Report & Accounts for the year ended 31 December 2013 23276-04 20 May 2014 4:19 PM Proof 5 02 Annual Report & Accounts | 2013 Our Business: We are one of the UK’s market leaders in the distance selling of industrial and commercial equipment. Our Strengths: We manufacture and distribute over 35,000 high quality products covering everything you need for the workplace from handling and lifting and premises equipment to retail and office supplies, including many new ideas to help keep your business running smoothly. Our Commitment: Providing our customers with an extensive product range, outstanding service and efficient delivery. 23276-04 20 May 2014 4:19 PM Proof 5 Directors & Advisors Directors J. R. Waterhouse – Non-Executive Chairman D. S. Slingsby – Managing Director C. J. Slingsby – Sales Director R. G. Hudson – Financial Director L. R. Wright – Marketing Director Company Secretary R. G. Hudson Registered Office Otley Road Baildon, Shipley West Yorkshire BD17 7LW Tel : (01274) 535030 Fax : (01274) 535035 Registered Number 452716 Registrars Capita Asset Services The Registry 34 Beckenham Road Beckenham Kent BR3 4TU Independent Auditors PricewaterhouseCoopers LLP Benson House 33 Wellington Street Leeds LS1 4JP Solicitors Squire Sanders (UK) LLP 2 Park Lane Leeds LS3 1ES Nominated Adviser & Broker Sanlam Securities UK Limited 10 King William Street London EC4N 7TW Bankers HSBC Bank plc 47 Market Street Bradford West Yorkshire BD1 1LW Website & E-Mail The company’s website address is www.slingsby.com The company’s e-mail address is sales@slingsby.com Contents Directors and Advisors Statement by the Chairman Strategic Report Report of the Directors Corporate Governance Statement of Directors’ Responsibilities Independent Auditors’ Report Consolidated Income Statement Statement of Consolidated Comprehensive Income and Expense Statement of Consolidated and Company Changes in Shareholders’ Equity Consolidated Balance Sheet Company Balance Sheet Consolidated Cash Flow Statement Company Cash Flow Statement Notes to the Cash Flow Statements Notes to the Accounts Five Year Summary Notice of Annual General Meeting Notes to the Notice of Annual General Meeting 01 02 04 08 10 11 12 14 15 15 17 18 19 19 20 21 37 38 38 1 23276-04 20 May 2014 4:19 PM Proof 5 Annual Report & Accounts | 2013 Statement by the Chairman In a statement I issued on behalf of the Board at our 2013 AGM last June, I stated that “the Board’s expectations are for a small pre-tax loss for the first half of 2013” and that “in the absence of an upturn in our markets and the economy as a whole, similar trading for the six months to 31 December 2013 will result in a more substantial loss for the second half”. The Group subsequently reported in September 2013 a pre-tax loss for the first half of £32,000. Sales in September and October did show a welcome improvement before falling away again substantially in the last two months of the financial year. Fierce price competition continued to put margins under pressure. A trading statement was therefore issued on 10 February 2014 in which it was stated that, “as a result of further difficult and variable trading in the second half of the year the Board now expects that the Group will incur a pre-tax loss substantially in excess of its previous expectations for the year ended 31 December 2013”. I am disappointed to report that the Group incurred a pre-tax loss for the 2013 year of £249,000 on sales of £14.0 million compared with a profit before tax of £102,000 on sales of £14.6 million in 2012. The second half year pre-tax loss was therefore £217,000. Comprehensive action has been taken to reduce overheads significantly since the year end. Following a fundamental review in December and post year end, we have reduced our workforce by approximately 20 per cent, including a layer of management. The manufacturing unit has been closed with all in-house designed products now sub- contracted out for manufacture to trade only suppliers in the UK. The design, final assembly and commissioning of premium added value product, have been retained within the business. We have rationalised our Irish operations and consolidated activity in Northern Ireland and the Republic. In the meantime, sales in the first three months of 2014 were 11 per cent below those of the comparative period last year, with margins continuing to be under pressure from aggressive pricing by competitors. In addition, exceptional restructuring costs of approximately £180,000 have been incurred in the current year. The full benefit of our cost reductions will not take effect until June and will result in reduced monthly overhead costs which, even on the current depressed level of sales, would improve the Group’s monthly operating performance going forward in the second half of 2014. The Board believes this will provide a secure platform for recovery as our initiatives to increase sales take effect. Our new enterprise system and website were installed in November 2013 and following some teething problems, this substantial investment is showing benefits. We are now able to be more responsive to opportunities online by offering more flexible and differentiated pricing. We continue to strive for best service at a competitive price. We therefore look to an improving level of sales in the second half of 2014 and into 2015. On behalf of the Board I wish to thank our loyal staff in these most difficult times. Our balance sheet continues to be strong, particularly our positive cash position, which stood at £2.3 million as at 31 December 2013 (2012: £2.8 million). Despite these reported results and taking into account the actions already taken to improve the future position, we wish to maintain a dividend, albeit on a reduced level. The Board is therefore recommending a final dividend of 10p per share (2012: 15p), payable on 4 July 2014 to shareholders on the register on 6 June 2014. The total dividend for 2013 is therefore 12p (2012: 19p). J. R. Waterhouse Non-Executive Chairman 22 May 2014 2 23276-04 20 May 2014 4:19 PM Proof 5 Annual Report & Accounts | 2013 We’re proud of our heritage and with over 120 years of experience, our knowledge goes way beyond our products. 23276-04 20 May 2014 4:19 PM Proof 5 3 Annual Report & Accounts | 2013 Strategic Report The group’s principal activity comprises the merchanting and distribution of a highly diversified range of industrial and commercial equipment primarily consisting of incidental purchasing supplies. The range spanning some 35,000 products includes the following sectors; materials handling, access, storage and shelving, office, safety and security, janitorial, mailroom and packaging, workshop and maintenance, environmental and waste management, premises, signs and labels, flooring and matting. The business environment is a highly fragmented sector consisting of a small number of directly comparable distant selling organisations and an increasingly large number of specialist distributors. Our customer base is similarly diverse and consequently demand derived from these organisations is reflective of the current macroeconomic circumstances. The group is seeking to build upon our strengths in distance selling and further enhance our e-commerce offering. We believe that deploying e-commerce initiatives with not only customers but also key trading partners will produce efficiencies as well as growth opportunities. As a generalist catalogue group with a wide ranging portfolio we understand the rapidly growing importance of having an intuitive, dynamic website. Further development of our website will allow us to respond and compete with single product website competitors, enabling us to focus on more targeted and dynamic campaigns to increase the efficiency and relevance to the customer. The group has further engaged with a broader range of trade accounts to extend its market penetration, offering wholesale business to resale accounts and virtual warehousing. Our focus is now on omni-channel solutions and our e-business should feature our best ever website, EDI solutions, bespoke e-catalogues and punchout e-procurement. During these continued challenging times, businesses will aggressively seek to cut the cost of procurement. By keeping our focus on providing value, choice, quality and service in our product offering we are in the right place to be chosen by more companies as their Workplace Partner. The heart of this relationship is the personal service offered by external VIP champions that are dedicated to leveraging our extensive key account base. For our larger accounts we have introduced our VIP customer club which offers exclusive benefits. We also offer a broad spectrum of specialist publications that have pioneered the provision of knowledge and expertise to the facilities management and occupation health sectors. With our commitment to expand our next day delivery comes the need to maintain our stockholdings in order to meet that pledge. This is something our customers expect and demand. The group recognises the importance of social responsibility and the business case for strengthening customer perception of our brand. We are thus committed to business sustainability. Internally, our Environmental Management System is certified to ISO 14001 ensuring compliance to applicable legislation, as well as continued improvement of our impact through management of material, resource and energy usage. Frequent review of our product offering and our various routes to market take advantage of developing technologies, increased recycled material content and reduced or improved packaging. By keeping focus on providing value, choice, quality and service in our product offering we are in the right place to be chosen by more companies as their Workplace Partner. 4 23276-04 20 May 2014 4:19 PM Proof 5 Annual Report & Accounts | 2013 The directors believe that the group’s strong brand values of quality, reliability and service excellence remain true today as they have done over the past 120 years of trading and this is recognised by the significant number of repeat customers who, in an increasingly fragmented marketplace, remain loyal to Slingsby. Principal risks and uncertainties The directors recognise that within the business there are a number of risks that may affect the performance of the business as below. These risks and uncertainties are subject to regular review and where appropriate processes are established to minimise the level of exposure. Key Performance Indicators and Business Performance Sales growth Return on capital employed Return on sales Gross profit margin 2013 2012 (4.3%) (6.8%) (1.8%) 39.4% (4.2%) 3.5% 0.7% 42.2% Notes: 1. Return on capital employed is calculated as (loss)/profit before taxation over the total equity at the year end. 2. Return on sales is calculated as (loss)/profit before taxation over revenue. A review of the business is included in the Statement by the Chairman on page 2. People The principal asset of the group is the commitment and skill of its people. The retention of these people is therefore key to the success of the business. The group has in place incentive schemes which are related to its results and which allow all employees to participate in the success of the group as a whole. Economic and market cycles and volatility The group’s operating performance is influenced by the economic conditions of the regions in which it operates, principally the UK. The current strained economic environment could result in a general reduction in business activity and a consequent loss of income for the group. The current credit market conditions mean financial institutions are applying more stringent lending criteria and the availability of debt is low by historical comparison thus affecting our customer demand patterns. 23276-04 20 May 2014 4:19 PM Proof 5 5 Annual Report & Accounts | 2013 As a business we do not expect further major investment in technology development in the near future, but 2014 will be a year to begin leveraging the investment in these solutions and ramping up the company’s electronic market place offering. Competition The group recognises that although it operates primarily within the UK it has to be mindful of highly competitive pan-European and global activity as well as service and performance criteria in local markets. Margins are carefully monitored and the commercial offering is adjusted where appropriate. Regulatory To ensure that we remain fully compliant with all regulatory requirements we constantly monitor changes in laws, regulations and standards relating to employment, safety, environment and quality, to enable us to adapt our policies and procedures accordingly. This ensures we continue to meet customer requirements, minimise business impact and control costs, whilst observing our legal and social responsibilities. Strategic Report Continued Economic and market cycles and volatility (continued) The main risk arising from the group’s financial instruments is liquidity risk. The group ensures that it has sufficient cash resources available to meet all short-term cash requirements for the foreseeable future. The group purchases a significant amount of its products from overseas suppliers in foreign currencies and uses forward foreign currency contracts. At present the directors do not believe that the group has significant interest rate risk. The Board keeps these risks under regular review. Commercial Relationships The group benefits from many long term relationships with key customers but having many thousands of customers gives us low revenue concentration risk. The group, which has no significant supplier dependency, is in frequent contact with its suppliers to ensure that it is fully aware of market trends and innovations. Technology Changes By the end of the year the group had reached the end of the three year technology plan put together in 2011. This plan has seen the successful implementation of the following business solutions: • A new website; • A new back office system; • New electronic links to a number of key customers; • • • A major upgrade of existing catalogue production systems to support the new e-commerce solutions; Significant investment in enhancing the data within the existing systems; A major renewal of existing hardware to efficiently support the new infrastructure. 6 23276-04 20 May 2014 4:19 PM Proof 5 Annual Report & Accounts | 2013 Approvals Environmental Sustainability To demonstrate our commitment to continuous improvement in both Quality and Environmental Management we remain UKAS (UK Accreditation Service) accredited to the international standards ISO 9001:2008 and ISO14001:2004 respectively. Exceptional item In addition to statutory and regulatory compliance, the group takes pride in its environmental initiatives which have been recognised by winning prestigious awards for carbon reduction. This year, whilst maintaining the same unbeatable content, we have reduced our main catalogue size by some 15 per cent to optimise paper, printing, and distribution. In the prior year, due to the continued economic downturn and lack of visibility of any upturn in activity levels the group reluctantly made redundancies at a cost of £129,000. Committed to reducing our carbon footprint Pensions The group has an obligation to fund its defined benefit pension scheme and this creates an exposure to interest rates, inflation, investment return and the longevity of the plan members. The group has eliminated these risks for future service by the closure of the scheme to future accrual from 31 March 2009; however, the funding of the past service liabilities remains and has the potential to create significant variances in the group’s operating profits, cash flow and balance sheet. Health and safety We continue to meet our statutory and regulatory environmental obligations, through membership of our local Eco-Network and appropriate compliance schemes. The group initiatives in optimising our carbon footprint not only benefit the environment but also reduce our costs, and were again recognised by a Bradford Chamber of Commerce ‘Raising the Bar’ environmental award in 2013. Year on year we continue to reduce our carbon footprint, justifying the Long Improvement Awards from Business in the Community (BITC) and attaining Gold level in the 2013 Environmental Index. This year will see a further significant improvement as we switch our electrical supply to fully renewable energy sources. By order of the Board R. G. Hudson Company Secretary 22 May 2014 23276-04 20 May 2014 4:19 PM Proof 5 7 Annual Report & Accounts | 2013 Report of the Directors The directors are pleased to present their annual report and audited consolidated financial statements for the year ended 31 December 2013. Future developments are considered in the Statement by the Chairman on page 2. HC Slingsby plc is incorporated and domiciled in the United Kingdom and based in Baildon, West Yorkshire. Directors The directors of the company who were in office during the year and up to the date of signing the financial statements are listed on page 1. Substantial Interests So far as the directors are aware there were the following substantial interests, other than those included in directors’ interests, in the shares of the company at 22 May 2014: Number of ordinary Shares of 25p each Percentage Holding M. Chadwick*1 107,495 10.7% Dividends J. Crowther Jones & Mr. T. E. Jones The following dividends have been proposed for the 2013 financial year: J. H. Ridley S. E. Slingsby An interim dividend of 2p per share (2012: 4p per share) paid in January 2014 amounted to The directors recommend a final dividend of 10p per share (2012: 15p per share) amounting to Directors’ Interests £’000 20 100 M. Miller (registered in the name of Pershing Nominees Limited) H. Slingsby P. S. Allen (8,961 registered in the name of R C Greig Nominees Limited) K. J. Williams The beneficial interests of the directors and their immediate families in the shares of the company are: C. Bennett (registered in the name of Rock (Nominees) Limited) Number of ordinary shares of 25p each S. Whittaker S. A. Williams 54,866 54,302 51,167 48,381 47,138 38,440 37,000 35,325 32,500 30,835 5.5% 5.4% 5.1% 4.8% 4.7% 3.8% 3.7% 3.5% 3.3% 3.1% 31 December 2013 1 January 2013 H C Slingsby plc Retirement Benefits Scheme 30,061 3.0% *1 80,995 registered in the name of Goodbody Stockbrokers Nominees Limited and 26,500 in the name of Rulegale Nominees Limited J. R. Waterhouse C. J. Slingsby D. S. Slingsby R. G. Hudson L. R. Wright 1,000 53,886 51,167 3,400 2,000 1,000 53,886 51,167 3,400 2,000 There have been no other changes in the directors’ shareholdings between 31 December 2013 and 22 May 2014. None of the directors had any beneficial interest in any contract of significance to which the company was a party, other than their service contracts, subsisting during the year. In addition to the above, C. J. Slingsby and D. S. Slingsby together have a non-beneficial interest in respect of 64,000 (2012: 64,000) ordinary shares. 8 23276-04 20 May 2014 4:19 PM Proof 5 Annual Report & Accounts | 2013 Financial Instruments The group’s financial instruments comprise cash, forward foreign exchange contracts and various items such as trade receivables and trade payables that arise directly from its operations. The main purpose of these financial instruments is to finance the group’s operations. Financial risk management disclosures are included in note 21 to the financial statements. Indemnification of Directors The company confirms that qualifying third party indemnity insurance cover has been effected in respect of directors’ and officers’ liability to protect “insured persons” in respect of liabilities devolving on them for wrongful acts arising in the normal conduct of the business. This was in place throughout the last financial year and is currently in force. Audit Information So far as each of the directors are aware, there is no relevant information that has not been disclosed to the company’s auditors and each of the directors believes that all steps have been taken that ought to have been taken to make them aware of any relevant audit information and to establish that the company’s auditors have been made aware of that information. Independent Auditors A resolution to re-appoint PricewaterhouseCoopers LLP as the company’s auditors and authorising the directors to fix their remuneration will be proposed at the Annual General Meeting. Corporate Governance The company’s statement on corporate governance is included in the Corporate Governance report on page 10 of the financial statements. By order of the Board R. G. Hudson Company Secretary 22 May 2014 23276-04 20 May 2014 4:19 PM Proof 5 9 Annual Report & Accounts | 2013 Corporate Governance As a Board, we recognise that applying sound governance principles in running the Company is essential. We apply the Quoted Companies Alliance corporate governance guidelines (the ‘QCA Code’) which are widely recognised as a benchmark for corporate governance of smaller quoted companies and are therefore most appropriate to H C Slingsby plc. The Company also complies with elements of the UK Corporate Governance Code (the ‘UK Code’) to the extent that it is appropriate to do so for a company of its nature and size. The following is a summary of procedures supporting this approach. Relations with Shareholders The company is ready, where practicable, to enter into a dialogue with institutional shareholders based on the mutual understanding of objectives. The board also uses the Annual General Meeting (“AGM”) to communicate with private investors. The directors are available to answer questions raised by shareholders at the AGM. The level of proxies lodged on each AGM resolution and the numbers for, against and withheld for each resolution are declared by the Chairman after the resolution has been dealt with on a show of hands. The Board The board meets formally on a monthly basis and special meetings are convened to discuss matters that require urgent consideration. In view of the size of the group and the close involvement of the directors, informal meetings take place frequently. Accordingly, a register of all meetings has not been kept with which to record attendances. There is a Schedule of Matters specifically reserved for the board’s decision. There is also an established procedure for all directors to take independent professional advice, if necessary, at the company’s expense. Additionally all directors have access to the advice and services of the Company Secretary and the company maintains directors’ and officers’ liability insurance. The Board is comprised of the following and includes one non- executive director: J. R. Waterhouse D. S. Slingsby C. J. Slingsby R. G. Hudson L. R. Wright – – – – – Non-Executive Chairman* Managing Director* Sales Director Financial Director and Company Secretary Marketing Director * Member of both Audit and Remuneration Committees Going Concern After making appropriate enquiries, including a review of forecasts and strategic plans the directors have a reasonable expectation that the group has adequate resources to continue in operational existence for the foreseeable future. For this reason the going concern basis has been adopted in preparing the group’s accounts. Internal Controls The board acknowledges that it is responsible for the group’s system of Internal Control and for reviewing its effectiveness. Reflecting the size of the group, a key control procedure is the close day to day supervision of the business by the executive directors, supported by the senior management with responsibility for key operations. The executive directors are involved in the budget setting process, constantly monitoring key performance indicators such as those highlighted in the business review and reviewing the management accounts on a monthly basis, noting and investigating major variances. All significant capital expenditure decisions are approved by the board as a whole, in line with the Schedule of Matters reserved for the Board. By order of the Board R. G. Hudson Company Secretary 22 May 2014 10 23276-04 20 May 2014 4:19 PM Proof 5 Annual Report & Accounts | 2013 Statement of Directors’ Responsibilities The directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulations. Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have prepared the group and parent company financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union. Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the group and the company and of the profit or loss of the group for that period. In preparing these financial statements, the directors are required to: The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the company’s transactions and disclose with reasonable accuracy at any time the financial position of the company and the group and to enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the company and the group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. The directors are responsible for the maintenance and integrity of the group website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. • • • • Select suitable accounting policies and then apply them consistently; By order of the Board Make judgements and accounting estimates that are reasonable and prudent; State whether applicable IFRSs as adopted by the European Union have been followed, subject to any material departures disclosed and explained in the financial statements; and Prepare the financial statements on the going concern basis, unless it is inappropriate to presume that the company and the group will continue in business. R. G. Hudson Company Secretary 22 May 2014 23276-04 20 May 2014 4:19 PM Proof 5 11 Annual Report & Accounts | 2013 Independent Auditors’ Report to the members of H C Slingsby plc Report on the financial statements Our opinion In our opinion: • • • • the financial statements, defined below, give a true and fair view of the state of the group’s and of the parent company’s affairs as at 31 December 2013 and of the group’s loss and the group’s and the parent company’s cash flows for the year ended; the group financial statements have been properly prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union; the parent company financial statements have been properly prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union and as applied in accordance with the provisions of the Companies Act 2006; and the financial statements have been prepared in accordance with the requirements of the Companies Act 2006. This opinion is to be read in the context of what we say in the remainder of this report. What we have audited The group financial statements and parent company financial statements (the “financial statements”), which are prepared by H C Slingsby plc, comprise: • • • • • the consolidated and company balance sheets as at 31 December 2013; the consolidated income statement and statement of consolidated comprehensive income and expense for the year then ended; the consolidated and company cash flow statements, and notes to the cash flow statements, for the year then ended; the consolidated and company statements of changes in shareholders’ equity for the year then ended; and the notes to the financial statements, which include a summary of significant accounting policies and other explanatory information. The financial reporting framework that has been applied in their preparation is applicable law and IFRSs as adopted by the European Union and, as regards the parent company financial statements, as applied in accordance with the provisions of the Companies Act 2006. In applying the financial reporting framework, the directors have made a number of subjective judgements, for example in respect of significant accounting estimates. In making such estimates, they have made assumptions and considered future events. What an audit of financial statements involves We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) (“ISAs (UK & Ireland)”). An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: • whether the accounting policies are appropriate to the group’s and the parent company’s circumstances and have been consistently applied and adequately disclosed; • the reasonableness of significant accounting estimates made by the directors; and • the overall presentation of the financial statements. In addition, we read all the financial and non-financial information in the Report and Accounts (the “Annual Report”) to identify material inconsistencies with the audited financial statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report. Opinion on other matter prescribed by the Companies Act 2006 In our opinion the information given in the Statement by the Chairman, Strategic Report and the Report of the Directors for the financial year for which the financial statements are prepared is consistent with the financial statements. Other matters on which we are required to report by exception Adequacy of accounting records and information and explanations received Under the Companies Act 2006 we are required to report to you if, in our opinion: • • • we have not received all the information and explanations we require for our audit; or adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or the parent company financial statements are not in agreement with the accounting records and returns. We have no exceptions to report arising from this responsibility. Directors’ remuneration Under the Companies Act 2006 we are required to report to you if, in our opinion, certain disclosures of directors’ remuneration specified by law are not made. We have no exceptions to report arising from this responsibility. 12 23276-04 20 May 2014 4:19 PM Proof 5 Annual Report & Accounts | 2013 Responsibilities for the financial statements and the audit Our responsibilities and those of the directors As explained more fully in the Statement of Directors’ Responsibilities, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and ISAs (UK & Ireland). Those standards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors. This report, including the opinions, has been prepared for and only for the company’s members as a body in accordance with Chapter 3 of Part 16 of the Companies Act 2006 and for no other purpose. We do not, in giving these opinions, accept or assume responsibility for any other purpose to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing. Arif Ahmad (Senior Statutory Auditor) For and on behalf of PricewaterhouseCoopers LLP Chartered Accountants and Statutory Auditors Leeds 22 May 2014 23276-04 20 May 2014 4:19 PM Proof 5 13 Annual Report & Accounts | 2013 Consolidated Income Statement for the year ended 31 December 2013 Revenue Cost of sales Gross profit Distribution costs Administration expenses Operating profit before exceptional item Exceptional item Operating profit Finance income Finance costs (Loss)/profit before taxation Taxation (Loss)/profit for the year attributable to equity shareholders Note 3 6 7 8 9 2013 £’000 13,965 (8,463) 5,502 (3,124) (2,241) 137 — 137 26 (412) (249) 154 (95) 2012 £’000 14,588 (8,433) 6,155 (3,276) (2,519) 489 (129) 360 43 (301) 102 70 172 Basic and diluted (loss)/earnings per share 10 (9.5p) 17.2p 14 23276-04 20 May 2014 4:19 PM Proof 5 Annual Report & Accounts | 2013Heading Statement of Consolidated Comprehensive Income and Expense for the year ended 31 December 2013 Items that will not be reclassified to profit or loss: Remeasurements of post-employment benefit obligations Movement in deferred tax relating to retirement benefit obligation Items that may be subsequently reclassified to profit or loss: Exchange adjustment Other comprehensive income/(expense) (Loss)/profit for the year Total comprehensive income/(expense) for the year attributable to equity shareholders Note 23 16 2013 £’000 1,641 (623) 6 1,024 (95) 2012 £’000 (1,339) 46 (7) (1,300) 172 929 (1,128) Statement of Consolidated and Company Changes in Shareholders’ Equity Group 1 January 2012 Profit for the year Other comprehensive expense for the year Total comprehensive expense for the year Dividends paid 1 January 2013 Loss for the year Other comprehensive income for the year Total comprehensive income for the year Dividends paid 31 December 2013 Note Share capital £’000 Retained earnings £’000 Translation reserve £’000 250 – – – – 250 – – – – 250 4,125 172 (1,293) (1,121) (320) 2,684 (95) 1,018 923 (190) 3,417 12 12 22 – (7) (7) – 15 – 6 6 – 21 Total equity £’000 4,397 172 (1,300) (1,128) (320) 2,949 (95) 1,024 929 (190) 3,688 The translation reserve comprises foreign exchange differences arising from the translation of the financial statements of foreign operations. 23276-04 20 May 2014 4:19 PM Proof 5 15 Annual Report & Accounts | 2013 Statement of Consolidated and Company Changes in Shareholders’ Equity Continued Company 1 January 2012 Profit for the year Other comprehensive expense for the year Total comprehensive expense for the year Dividends paid 1 January 2013 Loss for the year Other comprehensive income for the year Total comprehensive income for the year Dividends paid 31 December 2013 Share capital £’000 Retained earnings £’000 Note 250 – – – – 250 – – – – 250 3,881 168 (1,293) (1,125) (320) 2,436 (83) 1,018 935 (190) 3,181 12 12 Total equity £’000 4,131 168 (1,293) (1,125) (320) 2,686 (83) 1,018 935 (190) 3,431 16 23276-04 20 May 2014 4:19 PM Proof 5 Annual Report & Accounts | 2013 Consolidated Balance Sheet As at 31 December 2013 Assets Non-current assets Property, plant and equipment Intangible assets Deferred tax asset Current assets Inventories Trade and other receivables Cash and cash equivalents Current tax asset Liabilities Current liabilities Trade and other payables Derivative financial instruments Current tax liabilities Net current assets Non-current liabilities Retirement benefit obligation Net assets Capital and reserves Called up share capital Retained earnings Translation reserve Total equity Note 13 14 16 17 18 19 20 23 24 2013 £’000 6,131 594 910 7,635 1,897 2,401 2,325 28 6,651 (2,503) (26) – (2,529) 4,122 (8,069) 3,688 250 3,417 21 3,688 2012 £’000 6,358 202 1,419 7,979 2,270 2,443 2,836 – 7,549 (2,722) (7) (12) (2,741) 4,808 (9,838) 2,949 250 2,684 15 2,949 The financial statements on pages 14 to 36 were approved by the Board of Directors on 22 May 2014 and were signed on its behalf by: D. S. Slingsby Director R. G. Hudson Director H C Slingsby plc Registered Number: 452716 23276-04 20 May 2014 4:19 PM Proof 5 17 Annual Report & Accounts | 2013 Company Balance Sheet As at 31 December 2013 Assets Non-current assets Property, plant and equipment Intangible assets Investments in subsidiaries Deferred tax asset Current assets Inventories Trade and other receivables Cash and cash equivalents Current tax asset Liabilities Current liabilities Trade and other payables Derivative financial instruments Current tax liabilities Net current assets Non-current liabilities Retirement benefit obligation Net assets Capital and reserves Called up share capital Retained earnings Total equity Note 13 14 15 16 17 18 19 20 23 24 2013 £’000 6,131 594 – 910 7,635 1,897 2,402 2,048 26 6,373 (2,482) (26) – (2,508) 3,865 (8,069) 3,431 250 3,181 3,431 2012 £’000 6,358 202 – 1,419 7,979 2,270 2,410 2,581 – 7,261 (2,698) (7) (11) (2,716) 4,545 (9,838) 2,686 250 2,436 2,686 The financial statements on pages 14 to 36 were approved by the Board of Directors on 22 May 2014 and were signed on its behalf by: D. S. Slingsby Director R. G. Hudson Director H C Slingsby plc Registered Number: 452716 18 23276-04 20 May 2014 4:19 PM Proof 5 Annual Report & Accounts | 2013 Consolidated Cash Flow Statement For the year ended 31 December 2013 Cash flows from operating activities Cash generated from operations UK corporation tax paid Cash generated from operating activities Cash flows from investing activities Interest received Purchase of property, plant and equipment Proceeds from sales of property, plant and equipment Purchase of intangible assets Net cash outflow from investing activities Cash flows from financing activities Equity dividends paid Net cash outflow from financing activities Net (decrease)/increase in cash and cash equivalents Opening cash and cash equivalents Exchange differences Closing cash and cash equivalents Company Cash Flow Statement For the year ended 31 December 2013 Cash flows from operating activities Cash generated from operations UK corporation tax paid Cash generated from operating activities Cash flows from investing activities Interest received Purchase of property, plant and equipment Proceeds from sales of property, plant and equipment Purchase of intangible assets Net cash used in investing activities Cash flows from financing activities Equity dividends paid Net cash outflow from financing activities Net (decrease)/increase in cash and cash equivalents Opening cash and cash equivalents Closing cash and cash equivalents Note 13 14 12 Note 13 14 12 2013 £’000 166 – 166 44 (64) 11 (484) (493) (190) (190) (517) 2,836 6 2,325 2013 £’000 150 – 150 44 (64) 11 (484) (493) (190) (190) (533) 2,581 2,048 2012 £’000 1,041 (108) 933 40 (92) 26 (183) (209) (320) (320) 404 2,439 (7) 2,836 2012 £’000 1,042 (104) 938 40 (92) 26 (183) (209) (320) (320) 409 2,172 2,581 19 23276-04 20 May 2014 4:19 PM Proof 5 Annual Report & Accounts | 2013 Notes to the Cash Flow Statements For the year ended 31 December 2013 Cash generated from Operations (Loss)/profit before tax Net finance costs Depreciation and amortisation Profit on sale of property, plant and equipment Loss on disposal of intangible assets Pension deficit contributions Decrease in inventories Decrease/(increase) in trade and other receivables (Decrease)/increase in trade and other payables Cash generated from operating activities Group Company 2013 £’000 (249) 386 369 (1) 12 (540) 373 23 (207) 166 2012 £’000 102 258 381 (9) — (540) 2 114 733 1,041 2013 £’000 (234) 386 369 (1) 12 (540) 373 (11) (204) 150 2012 £’000 97 258 381 (9) — (540) 2 127 726 1,042 20 23276-04 20 May 2014 4:19 PM Proof 5 Annual Report & Accounts | 2013 Notes to the Accounts 1. Accounting Policies Basis of Preparation The principal accounting policies adopted in the preparation of these financial statements, which have been applied consistently to all years presented, are set out below. The financial statements have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union (IFRS as adopted by the EU), International Financial Reporting Interpretations Committee (IFRIC) interpretations and with the Companies Act 2006 applicable to companies reporting under IFRS. The standards used are those published by the International Accounting Standards Board (IASB) and endorsed by the EU at the time of preparing these statements. The financial statements are prepared under the historical cost convention on a going concern basis, except for derivative financial instruments which are measured at fair value through profit or loss. Accounting Developments Impact of new International Financial Reporting Standards – Adopted for 2013 The group has adopted the following new and amended IFRSs as of 1 January 2013: Amendment to IAS 1, ‘Financial statement presentation’ regarding other comprehensive income. IAS 19, ‘Employee benefits’ was revised in June 2011. The changes on the group’s accounting policies has been as follows: to immediately recognise all past service costs; and to replace interest cost and expected return on plan assets with a net interest amount that is calculated by applying the discount rate to the net defined liability. Prior year comparatives have not been restated as the adjustment is not material. Amendment to IFRS 7, ‘Financial instruments: Disclosures on asset and liability offsetting’ (effective 1 July 2013). A number of new standards and amendments to standards and interpretations are effective for annual periods beginning after January 2013 and have not been applied in preparing these Consolidated Financial Statements of the Group. There are no IFRS’s or IFRIC interpretations that are not yet effective that would be expected to have a material impact on the Group. Basis of Consolidation The financial statements of the group consolidate the financial statements of H C Slingsby plc and its subsidiary undertaking up to 31 December 2013 using acquisition accounting. Subsidiaries are entities over which the group has the power to govern the financial and operating policies. The results of subsidiary undertakings acquired during a financial period are included from the effective date of acquisition. Intra-Group sales, Intra-Group balances and Intra-Group profits are eliminated fully on consolidation, and consistent accounting policies have been adopted across the group. Exceptional Items Exceptional items are disclosed separately in the financial statements where it is necessary to do so to provide further understanding of the financial performance of the group. They are material items of income or expense that have been shown separately due to the significance of their nature or amount. Accounting Estimates and Judgements The preparation of these financial statements requires management to make estimates and judgements that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue during the reporting year. Actual results could materially differ from these estimates. Key sources of estimation uncertainty that could cause an adjustment to be required to the carrying amount of asset or liabilities within the next accounting year are: • Assumptions used in the calculation of the defined benefit pension scheme liability (note 23); and • Allowances against the valuation of inventories (note 17). Revenue and Recognition of Income Revenue compromises the fair value of the consideration received or receivable from the sale of goods and services in the ordinary course of the group’s activities. Revenue is shown net of value added tax, returns, rebates and discounts. Revenue is recognised when title of the goods passes to the customer, in accordance with the terms and conditions agreed with each customer and, in default, in accordance with the Group’s standard terms and conditions which state that title of goods passes once the Group receives cleared payment for the price of the goods and all other sums due. 23276-04 20 May 2014 4:19 PM Proof 5 21 Annual Report & Accounts | 2013 Notes to the Accounts continued 1. Accounting Policies (continued) Employee Benefits The group operates a defined benefit and a defined contribution pension scheme for its employees. Defined benefit scheme: The pension liability recognised in the balance sheet in respect of the defined benefit scheme is the present value of the defined benefit obligation at the balance sheet date less the fair value of the scheme assets. The defined benefit obligation is calculated tri-annually by independent actuaries using the projected unit method and this valuation is updated at each balance sheet date. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of high quality corporate bonds that have terms to maturity approximating to the terms of the related pension liability. Past service costs are recognised immediately in income. Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are recognised in full in the statement of comprehensive income in the period in which they arise. Defined contribution scheme: contributions payable are charged to the income statement in the accounting year in which they are incurred. The group has no further payment obligations once the contributions have been paid to this scheme. Leases Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases, net of any incentives received from the lessor, are charged to the income statement on a straight line basis over the period of the lease. Foreign Currency Items included in the financial statements of each of the group entities are measured using the currency of the primary economic environment which the entity operates (the financial currency). The consolidated financial statements are presented in GBP which is the group’s presentation currency. Foreign currency transactions are translated using exchange rates prevailing at the date of the transactions, or, where forward currency contracts have been taken out, at contractual rates. Per IAS 21 assets and liabilities are translated at exchange rates ruling at the end of each financial year. Gains and losses on retranslation are recognised in the income statement. Assets and liabilities of subsidiaries in foreign currencies are translated into sterling at the exchange rates ruling at the end of the financial year. Differences on exchange arising from the retranslation of the opening net investment in subsidiary companies and from the translation of the results of those companies at average rates are recognised as a separate component of equity and are reported in the statement of comprehensive income. Property, Plant and Equipment Property, plant and equipment is stated at cost net of accumulated depreciation and any provision for impairment. Cost comprises purchase cost together with any incidental costs of acquisition. Depreciation is provided to write off the cost less the estimated residual value of the property, plant and equipment by equal instalments over their estimated useful economic lives. The asset’s residual values and useful economic lives are reviewed, and adjusted as appropriate, at each balance sheet date. The following rates are applied: Freehold buildings Equipment — — 2% per annum 10%–33% per annum Freehold land is not depreciated. Intangible Assets Intangible assets are stated at cost less accumulated amortisation. They are recognised if it is possible that there will be future economic benefits attributable to the asset, the cost of the asset can be measured reliably, the asset is separately identifiable and there is control over the use of the asset. The assets are amortised over the period which the group expects to benefit from these assets. Provision is made for any impairment in value if applicable. IT software costs are amortised on a straight line basis at a rate of 33% per annum. Investments Investments are stated at cost, less provision for impairment where necessary. 22 23276-04 20 May 2014 4:19 PM Proof 5 Annual Report & Accounts | 2013 1. Accounting Policies (continued) Deferred Taxation Deferred taxation is recognised, using the full liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amount in the consolidated financial statements. Deferred taxation is determined using tax rates (and laws) that have been enacted, or substantially enacted, by the balance sheet date, and are expected to apply when the related deferred taxation asset is realised or deferred taxation liability is settled. Deferred taxation assets are recognised only to the extent that it is probable that future taxable profits will be available against which the temporary differences can be utilised. Inventories Inventories which include raw materials and work in progress, finished goods and goods for resale are stated at the lower of cost and net realisable value. Raw materials are valued on a first in first out basis. The cost of work in progress and finished goods includes an appropriate proportion of production overheads. Net realisable value is based on estimated selling price less additional costs to completion or disposal. Allowance is made for obsolete, defective and slow moving items based on annual usage. Trade and Other Receivables Trade and other receivables are initially recognised at fair value and subsequently held at amortised cost less provision for impairment. Provisions are made for the difference between the asset’s carrying amount and the present value of estimated future cash flows. Subsequent recoveries of amounts previously written off are credited to the Income Statement. Trade Catalogues Expenditure relating to the production and distribution of the main catalogue and supplementary mailings is written off in the financial statements in the year when the catalogue is produced. Cash and Cash Equivalents Cash and cash equivalents include cash in hand, deposits held on call with banks, other short term highly liquid investments with original maturities of three months or less, and bank overdrafts. Trade Payables Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method. Derivative Financial Instruments Derivative financial instruments are initially recognised at fair value on the date a contract is entered into and are subsequently re- measured at their fair value at each balance sheet date. The resulting gain or loss is recognised directly in the income statement. The group does not apply hedge accounting in respect of its financial instruments, nor does it trade in any financial instruments. Share Capital Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares are shown in equity as a deduction, net of tax, from the proceeds. Dividends Dividends proposed by the board are recognised in the financial statements when they have been approved by shareholders. Interim dividends are recognised when they are paid. Current Taxation The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the income statement because it excludes items that are not taxable or deductible. The group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date. The tax expense for the year comprises current and deferred tax that is recognised in the Income Statement, except that it relates to items recognised in other comprehensive income or directly in equity, in which case the tax is also recognised in other comprehensive income or directly in equity respectively. 23276-04 20 May 2014 4:19 PM Proof 5 23 Annual Report & Accounts | 2013 Notes to the Accounts continued 2. 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, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the steering committee that makes strategic decisions. The group only has one business segment, which is its principal activity, being the merchanting and distribution of industrial and commercial equipment. All of the group’s revenue, (losses)/profits, assets and liabilities are wholly attributable to that business segment. The operations of the group are based in the UK and the Republic of Ireland. The Republic of Ireland operation makes up less than 10 per cent of the group’s revenue and assets. 3. Exceptional Item Redundancy cost 4. Employee Information Staff costs for the group during year: Wages and salaries Social security costs Other pension costs (note 23) The average monthly number of persons employed by the group during the year was: Selling and distribution Manufacturing Administration 5. Directors’ Remuneration Aggregate emoluments Company contributions to money purchase pension scheme Highest paid director: Aggregate emoluments Defined benefit scheme accrued pension at end of year Four directors have accrued benefits under a defined benefit scheme (2012: four). One director accrues benefits under a defined contribution pension scheme (2012: three). 2013 £’000 – 2013 £’000 2,496 244 592 3,332 Number 68 11 25 104 2013 £’000 499 20 519 126 83 2012 £’000 129 2012 £’000 2,655 256 486 3,397 Number 69 12 25 106 2012 £’000 497 30 527 131 80 24 23276-04 20 May 2014 4:19 PM Proof 5 Annual Report & Accounts | 2013 6. Operating Profit Operating profit is stated after charging/(crediting): Loss/(profit) on disposal of property, plant and equipment Depreciation on property, plant and equipment Amortisation of intangible asset Operating lease charges — land and buildings — other Foreign exchange losses on operating activities Services provided by the company’s auditors Fees payable to the company’s auditors for the audit of parent company and consolidated financial statements Fees payable to the company’s auditors for other services: Other audit services pursuant to legislation: The audit of the company’s subsidiaries pursuant to legislation Other services pursuant to legislation: Tax services 7. Finance Income Bank interest receivable 8. Finance Costs Net retirement benefit obligation finance costs (note 23) 9. Taxation Current year UK corporation tax: — current year — adjustments in respect of prior years Deferred tax: UK deferred tax: — origination and reversal of timing differences — adjustments in respect of prior years Total taxation (credit) 23276-04 20 May 2014 4:19 PM Proof 5 2013 £’000 11 282 87 9 7 19 41 7 10 58 2013 £’000 26 2013 £’000 412 412 2012 £’000 (9) 283 98 18 7 33 40 6 8 54 2012 £’000 43 2012 £’000 301 301 2013 £’000 2012 £’000 (40) – (40) (4) (110) (114) (154) 12 (14) (2) 25 (93) (68) (70) 25 Annual Report & Accounts | 2013 Notes to the Accounts continued 9. Taxation (continued) Factors affecting the tax credit for the year: The tax on the company’s (loss)/profit before tax differs from the theoretical amount that would arise using the weighted average tax rate applicable to profits of the company as follows: (Loss)/profit before taxation Tax at the UK corporation tax rate of 23.25% (2012: 24.5%) Expenses not deductible for tax purposes Adjustments to tax in respect of prior years - current year - deferred tax in respect of tax rate changes Tax credit for the year 2013 £’000 (249) (58) 14 – (110) (154) 2012 £’000 102 25 12 (14) (93) (70) The standard rate of tax in the UK changed from 24% to 23% with effect from 1 April 2013. Accordingly, the company’s (losses)/ profits for this accounting period are taxed at an effective rate of 23.25%. Further reductions to 21% from 1 April 2014 and 20% from 1 April 2015 respectively were substantively enacted on 17 July 2013 and therefore deferred tax assets and liabilities are measured at a rate of 20% as at 31 December 2013. 10. (Loss)/earnings Per Share Basic (loss)/earnings per share is based upon (loss)/earnings of (£95,000) (2012: £172,000) and on 1,000,000 (2012: 1,000,000) ordinary shares in issue during the year. There is no difference between basic (loss)/earnings per share and diluted (loss)/earnings per share for both years as there are no potentially dilutive shares in issue. 11. (Loss)/profit for the Financial Year As permitted by Section 408 of the Companies Act 2006, the company has not published its own income statement. The result of the company for the financial year was a loss of £83,000 (2012: £168,000 profit). 12. Dividends Interim dividend paid for the 2012 financial year of 4.0p (2011: 4.0p) Final dividend paid for the 2012 financial year of 15.0p (2011: 28.0p) 2013 £’000 40 150 190 2012 £’000 40 280 320 Dividends proposed for the 2013 financial year are set out in the Report of the Directors. These will be paid in 2014 and have not been accrued in the financial statements. 26 23276-04 20 May 2014 4:19 PM Proof 5 Annual Report & Accounts | 2013 13. Property, Plant and Equipment Group and Company Cost 1 January 2012 Additions Disposals 1 January 2013 Additions Disposals 31 December 2013 Accumulated depreciation 1 January 2012 Charge for the year Disposals 1 January 2013 Charge for the year Disposals 31 December 2013 Net book amount At 31 December 2013 At 31 December 2012 At 31 December 2011 Freehold land and buildings £’000 Equipment £’000 6,594 – – 6,594 – – 6,594 600 104 – 704 104 – 808 5,786 5,890 5,994 2,454 92 (68) 2,478 64 (242) 2,300 1,882 179 (51) 2,010 178 (233) 1,955 345 468 572 Depreciation is charged to administration expenses on the Income Statement. 14. Intangible Assets Group and Company Cost 1 January 2012 Additions 1 January 2013 Additions Disposals 31 December 2013 Accumulated amortisation 1 January 2012 Charge for the year 1 January 2013 Charge for the year Disposals 31 December 2013 Net book amount At 31 December 2013 At 31 December 2012 At 31 December 2011 Amortisation is charged to administration expenses in the Income Statement. 23276-04 20 May 2014 4:19 PM Proof 5 Total £’000 9,048 92 (68) 9,072 64 (242) 8,894 2,482 283 (51) 2,714 282 (233) 2,763 6,131 6,358 6,566 IT Software £’000 1,358 183 1,541 491 (1,256) 776 1,241 98 1,339 87 (1,244) 182 594 202 117 27 Annual Report & Accounts | 2013 Notes to the Accounts continued 15. Investment in Subsidiary The company’s wholly owned subsidiary, Slingsby Mail Order Limited, is incorporated in the Republic of Ireland, the results of which are fully consolidated in the group accounts. Its principal activity is the merchanting of materials handling and distribution equipment. The company owns 100 per cent of its ordinary share capital. The carrying value of this investment is considered impaired and has been fully provided against. 16. Deferred Tax The deferred tax balances in these accounts are attributable to the following: Group and Company Pension liability Short term timing differences Rolled over capital gain 2013 £’000 1,614 (519) (185) 910 2012 £’000 2,263 (631) (213) 1,419 Deferred tax assets are recognised only to the extent that it is probable that future taxable profits will be available against which the temporary differences can be utilised. Deferred tax assets and liabilities are offset where there is a legally enforceable right to offset and there is an intention to settle the balance net. Movements in deferred tax assets/(liabilities) are as follows: Group and Company 1 January 2012 (Charged)/credited to income statement Credited to equity 1 January 2013 (Charged)/credited to income statement Charged to equity 31 December 2013 17. Inventories Group and Company Raw materials and work in progress Finished goods and goods for resale Pension liability £’000 2,272 (55) 46 2,263 (26) (623) 1,614 Short term timing differences £’000 (726) 95 – (631) 112 – (519) Rolled over capital gain £’000 (241) 28 – (213) 28 – (185) 2013 £’000 169 1,728 1,897 Total £’000 1,305 (68) 46 1,419 114 (623) 910 2012 £’000 182 2,088 2,270 Inventories are presented net of provisions for write downs, based on management’s estimate of net realisable value. The amount charged to the income statement in respect of write downs of inventories was £26,000 (2012: £34,000). The cost of inventories recognised as an expense and included in the group’s cost of sales was £8,000,000 (2012: £8,079,000) and £7,691,000 (2012: £7,708,000) for the company. The provision for obsolete stock at the year-end is £400,000 (2012: £373,000). 28 23276-04 20 May 2014 4:19 PM Proof 5 Annual Report & Accounts | 2013 18. Trade and Other Receivables Trade receivables Receivables from subsidiary Prepayments Group Company 2013 £’000 1,941 – 460 2,401 2012 £’000 1,892 – 551 2,443 2013 £’000 1,892 59 451 2,402 2012 £’000 1,843 33 534 2,410 Trade and other receivables are non-interest bearing. There is no material difference between the carrying amount and the fair value of trade and other receivables. Trade receivables are presented net of provision for doubtful trade receivables. Provisions are estimated by management based on past default experience and other factors as considered appropriate. The credit quality of financial assets that are neither past due nor impaired can be assessed by reference to external credit ratings or to historical information about counterparty default rates. Movements on the group and company provisions for impairment of trade receivables are: At 1 January Provision made for impaired receivables Unused provision reversed Receivables written off during the year as uncollectable At 31 December Group Company 2013 £’000 3 59 (7) (37) 18 2012 £’000 3 42 (16) (26) 3 2013 £’000 3 59 (7) (37) 18 2012 £’000 3 38 (12) (26) 3 Receivables due from subsidiary were not impaired at 31 December 2013 and 31 December 2012. At 31 December 2013 group trade receivables of £18,000 (2012: £3,000) and company trade receivables of £18,000 (2012: £3,000) were impaired. The amount of provision is the full gross amount due. The receivables are considered to be impaired as they have either been disputed by the respective customers or the customers are in financial difficulty. The ageing of these receivables is as follows: Up to three months over terms Over three months over terms Group Company 2013 £’000 3 15 18 2012 £’000 2 1 3 2013 £’000 3 15 18 2012 £’000 2 1 3 23276-04 20 May 2014 4:19 PM Proof 5 29 Annual Report & Accounts | 2013 Notes to the Accounts continued 18. Trade and Other Receivables (continued) At 31 December 2013 group trade receivables of £910,000 (2012: £929,000) and company trade receivables of £892,000 (2012: £905,000) were past due but not impaired. Overdue receivables against which no provision has been made relate to customers for whom there is no recent history of default or any other indication that settlement will not be forthcoming. The ageing of these receivables is as follows: Up to three months over terms Over three months over terms Group Company 2013 £’000 907 3 910 2012 £’000 918 11 929 2013 £’000 889 3 892 2012 £’000 895 10 905 Receivables that are neither past due nor impaired are within credit limits for the respective customer and the directors are not aware of any reasons that indicate the amounts due are disputed or not collectable. The maximum exposure to credit risk at the reporting date is the fair value of each class of receivable shown above. The group does not hold any collateral as security. The carrying amounts of the group’s and company’s receivables are denominated in the following currencies: Pounds sterling Euro 19. Trade and Other Payables Trade payables Other taxation and social security payable Other payables Accruals Group Company 2012 £’000 2,383 60 2,443 2013 £’000 2,402 – 2,402 Group Company 2012 £’000 2,077 336 14 295 2,722 2013 £’000 1,918 300 15 249 2,482 2012 £’000 2,410 – 2,410 2012 £’000 2,072 324 14 288 2,698 2013 £’000 2,343 58 2,401 2013 £’000 1,920 311 15 257 2,503 Trade and other payables are non-interest bearing. There is no material difference between the carrying amount and the fair value of trade and other payables. 20. Derivative Financial Instruments Forward foreign currency contracts and options Assets Liabilities 2013 £’000 – 2012 £’000 – 2013 £’000 26 2012 £’000 7 Gains and losses on the carrying value of forward foreign currency contract assets and liabilities are recognised in the income statement. The forward foreign currency contracts existing at the year end mature in 2014. They have been valued using year end market data. 30 23276-04 20 May 2014 4:19 PM Proof 5 Annual Report & Accounts | 2013 21. Financial Risk Management In the normal course of business the group and company is exposed to certain financial risks, principally foreign exchange risk, interest rate risk, liquidity risk and credit risk. Foreign Exchange Risk The group and company enters into forward foreign currency contracts to eliminate certain currency exposures that arise on purchase contracts denominated in foreign currencies. Interest Rate Risk The group’s and company’s exposure to interest rate risk arises on cash and short term deposits and is managed through the appropriate mix of fixed and floating rate interest rates. Cash deposits are placed for varying terms depending upon interest rates and yields based principally on LIBOR rates. Cash at bank yields interest based principally on LIBOR rates. Liquidity Risk In the normal course of business the group and company is exposed to liquidity risk. The objective is to ensure that sufficient resources are available to fund short term working capital and longer term strategic requirements. This is achieved through the use of an appropriate mix of short, medium and long term deposits and investments. Credit Risk Credit risk principally arises on cash deposits and trade receivables. The credit risk arising on cash deposits is limited because the counterparties are financial institutions with high credit ratings assigned by international credit rating agencies. The credit risk arising on trade receivables is spread over large numbers of customers. There are no significant concentrations of credit risk. Sensitivity Analysis There is not expected to be a material impact on reported results and the balance sheet relating to the above risks. 22. Capital Risk Management The capital structure of the group consists of cash and equity. 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 capital. In order to maintain the capital structure the group may adjust the amount of dividends paid to shareholders. 23. Pension Commitments Group and Company Retirement Benefit Obligations At 31 December 2013 H C Slingsby plc (“the Company”) operated pension schemes for the benefit of its employees. The schemes are provided through both defined benefit and defined contribution arrangements. This disclosure is concerned only with the defined benefit arrangement, the H C Slingsby plc Retirement Benefits Scheme (“the Scheme”). The liability associated with the Scheme is material to the Company. The Company’s objective is for the Scheme to target 100% funding on a basis that should ensure that benefits can be paid as they fall due. Any shortfall in the assets directly held by the Scheme, relative to its funding target, will be financed over a period that ensures the contributions are reasonably affordable to the Company. The expected contribution to the Scheme over the 2014 fiscal year is £540,000 (plus administration and other expenses). The defined benefit scheme was closed to new entrants in 2006 and to future accrual in 2009. Nature of Scheme The Scheme targets a pension paid throughout life. The amount of pension depends on how long employees are active members of the scheme and their salary when they leave the scheme (a “final salary” plan). The pension receives inflation-linked increases in the years before retirement. Once in payment, pensions either do not increase or increase in line with inflation or a fixed rate. The Scheme was closed to future accrual in 2009. It is governed by a Board of Trustees (the “Trustee Board”) that has control over its operation, funding and investment strategy. The Trustee Board is chaired by Dominic Slingsby and comprised of nominees of the Company and elected Scheme members. The Trustee Board will consult with the Company on certain matters. 23276-04 20 May 2014 4:19 PM Proof 5 31 Annual Report & Accounts | 2013 Notes to the Accounts continued 23. Pension Commitments (continued) Funding the liabilities UK legislation requires the Trustee Board to carry out valuations at least every three years and to target full funding against a basis that prudently reflects the Scheme’s risk exposure. The most recent valuation was carried out as at 1 January 2011 and a shortfall of £5.5m against the Trustee Board’s funding objective was identified. The Company agreed to pay annual contributions of £540,000 to remove the shortfall over 14 years and 3 months. The weighted average duration of the defined benefit obligation is 22 years. Investment strategy Approximately 60% of the Scheme’s assets are held in equity type assets, and 40% are held in long-term fixed interest and inflation linked securities. Included within the fair value of the Scheme assets are 30,061 of the Company’s shares, with a fair value of £120,000 as at 31 December 2013. The Scheme’s liabilities are calculated using a discount rate set with reference to corporate bond yields; if Scheme assets underperform this yield, this will increase the deficit. The Scheme holds a significant proportion of equities, which are expected to outperform corporate bonds in the long-term while providing volatility and risk in the short-term. As the Scheme matures, the expectation is that the Trustee Board would reduce the level of investment risk by investing more in assets that better match the liabilities. In essence this would see a gradual sale of equities and the purchase of gilts and corporate bonds. The Company is of the view that, due to the long-term nature of the Scheme’s liabilities, it is appropriate to continue with a degree of equity investment so as to manage the Scheme’s long-term liabilities efficiently. The Trustee Board has derived its investment strategy, in consultation with the Company, so as to reflect the Scheme’s long-term liabilities. At the current time approximately 40% of the Scheme’s assets are invested in long-term fixed interest and inflation linked securities of a duration that broadly matches the duration of benefit payments. The balance is invested in a diversified portfolio of global equity type assets. Both the Trustee Board and the Company believe that equities offer the best returns over the long term with an acceptable level of risk. The Scheme’s investments are well diversified, such that the failure of any single investment would not have a material impact on the overall level of assets. It should be noted that the Trustee Board has sole responsibility for setting the investment strategy for the Scheme, albeit the Company is consulted over any change to investment strategy. The processes used to manage risks within the Scheme have not changed from previous periods. Derivatives are not used to manage risks within the Scheme. Other risks Actions taken by the local regulator, or changes to European legislation, could result in stronger local funding standards, which could materially affect the Company’s cash flow. There is a risk that changes in the assumptions for discount rate, price inflation or life expectancy could result in an increase in the deficit in the Scheme. Other assumptions used to value the defined benefit obligation are also uncertain, although their effect is less material. Winding up Although currently there are no plans to do so, with the Company’s approval, the Trustees could choose to wind up the Scheme in which case the benefits would have to be bought out with an insurance company. The cost of buying-out benefits would be significantly more than the defined benefit obligation calculated in accordance with IAS 19 (revised). The measurement of the Company’s net defined benefit liability is particularly sensitive to changes in certain key assumptions, which are: Discount rate This has been selected following actuarial advice received, taking into account the duration of the liabilities. An increase or decrease in the discount rate of 0.25% would result in a decrease or increase of approximately £1.1m in the present value of the defined benefit obligation. Inflation The methodology used to derive the assumption adopted is consistent with discount rate methodology. An increase or decrease in the inflation rate of 0.25% would result in an increase or decrease of approximately £0.7m in the present value of the defined benefit obligation. 32 23276-04 20 May 2014 4:19 PM Proof 5 Annual Report & Accounts | 2013 23. Pension Commitments (continued) Mortality rates The mortality assumptions adopted are based on actuarial advice received and reflect the most recent information as appropriate. The assumptions used indicate that the future life expectancy of a male (female) pensioner reaching age 65 in 2013 would be 22.1 (24.5) years and the future life expectancy from age 65 for a male (female) non-pensioner member currently aged 45 of 23.8 (26.5) years. The increase or decrease in the present value of the defined benefit obligation due to a member living one year longer, or one year less, would be approximately £0.7m. The methods used to carry out the sensitivity analyses presented above for the material assumptions are the same as those the Company has used previously. The calculations alter the relevant assumption by the amount specified, whilst assuming that all other variables remained the same. This approach is not necessarily realistic, since some assumptions are related: for example, if the scenario is to show the effect if inflation is higher than expected, it might be reasonable to expect that nominal yields on corporate bonds will increase also. However, it enables the reader to isolate one effect from another. Year ended 31 December 2013 The Company’s policy is to recognise actuarial gains and losses immediately in full each year. The Company operates a scheme in the UK with a final salary section. A full actuarial valuation was carried out as at 1 January 2011 and updated to 31 December 2013 by a qualified independent actuary. Reconciliation of the present value of the defined benefit obligation Present value of defined benefit obligation at beginning of year Interest cost Effect of changes in financial assumptions Benefits paid Present value of defined benefit obligation at end of year Reconciliation of fair value of scheme assets Fair value of scheme assets at start of year Interest income Return on scheme assets Contributions by the Company Benefits paid Fair value of scheme assets at end of year Amounts to be recognised in the balance sheet Present value of funded obligation Fair value of scheme assets Net liability in balance sheet 2013 £’000 21,669 914 (1,092) (842) 20,649 2013 £’000 11,831 502 549 540 (842) 12,580 2013 £’000 20,649 (12,580) 8,069 2012 £’000 19,812 915 1,616 (674) 21,669 2012 £’000 11,074 614 277 540 (674) 11,831 2012 £’000 21,669 (11,831) 9,838 23276-04 20 May 2014 4:19 PM Proof 5 33 Annual Report & Accounts | 2013 Notes to the Accounts continued 23. Pension Commitments (continued) Amounts to be recognised in the income statement Interest on obligation Interest income on scheme assets Total expense Total amount recognised in the statement of consolidated income SOCI Actuarial (gain)/loss Actuarial (gain)/loss recognised in SOCI Pension cost Defined benefit scheme Defined contribution scheme Scheme assets Equities Gilts and bonds Total scheme assets Expected rate of return on scheme assets 2013 % 60 40 100 2013 £’000 7,541 5,039 12,580 4.6% 2013 £’000 914 (502) 412 2013 £’000 (1,641) (1,641) 2013 £’000 433 159 592 2012 % 56 44 100 2012 £’000 915 (614) 301 2012 £’000 1,339 1,339 2012 £’000 311 175 486 2012 £’000 6,625 5,206 11,831 5.3% At 31 December 2013 the scheme assets were invested in a diversified portfolio that consisted primarily of equity and debt securities. The fair value of the scheme as a percentage of total scheme assets and target allocations are set out above. Amount of Company related investments included in fair value of assets Company’s own financial instruments 2013 £’000 120 2012 £’000 150 34 23276-04 20 May 2014 4:19 PM Proof 5 Annual Report & Accounts | 2013 23. Pension Commitments (continued) Principal actuarial assumptions at the Balance Sheet date: The assumptions as at the reporting date are used to determine the present value of the benefit obligation at that date. The key financial assumptions are set out below: Discount rate Long-term rate of return on assets RPI inflation CPI Inflation Pension increases: – Non-Executive pension accrued before 1 January 1992 (0% fixed) – Non-Executive pension accrued after 1 January 1992 (RPI max 5%) – Executive pension accrued before 1 January 1992 (4% fixed) – Executive pension accrued after 1 January 1992 (RPI 4% min, 5% max) Pre and post retirement mortality Retiring today: – Males – Females Retiring in 20 years: – Males – Females Cash commutation 2013 4.60% 4.60% 3.40% 2.50% 0.00% 3.30% 4.00% 4.20% 87.1 89.5 88.8 91.5 2012 4.30% 5.80% (restricted to the discount rate of 4.30%) 3.20% 2.60% 0.00% 3.20% 4.00% 4.00% 87.0 89.4 88.7 91.4 25% of the pension at age 65 as at rate of 12.5:1 25% of the pension at age 65 as at rate of 12.5:1 Mortality Assumption: Base mortality table — Males – standard table SINMA (appropriate to the members’ year of birth) — Females – standard table SINFA (appropriate to the members’ year of birth) A scaling factor of 105% has been applied to the notes under the standard tables. An allowance for future improvements has been made in line with the CMI 2011 Core Regulations assuming a long-term annual note of improvement in mortality rates of 1.25% for men and women. Defined Contribution Scheme The Company commenced the operation of a defined contribution scheme on 1 October 2006. Contributions payable by the Company to the defined contribution scheme of £159,000 (2012: £175,000) have been charged to operating profit. 23276-04 20 May 2014 4:19 PM Proof 5 35 Annual Report & Accounts | 2013 Notes to the Accounts continued 24. Share Capital Ordinary shares of 25p Authorised At 1 January and 31 December Allotted, called up and fully paid At 1 January and 31 December 2013 Number 2013 £’000 2012 Number 1,200,000 300 1,200,000 1,000,000 250 1,000,000 2012 £’000 300 250 25. Operating Lease Commitments At 31 December 2013, the group had the following outstanding future aggregate minimum lease payments under non-cancellable operating leases for land and buildings as follows: Operating leases commitments: – within one year – in more than one year but less than five years 2013 £’000 20 – 2012 £’000 12 13 Operating lease charges recognised in the income statement as shown in note 6. 26. Related Party Transactions Key Management Key management personnel comprise the group’s executive and non-executive directors. Their remuneration is set out in note 5. There were no other transactions with key management. Company – Transactions with Subsidiary Sales amounting to £308,000 (2012: £371,000) were made by H C Slingsby plc to Slingsby Mail Order Limited. Amounts due from Slingsby Mail Order Limited at 31 December 2013 were £59,000 (2012: £33,000). 36 23276-04 20 May 2014 4:19 PM Proof 5 Annual Report & Accounts | 2013 Five Year Summary Income Statement Turnover Gross profit Operating profit before exceptional item Exceptional item (Loss)/profit before tax (Loss)/profit for the financial year (Loss)/earnings per share – basic and diluted Dividend Per Ordinary Share*: - Interim - Final Cash Flow Statement 2013 £’000 13,965 5,502 137 – (249) (95) (9.5p) 2012 £’000 14,588 6,155 489 129 102 172 2011 £’000 15,221 6,779 633 – 422 320 17.2p 32.0p 2010 £’000 16,652 7,380 1,259 – 1,082 717 71.7p 2009 £’000 15,833 6,689 707 592 1,007 815 81.5p 2.0p 10.0p 4.0p 15.0p 4.0p 28.0p 5.0p 35.0p 4.0p 30.0p Cash generated by operating activities 166 1,041 (81) 1,344 793 Balance Sheet Net current assets Net assets Cash and cash equivalents 4,122 3,688 2,325 4,808 2,949 2,836 5,147 4,397 2,439 5,162 6,169 3,420 4,732 6,153 2,778 * Dividends per ordinary share are stated in respect of the years to which they relate. This is not the same as the years in which they are recognised in the financial statements. 23276-04 20 May 2014 4:19 PM Proof 5 37 Annual Report & Accounts | 2013 Notice of Annual General Meeting Notice is hereby given that the sixty-sixth Annual General Meeting of H C Slingsby plc will be held at the Marriot Hollins Hall Hotel & Country Club, Hollins Hill, Baildon, Shipley, West Yorkshire, BD17 7QW on Friday 20 June 2014 at 10.00 am. You will be asked to consider and vote on the resolutions below. 1. To receive the report and financial statements of the Company for the year ended 31 December 2013. 2. To approve payment of a final dividend in the sum of 10.0p per ordinary share. 3. To reappoint PricewaterhouseCoopers LLP as auditors to the group and authorise the directors to fix their remuneration. 4. To reappoint as a director Mr. J. R. Waterhouse who will be retiring under the company’s articles of association at the meeting. 5. To reappoint as a director Mr. D. S. Slingsby who will be retiring under the company’s articles of association at the meeting. By Order of the Board R. G. Hudson Company Secretary H C Slingsby plc Registered Office: Otley Road, Baildon, Shipley, BD17 7LW 22 May 2014 Appointment of Proxies 1. As a member of the company, you are entitled to appoint a proxy or proxies (see note 3 below) to exercise all or any of your rights to attend, speak and vote at the meeting and you should have received a proxy form with this notice of meeting. You can only appoint a proxy using the procedures set out in these notes and the notes to the proxy form. 2. 3. 4. A proxy does not need to be a member of the company but must attend the meeting to represent you. Details of how to appoint the Chairman of the meeting or another person as your proxy using the proxy form are set out in the notes to the proxy form. If you wish your proxy to speak on your behalf at the meeting you will need to appoint your own choice of proxy (not the Chairman) and give your instructions directly to them. You may appoint more than one proxy provided each proxy is appointed to exercise rights attached to different shares within your overall shareholding. You may not appoint more than one proxy to exercise rights attached to any one share. To appoint more than one proxy, each different proxy appointment form must be received by Capita Asset Services no later than 48 hours before the time appointed for the meeting. If you do not give your proxy an indication of how to vote on any resolution, your proxy will vote or abstain from voting at his or her discretion. A vote withheld is also effectively an abstention; the vote will not be counted in the calculation of votes for or against the resolution. Your proxy will vote (or abstain from voting) as he or she thinks fit in relation to any other matter which is put before the meeting. 5. The notes to the proxy form explain how to direct your proxy how to vote on each resolution or withhold their vote. To appoint a proxy using the proxy form, the form must be: — completed and signed; — sent or delivered to Capita Asset Services at Proxy Department, Beckenham, Kent, BR3 4TU; and — received by the Registrars no later than 48 hours before the time appointed for the meeting. In the case of a member which is a company, the proxy form must be executed under its common seal or signed on its behalf by an officer of the company or an attorney for the company. Any power of attorney or any other authority under which the proxy form is signed (or a duly certified copy of such power or authority) must be included with the proxy form. 38 23276-04 20 May 2014 4:19 PM Proof 5 Annual Report & Accounts | 2013 Appointment of Proxy by Joint Members 6. 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 company’s register of members in respect of the joint holding (the first-named being the most senior). Changing Proxy Instructions 7. To change your proxy instructions simply submit a new proxy appointment using the methods set out above. Note that the cut-off time for receipt of proxy appointments (see above) also applies in relation to amended instructions; any amended proxy appointment received after the relevant cut-off time will be disregarded. Where you have appointed a proxy or proxies and would like to change the instructions, please contact Capita Asset Services at 34 Beckenham Road, Beckenham, Kent, BR3 4TU. If you submit more than one valid proxy appointment in respect of the same shares, the appointment received last before the latest time for the receipt of proxies will take precedence. Termination of Proxy Appointments 8. In order to revoke a proxy instruction you will need to inform the company by sending a signed notice clearly stating your intention to revoke a proxy appointment to the Registrars at Capita Asset Services, Proxy Department, Beckenham Road, Beckenham, Kent, BR3 4TU. In the case of a member which is a company, the revocation notice must be executed under its common seal or signed on its behalf by an officer of the company or an attorney for the company. Any power of attorney or any other authority under which the revocation notice is signed (or a duly certified copy of such power or authority) must be included with the revocation notice. The revocation notice must be received by the Registrars no later than 48 hours before the time appointed for the meeting. If you attempt to revoke appointment but the revocation is received after the time specified then, subject to the paragraph directly below, your proxy appointment will remain valid. Appointment of a proxy does not preclude you from attending the meeting and voting in person. If you have appointed a proxy or proxies and attend the meeting in person, your proxy appointment(s) will automatically be terminated. Communication 9. Except as provided above, members who wish to communicate with the company in relation to the meeting should contact Mr R. G. Hudson by email at ray.hudson@slingsby.com or by telephone on (01274) 535030. 23276-04 20 May 2014 4:19 PM Proof 5 39 Annual Report & Accounts | 2013 Shareholder Notes 40 23276-04 20 May 2014 4:19 PM Proof 5 Annual Report & Accounts | 2013 Business system & e-commerce solutions As part of our ongoing commitment to offer service of the highest quality, we have invested in a sophisticated new business and e-commerce solution. Our new business system has enabled us to streamline our business processes which allow us to offer an even better service for our customers both on and offline. Our new e-commerce solution gives our customers a vastly improved user experience through an improved search functionality, an advanced multi-navigation and filtering system, live chat and extensive advice and information. 23276-04 20 May 2014 4:19 PM Proof 5 HC Slingsby plc T: 01274 535 030 F: 01274 535 035 W: www.slingsby.com E: sales@slingsby.com 01 23276-04 20 May 2014 4:19 PM Proof 5 Annual Report & Accounts | 2013