total equity Liabilities Trade and other payables Financial liabilities Corporation tax liabilities Deferred tax liability Provision for liabilities and charges Note NoteNote 13 1313 13 1313 13 1313 14 1414 15 1515 16 1616 17 1717 18 1818 19 1919 20 2020 21 2121 22 2222 23 2323 2017 £000 504 20,758 786 14,975 28 2016 £000 504 20,758 415 12,389 180 37,051 34,246 2,032 4,559 10,975 2,176 4,560 13,459 17,566 20,195 54,617 54,441 828 81,845 24,712 (66,527) 828 81,979 22,052 (66,527) 40,858 38,332 10,864 - 776 90 599 11,983 70 1,599 61 701 12,329 14,414 Total comprehensive income for the period attributable to equity shareholders 10,828 15,556 Current liabilities Earnings Per Share Basic (pence per share) Diluted (pence per share) All operations were continuing throughout all periods. All accompanying notes form part of the financial statements. *See note 2 Provision for liabilities and charges 23 2323 1,430 1,695 8 13.1p 13.0p 19.0p 18.9p Non-current liabilities Total liabilities Total equity and liabilities 1,430 1,695 13,759 16,109 54,617 54,441 All accompanying notes form part of the financial statements. The financial statements were approved by the Board of Directors and authorised for issue on 2 March 2018 and were signed on their behalf by: 2 SJ Birmingham Chief Executive Officer P56 P57 Share capital Share premium Profit and loss account £000 £000 £000 Common control transaction reserve £000 Total equity £000 Balance at 1 January 2016 803 79,440 24,278 (66,527) 37,994 Total comprehensive income for the year Transactions with owners recorded directly in equity: Issue of shares Equity settled share based payment transactions Deferred tax asset taken to reserves Dividends 25 - - - 2,539 - - - 15,556 (2,564) 240 (1,091) (14,367) 15,556 - 240 (1,091) (14,367) - - - - Balance at 31 December 2016 828 81,979 22,052 (66,527) 38,332 Total comprehensive income for the year Transactions with owners recorded directly in equity: Issue of shares (see note 19) Buy back of shares (see note 19) Equity settled share based payment transactions Corporation tax relief taken to reserves Dividends (see note 7) 2 (2) - - - 256 (390) - - - 10,828 - - 421 747 (9,336) 10,828 258 (392) 421 747 (9,336) - - - - - Balance at 31 December 2017 828 81,845 24,712 (66,527) 40,858 All accompanying notes form part of the financial statements. Cash flows from operating activities Profit for the year Adjustments for: Depreciation of plant, property and equipment Amortisation of intangible fixed assets Finance income Finance expense Loss on sale of plant, property and equipment Equity settled share based payments Tax expense Decrease/(increase) in inventories Decrease/(increase) in trade and other receivables (Decrease)/increase in trade and other payables (Decrease)/increase in provisions Hire purchase interest paid Taxation paid Net cash from operating activities Cash flows from investing activities Acquisition of property, plant and equipment Interest received Proceeds from issue of property, plant and equipment Acquisition of intangible fixed assets Net cash outflow from investing activities Cash flows from financing activities Proceeds from the issue of ordinary shares Purchase and cancellation of ordinary shares Payment of hire purchase and finance leases Dividends paid Net cash outflow from financing activities Net decrease in cash and cash equivalents Cash and cash equivalents at start of year Cash and cash equivalents at end of year All accompanying notes form part of the financial statements. 2017 £000 2016 £000 10,828 15,556 1,489 241 (35) 10 - 421 2,986 15,940 144 1 (1,120) (367) (1,342) (10) (10) (2,880) 954 214 (98) 11 7 240 3,778 20,662 (676) (702) 1,824 26 472 (11) (11) (3,893) 11,708 17,230 (4,075) 35 - (612) (5,901) 98 42 (20) (4,652) (5,781) 258 (392) (70) (9,336) - - (108) (14,367) (9,540) (14,475) (2,484) 13,459 (3,026) 16,485 10,975 13,459 P58 P59 P60 P61 P62 P63 P64 P65 6 Expenses and auditor's remuneration Included in profit are the following: Depreciation of plant, property and equipment: Owned assets Leased assets Amortisation of intangibles assets Loss on disposal of plant, property and equipment Operating lease rentals: Hire of plant and machinery Rent payable on land and buildings Auditor's remuneration: Audit of financial statements relating to subsidiaries Audit of financial statements relating to parent Other services relating to taxation Non-recurring costs: Restructuring costs Operational Other 2017 £000 1,397 - 241 - 3,255 1,336 42 44 10 580 184 66 830 2016 £000 992 57 119 7 3,023 1,227 44 36 10 - - - - The operating lease rentals disclosed above for plant and machinery relate to daily contract hire and therefore there is no corresponding lease commitment. 7 Dividends The aggregate amount of dividends paid comprises: 2017 £000 2016 £000 Final dividend paid of £0.075 (2016: £0.075) per ordinary share 6,224 5,631 Special dividend (2016: £0.075 per ordinary share) - 5,631 Interim dividend paid of £0.0375 (2016: £0.0375) per ordinary share 3,112 3,105 A final dividend of 7.5p per ordinary share are proposed by the Board subject to approval at the AGM. 9,336 14,367 P66 P67 8 Earnings per share Basic earnings per ordinary share (pence) Diluted earnings per ordinary share (pence) 9 Key management remuneration 2017 13.1 13.0 2016 19.0 18.9 Key management personnel, as disclosed under IAS 24 (Related Party Disclosures), have been identified as the Board of Directors and other senior operational management. a) Basic earnings per share The calculation of basic earnings per share has been based on the following profit attributable to ordinary shareholders and weighted-average number of shares outstanding. i) Profit attributable to ordinary shareholders (basic) Profit attributable to ordinary shareholders 2017 £000 10,828 2016 £000 15,556 A summary of key management remuneration is as follows: Salary, bonus and other benefits Pensions Share based payments and associated costs Settlement payments Total remuneration ii) Weighted-average number of ordinary shares (basic) Details of long term incentive plans can be found in note 30. 2017 £000 1,292 82 246 354 2016 £000 1,745 66 996 - 1,974 2,807 No of shares ‘000 82,883 No of shares ‘000 82,006 Detailed disclosures of individual remuneration, pension entitlements and share options, for the Directors who served during the year are as follows: In issue during the year b) Diluted earnings per share The calculation of diluted earnings per share has been based on the following profit attributable to ordinary shareholders and weighted-average number of ordinary shares outstanding after adjustment for the effects of all dilutive potential ordinary shares. i) Profit attributable to ordinary shareholders (diluted) Profit attributable to ordinary shareholders ii) Weighted-average number of ordinary shares (diluted) Weighted-average number of ordinary shares (basic) Effect of conversion of share options 2017 £000 10,828 2016 £000 15,556 No of shares ‘000 82,883 396 No of shares ‘000 82,006 341 83,279 82,347 The average market value of the Company's shares for the purpose of calculating the dilutive effect of share options was based on quoted market prices for the period during which the options were outstanding. Remuneration 2017 Executive directors S J Birmingham M J Robinson 1 G Richell Non Executive C J Davies R S Halbert P Richardson 2016 Executive directors S J Birmingham M J Robinson Non Executive C J Davies R S Halbert P Richardson 2 Salary and fees £000 Benefits £000 Annual bonus £000 LTIP Pension £000 £000 184 159 141 48 74 43 649 20 12 11 - - - 43 - - - - - - - - - - - - - - 15 13 11 - - - 39 Salary and fees £000 Benefits £000 Annual bonus £000 LTIP Pension £000 £000 179 156 47 73 19 474 18 10 - - - 165 152 - - - 28 317 - - - - - - 14 12 - - - 26 Total £000 219 184 163 48 74 43 731 Total £000 376 330 47 73 19 845 1 G Richell was appointed to the Board on 13 February 2017 and his fees therefore reflect a part year. 2 P Richardson was appointed to the Board on 18 July 2016 and his fees in the prior year reflect a part year. P68 P69 Share options and long term incentive plans 12 Taxation S J Birmingham M J Robinson G Richell Plan Options held at start of period Options granted in period Options exercised in period Options lapsed in period Options held at end of period LTIP 2015 LTIP 2016 LTIP 2017 LTIP 2015 LTIP 2016 LTIP 2017 LTIP 2017 97,902 66,585 - 85,594 58,220 - - - - 47,935 - - 41,913 41,913 308,301 131,761 - - - - - - - - - - - - - - - - 97,902 66,585 47,935 85,594 58,220 41,913 41,913 440,062 10 Staff numbers and costs The average monthly number of persons (including directors) employed by the Group during the year analysed by category, were as follows: Manufacturing Sales and distribution Administration The aggregate payroll costs Wages and salaries Social security costs Other pension costs (see note 26) Share based payments expenses (see note 30) The analysis of the Directors' remuneration is shown in the Directors’ Report on page 3 .8 No Directors were accruing benefits under money purchase pension schemes (2016: nil). 11 Finance costs On finance leases and hire purchase contracts 2017 Number 361 118 332 811 2017 £000 20,044 1,943 589 421 2016 Number 363 40 312 715 2016 £000 18,613 1,653 482 1,187 22,997 21,935 2017 £000 10 10 2016 £000 11 11 Recognised in the statement of comprehensive income Current tax Current tax on income for the period Adjustments in respect of prior periods Total current tax Deferred tax Origination and reversal of timing differences Effect of change in tax rate Adjustments in respect of prior periods Total deferred tax (see note 15) Total tax expense The current year tax charge is split into the following: Tax charge Total tax expense Reconciliation of effective tax rate Current tax reconciliation Profit for the year Total tax expense Profit excluding tax Expected tax charge based on the standard rate of corporation tax in the UK of 19.25% (2016: 20.00%) Effects of: Expenses not deductible for tax purposes Adjustments to tax charge in respect of prior periods Effect of change in tax rate Total tax expense 2017 £000 2016 £000 2,805 - 3,958 (211) 2,805 3,747 180 (11) 12 181 22 9 - 31 2,986 3,778 2,986 3,778 2,986 3,778 2017 £000 10,828 2,986 2016 £000 15,556 3,778 13,814 19,334 2,659 3,867 326 12 (11) 113 (211) 9 2,986 3,778 A reduction in the UK corporation tax rate from 21% to 20% (effective from 1 April 2015) was substantively enacted on 2 July 2013. Further reductions to 19% (effective from 1 April 2017) and to 18% (effective 1 April 2020) were substantively enacted on 26 October 2015, and an additional reduction to 17% (effective 1 April 2020) was substantively enacted on 6 September 2017. This will reduce the Group's future current tax charge accordingly. The deferred tax asset at 31 December 2017 has been calculated based on these rates. P70 P71 13 Intangible assets 14 Plant, property and equipment Goodwill Trademark Software £000 £000 £000 Assets under the course of construction £000 Total £000 Cost At 1 January 2017 20,758 504 1,436 - 22,698 Additions Disposals Transfer - - - - - - 449 (168) - At 31 December 2017 20,758 504 1,717 Amortisation At 1 January 2017 Charge for the year Disposals At 31 December 2017 NBV at 31 December 2016 NBV at 31 December 2017 - - - - 20,758 20,758 - - - - 504 504 1,021 241 (168) 1,094 415 623 163 - - 163 - - - - - 612 (168) - 23,142 1,021 241 (168) 1,094 21,677 Freehold property Leasehold improvement Plant and machinery Office and computer equipment Motor vehicles Assets under the course of construction Total £000 £000 £000 £000 £000 £000 £000 Cost At 1 January 2017 Additions Transfers Disposals 4,029 1,302 3,950 - 59 278 - - 6,594 1,282 2,020 1,533 - 410 - (252) At 31 December 2017 9,281 337 10,147 1,440 Depreciation At 1 January 2017 Charge for the year Disposals At 31 December 2017 243 170 - 413 3,893 901 23 35 - 58 36 1,070 - 4,963 2,701 214 (252) 863 381 577 8 - - - 8 6 - - 6 2 2 5,483 17,455 65 (5,483) - 4,075 - (252) 65 21,278 - - - - 5,066 1,489 (252) 6,303 5,483 12,389 65 14,975 163 22,048 NBV at 31 December 2016 3,786 NBV at 31 December 2017 8,868 279 5,184 The goodwill is allocated to one cash generating unit (“CGU”) being Style Group Holdings Ltd. Management have performed impairment reviews on the carrying value of the goodwill at 31 December 2017 and 31 December 2016. The recoverable amount of the CGU has been determined from value in use calculations based on cash flow projections covering a three year period to 31 December 2018 which are then taken into perpetuity. The assessment was performed on a value in use basis using a 12% discount rate (2016: 12%) and the following year's budget as approved by the Board and extrapolated forwards using steady growth rate of 5% (2016: 5%) for the following 2 years. The key assumptions underpinning these forecasts are based on historic growth rates, prices and costs adjusted for up to date information. Management does not currently believe that any reasonably possible change in the key assumptions on which assessments of recoverable amounts have been based would cause the carrying amount of goodwill to exceed its recoverable amount. The trademark represents the Safestyle trademark which was acquired in 2010. The trademark is considered to have an indefinite useful life because there is no foreseeable limit to the period over which the asset is expected to generate net cash inflows for the business. The trademark is not amortised but is tested annually to determine whether there is any indication of impairment and is included in the review above. The Group currently has no assets under finance leases and hire purchase contracts. Included within the net book value are assets which last year were under finance leases and hire purchase contracts as follows: Plant & machinery Motor vehicles The depreciation charged on these assets in 2016 was £62,000. 2017 £000 - - - 2016 £000 170 - 170 P72 P73 15 Deferred taxation asset Included in the analysis of receivables are the following amounts: Balance at beginning of period Debit to the statement of comprehensive income for the period Share based payments to reserves Balance at end of period The deferred tax asset provided in the financial statements at 17% (2016: 17%) is as follows: Share based payments 16 Inventories Raw materials and consumables Work in progress Finished goods The above amounts are stated net of inventory provisions. 17 Trade and other receivables Trade receivables (net of provisions) Prepayments and accrued income 2017 £000 180 (152) - 2016 £000 1,241 (31) (1,030) 28 180 28 28 2017 £000 1,644 44 344 180 180 2016 £000 1,622 67 487 2,032 2,176 2017 £000 1,713 2,846 2016 £000 2,279 2,281 4,559 4,560 Contractual payment terms with the Group's customers are typically zero days. Payment is due upon installation and in the event of a customer default, a trade receivable arises. The above receivables are shown net of the following provisions for doubtful debts. Opening provision against trade receivables Provision utilised in year Expensed in year Closing provision for trade receivables 2017 £000 842 (532) 735 1,045 2016 £000 167 (209) 884 842 Past due receivables < 1 month overdue 1-2 months overdue 2-3 months overdue 3-12 months overdue > 1 year overdue Gross 2017 £000 608 338 212 861 739 Provision 2017 £000 (8) (23) (46) (229) (739) Net 2017 £000 600 315 166 632 - Gross 2016 £000 1,155 393 456 429 688 Provision 2016 £000 - - - (154) (688) Net 2016 £000 1,155 393 456 275 - Total overdue receivables 2,758 (1,045) 1,713 3,121 (842) 2,279 18 Cash and cash equivalents Cash and cash equivalents Balance at end of period 2017 £000 2016 £000 10,975 13,459 10,975 13,459 All of the Group's cash and cash equivalents are at floating interest rates and is denominated in UK Sterling (£). The Directors consider that the carrying value of cash and cash equivalents approximates to their fair value. For details of the Group's credit risk management policies, refer to note 24. 19 Share capital Authorised 77,777,777 Ordinary Shares @ 1p each 97,223 Ordinary Shares @ 1p each on 17 July 2015 2,367,143 Ordinary Shares @ 1p each on 22 October 2015 2,564,427 Ordinary Shares @ 1p each on 22 April 2016 177,513 Ordinary Shares @ 1p each on 02 May 2017 2,201 Ordinary Shares @ 1p each on 09 May 2017 3,302 Ordinary Shares @ 1p each on 01 June 2017 4,128 Ordinary Shares @ 1p each on 01 June 2017 90,000 Ordinary shares @ 1p each cancelled on 03 October 2017 90,000 Ordinary shares @ 1p each cancelled on 04 October 2017 15,000 Ordinary shares @ 1p each cancelled on 05 October 2017 10,182 Ordinary Shares @ 1p each on 20 November 2017 2017 £000 2016 £000 778 1 24 25 2 - - - (1) (1) - - 828 778 1 24 25 - - - - - - - - 828 P74 P75 Allotted, issued and fully paid 77,777,777 Ordinary Shares @ 1p each 97,223 Ordinary Shares @ 1p each on 17 July 2015 2,367,143 Ordinary Shares @ 1p each on 22 October 2015 2,564,427 Ordinary Shares @ 1p each on 22 April 2016 177,513 Ordinary Shares @ 1p each on 02 May 2017 2,201 Ordinary Shares @ 1p each on 09 May 2017 3,302 Ordinary Shares @ 1p each on 01 June 2017 4,128 Ordinary Shares @ 1p each on 01 June 2017 90,000 Ordinary shares @ 1p each cancelled on 03 October 2017 90,000 Ordinary shares @ 1p each cancelled on 04 October 2017 15,000 Ordinary shares @ 1p each cancelled on 05 October 2017 4,128 Ordinary Shares @ 1p each on 20 November 2017 2017 £000 2016 £000 Future minimum lease payments under finance leases and hire purchase contracts are as follows: 778 1 24 25 2 - - - (1) (1) - - 828 778 1 24 25 - - - - - - - - 828 Future minimum lease payment Interest payable on leases Present value of minimum lease payments 2017 £000 2016 £000 2017 £000 2016 £000 2017 £000 2016 £000 Due within one year Due between one and two years Due between two and five years - - - - 80 - - 80 - - - - 10 - - 10 - - - - 70 - - 70 The effective interest rate on finance leases is nil% (2016: 3.20%). The Group has no finance leases or hire purchase contracts in existence at 31 December 2017 with the last asset finance by a finance lease being becoming owned within the year. During the year 197,236 ordinary shares of £0.01 each were issued relating to the SAYE 2013 LTIP scheme at an exercise price of £1.308 per share, settled in cash. £1,972 was credited to share capital and £256,012 was credited to the share premium account. The scheme is now closed and no further shares will be issued from the scheme. In October 2017 the Company purchased and cancelled 195,000 shares in a share buy back scheme for a purchase price of £2.00 per share. £1,950 and £388,050 was debited to the share capital and share premium accounts respectively. Costs incurred in the purchase of shares of £1,953 were debited from the share premium accounts. 20 Trade and other payables Trade payables Other taxation and social security costs Other payables Accruals and deferred income 21 Financial liabilities Current liabilities Obligations under finance lease and hire purchase contracts Non-current liabilities Obligations under finance lease and hire purchase contracts Total secured financial liabilities Obligations under finance leases and hire purchase are secured on the related assets. 2017 £000 3,571 2,423 3,022 1,848 2016 £000 4,600 1,098 3,064 3,221 10,864 11,983 2017 £000 2016 £000 - - - - - 70 70 - - 70 22 Deferred Tax Liability Balance at beginning of period Debit to the statement of comprehensive income for the period Balance at end of year The deferred tax asset provided in the financial statements at 17% (2016: 17%) is as follows: Capital allowances in excess of depreciation 23 Provisions for liabilities and charges Warranty provision Balance at beginning of year Utilised in year Provided in year Balance at end of year Current Non current Balance at end of year 2017 £000 2016 £000 61 29 90 90 90 37 24 61 61 61 2017 £000 2,396 (1,180) 813 2016 £000 2,370 (1,221) 1,247 2,029 2,396 599 1,430 701 1,695 2,029 2,396 The Group gives guarantees against all its products, which in the majority of cases covers a period of 10 years. Provision is made for the expected future costs of rectifying faults arising within the guarantee period and then discounted at 7% to a net present value. P76 P77 24 Financial instruments Financial liabilities The Group is exposed to the risks that arise from its use of financial instruments. This note describes the objectives, policies and processes of the Group for managing those risks and the methods used to measure them. Further quantitative information in respect of these risks is presented throughout these financial statements. Capital risk management The Group manages its capital to ensure that it will be able to continue as a going concern while maximising the return to stakeholders. The Group is funded principally by equity although loans have been utilised during the review period of these financial statements. As at 31 December 2017, no loans were outstanding (2016: £nil). The capital structure of the Group consists of equity, comprising issued share capital. The Group has no externally imposed capital requirements. In order to maintain or adjust the capital structure, the Group may return capital to shareholders or issue new shares. Principal nancial instruments The principal financial instruments used by the Group, from which financial instrument risk arises are as follows: · Trade and other receivables · Trade and other payables · Cash and cash equivalents The carrying value of these financial instruments is considered to approximate to their fair value. Financial assets At the reporting date, the Group held the following financial assets: Trade receivables Cash and cash equivalents 2017 £000 2016 £000 1,713 10,975 2,279 13,459 12,688 15,738 At the reporting date, the Group held the following financial liabilities, all of which were classified as other financial liabilities: Trade payables Other payables Market risk 2017 £000 3,571 3,022 2016 £000 4,600 3,064 6,593 7,664 The Group is not materially exposed to changes in foreign currency exchange rates or interest rate movements. Trade receivables totalling £545k (2016: £529k) are secured by charges against the debtors' property. Credit risk Credit risk refers to the risk that counterparty will default on its contractual obligations resulting in financial loss to the Group. Credit risk arises principally from the Group's cash balances and trade and other receivables. The concentration of the Group's credit risk is considered by counterparty. The Group gives careful consideration to which organisation it uses for its banking services in order to minimise credit risk. The Group has a significant concentration of cash held in accounts with one large bank in the UK, an institution with an A credit rating (long term, as assessed by Moody's). The amounts of cash held on deposit with that bank at each reporting date can be seen in the financial assets table above. All of the cash and cash equivalents held with that bank at each reporting date were denominated in UK Sterling. The nature of the Group's business and current stage of its development are such that individual customers can comprise a significant proportion of its trade and other receivables at any point in time. The Group mitigates the associated risk by close monitoring of the debtor ledger. At 31 December 2017, the Group's trade receivables balance was £1,713k (2016: £2,279k). The carrying amount of financial assets recorded in the financial statements represents the Group's maximum exposure to credit risk without taking account of the value of any collateral obtained. In the Directors' opinion, there has been some impairment of trade receivables during the year in the trade receivable provisions table in note 17. An allowance for impairment is made where there is an identified loss event which, based on previous experience, is evidence of a reduction in the recoverability of the cash flows. The Board of Directors considers the above measures to be sufficient to control the credit risk exposure. P78 P79 Liquidity risk management 26 Pension costs Liquidity risk is the risk that the Group will encounter difficulty in meeting its financial obligations as they fall due. Ultimate responsibility for liquidity risk management rests with the Board of Directors. The Board manages liquidity risk by regularly reviewing the Group's cash requirements by reference to short term cash flow forecasts and medium term working capital projections. At 31 December 2017, the Group had £10,975k (31 December 2016: £13,459k) of cash reserves. Foreign currency risk management Historically, the Group's exposure to foreign currency risk has been limited, all of its invoicing and the majority of its payments are in UK Sterling. There are no balances held in foreign currencies at each reporting date and it has made no payments in foreign currencies other than US dollar and Euro. Accordingly, the Board has not presented any sensitivity analysis in this area as it is immaterial. Maturity of financial assets and liabilities All of the Group's non derivative financial liabilities and its financial assets at each reporting date are either payable or receivable within one year. 25 Commitments The Group had annual commitment under non-cancellable operating leases as follows: Motor vehicles: Expiring within one year Expiring between two and five years Expiring after five years Plant and machinery: Expiring within one year Expiring between two and five years Expiring after five years Land and buildings: Expiring within one year Expiring between two and five years Expiring after five years 2017 £000 2,765 3,457 - 127 115 - 1,495 4,982 2,971 2016 £000 1,690 1,615 - 121 165 - 1,306 4,167 2,564 15,912 11,628 During the period ended 31 December 2017, the Group entered into contracts to purchase property, plant and equipment for £nil (2016: £1,302k). The charge for the period amounts to £589,000 (2016: £482,000) and relates to contributions paid into a money purchase scheme in the period. 27 Group companies Safestyle UK plc holds more than 20% of the share capital of the following companies: Registered Address Principal Activity Country of incorporation Class of shares % held by parent Style Group Holdings Limited Style Group Limited* HPAS Limited* 14 Eldon Place, Bradford, BD1 3AZ 14 Eldon Place, Bradford, BD1 3AZ 14 Eldon Place, Bradford, BD1 3AZ Windowstyle UK Limited* Safestyle UK Limited* Style Group Europe Limited* 14 Eldon Place, Bradford, BD1 3AZ 14 Eldon Place, Bradford, BD1 3AZ 14 Eldon Place, Bradford, BD1 3AZ *Owned Indirectly 28 Related party transactions Holding company Holding company Home improvements and double glazing contractors Dormant Dormant Dormant England and Wales England and Wales England and Wales Ordinary Ordinary Ordinary 100 100 100 England and Wales England and Wales England and Wales Ordinary Ordinary Ordinary 100 100 100 During the year ended 31 December 2017 there were no related party transactions, other than transactions with subsidiaries. During the year, Safestyle UK plc charged management charges to subsidiaries of £2.4m (2016: £1.8m) and received dividends of £9.4m (2016: £17.4m). At the year-end total amounts receivable from subsidiaries were £1.4m (2016: £3.2m). Transactions with key management personnel are shown in note 9. 29 Ultimate controlling party Safestyle UK plc is quoted on the stock exchange (AIM) and ultimate control is exercised by the shareholders. P80 P81 30 Share Based Payments At 31 December 2017 the Group had the following share based payment arrangements: LTIPS On 10 April 2017, a further 348,210 options were granted (“LTIP 2017”). The LTIP 2015, 2016 and 2017 schemes require a combination of specific performance based criteria and remaining an employee for a minimum period. The numbers of share options in existence during the year were as follows: 2017 2016 Number of share options Weighted average exercise price Number of share options Weighted average exercise price Outstanding at start of period Granted during the year Issued in the year Cancelled in the year Lapsed in the year Outstanding at end of period Exercisable at end of period 1,030,134 348,210 - - (470,985) 907,359 - £2.18 - - - £1.86 £1.51 - 4,581,976 448,533 (2,564,427) (1,421,683) (14,265) 1,030,134 - £1.10 £2.68 £1.00 £1.00 £1.79 £2.18 - Options are valued using the Black-Scholes option pricing model. The following information is relevant in the determination of the fair value of the options granted during the period. Grant date Vesting date Lapsing date LTIP 2017 10/04/2017 10/04/2020 10/04/2027 LTIP 2016 29/04/2016 29/04/2019 01/04/2026 LTIP 2015 01/04/2015 01/04/2018 01/04/2025 Risk free interest rate Expected volatility Expected option life (in years) Weighted average share price after adjusting for PV of dividends Weighted average exercise price Weighted average fair value of options granted Dividend yield Remaining contractual life 0.15% 33.60% 6.50 £3.04 £0.00 256.00p 5.71% 9.78 1.22% 36.93% 6.50 £2.67 £2.68 65.79p 3.60% 8.76 1.28% 43.13% 6.50 £1.80 £1.79 44.78p 5.20% 7.76 At the grant date there was limited share price history for the company on which to calculate volatility. Volatility was therefore estimated using both Safestyle and companies classified in the 'Home Improvement Retailers' subsector on the London Stock Exchange. SAYE The numbers of share options in existence during the year were as follows: 2017 2016 Number of share options Weighted average exercise price Number of share options Weighted average exercise price Outstanding at start of period Granted during the year Issued in year Lapsed during the period Outstanding at end of period Exercisable at end of period 423,382 128,205 (197,236) (150,226) 204,125 - £1.49 £2.40 £1.31 £1.68 £2.10 - 452,460 87,485 - (116,563) 423,382 - £1.37 £2.25 - £1.57 £1.49 - Options are valued using the Black-Scholes option pricing model. The following information is relevant in the determination of the fair value of the options granted during the year. Grant date Vesting date Lapsing date SAYE 2017 24/04/2017 01/06/2020 01/12/2020 SAYE 2016 01/04/2016 01/05/2019 01/11/2019 SAYE 2015 01/04/2015 01/05/2018 01/11/2018 Risk free interest rate Expected volatility Expected option life (in years) Weighted average share price after adjusting for PV of dividends Weighted average exercise price Weighted average fair value of options granted Dividend yield Remaining contractual life 0.21% 34.20% 3.35 £3.14 £2.51 69.00p 5.53% 3.42 0.56% 32.88% 3.35 £2.81 £2.25 71.93p 3.40% 2.34 0.76% 33.54% 3.35 £1.80 £1.43 41.52p 5.20% 1.34 At the grant date there was limited share price history for the Company on which to calculate volatility. Volatility was therefore estimated using both Safestyle and companies classified in the 'Home Improvement Retailers' subsector on the London Stock Exchange. The total share based expense comprises: Equity settled - LTIP Equity settled - SAYE 31 Equity settled share based payments charges 2017 £000 351 70 421 2017 £000 351 70 - 421 2016 £000 153 87 240 2016 £000 153 87 947 1,187 P83 On 1 April 2017 the Company launched a new share save (SAYE) scheme (“SAYE 2017”) in addition to the existing schemes (“SAYE 2015 and “SAYE 2016”) for employees. The SAYE 2013 vested within the year with 197,236 shares being issued at an issue price of 130.8 pence per share. The scheme has now closed and no further shares will be issued. All schemes allow employees to acquire a certain number of shares at a discount of 20% of the share price prior to the invitation to join the scheme, using amounts saved under a 'Save As You Earn' savings contract. Equity settled - LTIP Equity settled - SAYE Employers national insurance on issue of LTIP with associated charges P82 32 Contingent liability During the year there were two incidents during installations which led to reportable injuries. The Health & Safety Executive (“HSE”) has carried out investigations into both of these cases. Whilst it continues to investigate, the HSE has advised the Group, subsequent to the year end, that it intends to prosecute Safestyle in relation to one of the incidents, in which a contractor suffered a knee injury. The Group has taken legal advice and it is expected that a fine will be imposed. The pro-forma range of the potential fine is believed to be £550k to £2.9m. This range may be reduced as the matter is progressed and the precise quantum depends on a number of factors including the level of culpability, the harm category and what mitigating factors may be taken into account, such as full cooperation with the HSE's investigation and the Group's good health and safety record. Consequently management has not recognised a provision in these financial statements. 33 Reconciliation of profit before taxation to underlying profit before taxation Profit before taxation add back Non-recurring costs Equity settled share based payments charges 2017 £000 13,814 830 421 2016 £000 19,344 - 1,187 Underlying profit before taxation 15,065 20,521 34 Reconciliation of profit before taxation to underlying EBITDA Profit before taxation add back Finance income Finance costs Depreciation and amortisation EBITDA add back Non-recurring costs Equity settled share based payments charges Underlying profit before taxation 2017 £000 13,814 (35) 10 1,730 2016 £000 19,344 (98) 11 1,168 15,519 20,415 830 421 - 1,178 16,770 21,602 P84 P85
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